Highs and Lows: The Annual Cobalt Trading Cycle
Cobalt’s continued rise to fame has brought a lot of investors into the fold who are new to this particular market. After all, this is a market has gone from $12/13 lb up to $44 lb, pretty much in a straight line, with only one brief correction (low $30’s down to high $20’s) on the whole trip!
As you can imagine, once investors discover I spent most of the last 40 years as a cobalt trader they waste no time in quizzing me about historical price movements. One of the most popular question is this: Is there a pattern?
The answer is yes and no! Which is to say that, while longer term market trends driven by fundamentals will always and ultimately dominate, superimposed on that trend every commodity has its own unique trade cycle. For cobalt, as with many other commodities, that cycle is annual. A general rule of thumb is as follows:
January through April: The early months of the year are typically the busiest. I always look at it as New Year enthusiasm. You’d be surprised how much is influenced by human nature (optimism, wishful thinking and the like).
May through August: There is typically a slow down as we head to Summer. The old stock market adage of "sell in May and go away" applies here. Traders who have been long and enjoying the steady rising trend over last few months, often look to lock in some or all of that profit.
However, the slow down is also a result of many manufacturing plants traditionally closing for a month during Summer. This means routine cobalt purchasing will stop a month or so before that, in order to run down unnecessary stock in pipeline.
Of course, you will also find the more experienced traders stepping back from the market and allowing the Summer lull to create opportunities to replace stocks which they sold out at higher prices.
September: Think of this as the "What on Earth just happened?" month. This is the point at which the market starts powering back up. It’s normally kick-started by cobalt consumers looking to refill the supply pipeline that was depleted prior to the Summer shut down for manufacturing plants.
October through to early December: Often referred to as the "mating season", this is when the big beasts on the consuming side (e.g. big European chemical plants) and the supply side (e.g. the major producers) hunker down to negotiate long term contracts.
This period usually brings with it a re-focusing on the forecast demand and supply balance and, with the current bullish fundamentals, a tightening in the market as major deals are hammered out.
Mid-December: The dance is done and the traders are ready for Christmas and their vacation time… and then around we go again!
Of course, the rise of electric vehicles and energy storage continues to bring with it an extra dynamic, which we’ve seen reflected in the strong price run up to $44 lb. However, it’s worth bearing in mind that at this stage, as far as the impact of EV demand is concerned, the price rise to date is partly in anticipation of the event. As the stats show us, the real shortages won’t start to bite until 2021 and beyond.
That is, of course, unless something drastic occurs, which is certainly possible considering global supply is heavily reliant on mines in the Democratic Republic of the Congo (DRC) where there have been several potentially significant events in recent weeks….
If you have any questions, please get in touch with us.
Anthony Milewski, Chairman of Nickel 28
About Anthony Milewski
Mr. Anthony Milewski has spent his career in various aspects of the mining industry, including as a company director, advisor, founder and investor. In particular, he has been active in the commodities related to decarbonization and the energy transition, including nickel, cobalt, copper and carbon credits. Anthony has served on the London Metals Exchange Cobalt Committee, which includes representatives from the largest mining and commodities companies globally, to represent the interests of the industry to the board of directors the LME. Mr. Milewski holds a B.A. in Russian history from Brigham Young University, an M.A. in Russian and Central Asian Studies from the University of Washington, and a J.D. from the University of Washington. Anthony Milewski has been interviewed by numerous Media outlets, and is a regular speaker at mining conferences.
Forward-Looking Information: Some of the posted entries on the CEO Corner may contain forward-looking statements. Forward-looking statements address future events and conditions which involve inherent risks and uncertainties. Actual results could differ materially from those expressed or implied by them. Examples of forward looking information and assumptions include future estimates of the worldwide supply and demand for nickel and other metals and the effect that these changes could have on the short term and long term price of nickel and other metals on the world markets, statements regarding the future operating or financial performance of Nickel 28 including the net present value, metal recoveries, capital costs, operating costs, production, rates of return and payback. Forward looking statements involve known and unknown risks and uncertainties which may not prove to be accurate. Such statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations. Among those factors which could cause actual results to differ materially are the following: market conditions and other risk factors listed from time to time in our reports filed with Canadian securities regulators on SEDAR at www.sedar.com.
In some cases, forward-looking statements can be identified by terminology such as "may", "will", "should", "expect", "projects", "plans", "anticipates" and similar expressions. These statements represent management's expectations or beliefs concerning, among other things, future operations and various components thereof affecting the economic performance of Nickel 28. Undue reliance should not be placed on these forward-looking statements which are based upon management's assumptions and are subject to known and unknown risks and uncertainties, including the business risks discussed above, which may cause actual performance and financial results in future periods to differ materially from any projections of future performance or results expressed or implied by such forward-looking statements. Accordingly, readers are cautioned that events or circumstances could cause results to differ materially from those predicted.
Links: Some of the posted entries on the CEO Corner may include links to 3rd party websites. Nickel 28 has not reviewed all websites linked to or from this Site and is not responsible for the contents of any such websites. The inclusion of any link does not imply endorsement by Nickel 28 of the linked website or its content. Use of any such linked website is at the user's own risk.
For further information we refer you to our legal notice.
