Norilsk Says LME Cobalt May Become a Reference

CAIRO, Mar. 10 -- Russian metals group Norilsk Nickel (GMKN.MM) said on Tuesday there was scope for the London Metal Exchange's newly launched cobalt futures to become a reference price and is considering using them in trial sales.

"Hopefully the LME will become a good reference basis but still, this is something we have to discover," said Anton Berlin, marketing director of the world's biggest nickel producer said at the Reuters Global Mining and Steel Summit. The LME launched its new molybdenum and cobalt futures contracts on February 22. Both of these minor metals are by-products of metals that already trade on the LME, but this is the first time that either has traded on an exchange.

Berlin said Norilsk has not yet used the contracts and wanted to wait and see how they develop, but left open the possibility of the company using them in future.

"We'll certainly make...test sales just to see how it works," he said.

"Sometimes it doesn't work out, like the LME silver. But LME can show quite a range of other products that have been successful. For us...it is to find the basis of price discovery which is fair and does reflect the existing market," he said.

Norilsk supplies its cobalt production to U.S.-based OM Group (OMG.N), one of the top refined cobalt producers, under a five-year agreement.

Berlin said the deal with the OM Group expires in 2012 and the company is considering whether or not to renew.

"I strongly believe that we were doing a good job selling cobalt so there's room for discussion," he said. "We are not being emotional. We want to get economically the best deal we can get...we still have time to think about it," he said.