COB 0.00% 14.0¢ cobalt blue holdings limited

Excerpt from Citibank.... "Cobalt Outlook - Buy the dip A tight...

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    Excerpt from Citibank....


    "Cobalt Outlook - Buy the dip

    A tight market and (warranted) supply fears to drive higher prices

    Cobalt prices are set to rise by a further 20% over the next 2 years on the back of a sustained deficit market and anticipated stock building on the back of high levels of supply risk. The recent retracement in cobalt prices from 95,000/t to $89,000/t is a buying opportunity in our view. We see prices rising to average $100,000/t by 4Q18, and increasing further over time, to average $110,000/t by 2020. We could see prices reach these levels earlier than expected should downside supply risks at Katanga and Mutanda, which together are expected to produce 35,500t (59,300/t) or 27% (39%) of global supply during 2018 (2019) materialise. 

    Even without DRC supply risks materialising we believe that cobalt is likely to remain scarce, with stockpiling set to continue, tightening the market more than would otherwise be the case. Specifically, Cobalt 27 increased its physical cobalt stockpile by 800t to around 3000t over the last five months and recently raised another $126mn to buy more. Meanwhile, the vast bulk of major consumers and traders in the market are likely to continue to hunt for and lock in additional supplies. Specifically, battery producers and car manufactures (including Apple, Samsung SDI Co, Volkswagen and other major consumers – as per media reports) are signing deals or in talks with various producers to secure future supply or build stocks.

    DRC supply risks are growing and the cobalt market is extremely sensitive to the DRC output — The African nation accounts for more than 60% of the global cobalt supply and the majority of the incremental supply over the next 2 years. In 2017, cobalt’s sudden move above $65k was prompted by a dispute which shuttered a DR Congo mine producing 5kt of cobalt. Now up to c83kt of existing output and 108kt of 2019 output is at threat from a very recent dispute (for details please see here). Other important risks include a new mining code, contract renegotiations with Gecamines, ethical sourcing of cobalt, and a potential deterioration of security.  "
 
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