EUROPE MINOR METALS-Cobalt Holds Firm on Robust Demand

LONDON, May 21 -- Cobalt prices held firm in Europe this week, supported by robust demand from consumers in the aero engine and battery industries, however some traders are not convinced the pick-up will last.

High grade cobalt COB-CATH-LON was quoted between $21 and $22.50 a lb, little changed from last week. Some traders think prices are heading towards the highs around $28 a lb seen in the final quarter of 2008.

"There is strong demand from everywhere, aero engine makers, power generation, medical implants, batteries for mobile phones and hybrid cars," a London-based cobalt trader said.

"We needed to get some deliveries to Germany this week and we couldn't find a truck, everything is booked. The backwardation (premium for metal for delivery now over metal for delivery at a later date) is a sign of how strong demand is."

The London Metal Exchange's cash cobalt and molybdenum -- valued for its anti-rust and strengthening properties in steel -- contracts started trading on Wednesday. 

The premium or backwardation for cash cobalt over the three-month contract stands CBD0-3 at around $500 a tonne.

One Europe-based trader said he couldn't understand why there was a backwardation. "There has been some interest, but there isn't a shortage ... The improvement in demand is small, we're not sure it will be permanent."

Elsewhere, silicon metal SIL-LON rose above $3,000 a tonne in Europe, to hit its highest since November 2008, as strong demand from the chemical industry met a dearth of supply, traders said.

Silicon was quoted between $2,850 and $3,250 a tonne this week, a gain of about 50 percent since May 2009. Last week the price was quoted between $2,850 to $2,950 a tonne. 

"Consumption is rising fast and it's meeting a shortage. We've done some good deals and we've had lots of enquiries," one UK-based silicon trader said. "Things are looking up, but how long it will continue is anybody's guess."