Unit of Austria's Voestalpine seeks year-long cobalt deal in race for supply
LONDON, Oct 27 (Reuters) – Austrian specialty steel firm Boehler wants to buy cobalt in a year-long contract rather than buying monthly, two industry sources said on Friday, as rising demand from electric car makers has complicated its normal purchase patterns.
Demand for cobalt, a key component of rechargeable batteries, is expected to soar in coming years as governments battle pollution and more electric cars are built.
German carmaker Volkswagen asked producers last month to submit proposals for supplies for up to 10 years from 2019.
Boehler, a unit of Vienna-listed Voestalpine, has till now bought cobalt in monthly tenders of up to 20 tonnes.
Two sources with direct knowledge of the matter said it recently issued a tender seeking 15-20 tonnes a month for 2018 using a pricing formula based on published prices, the quality of the cobalt and other factors.
Voestalpine was not immediately available to comment.
"Traditionally they have bought monthly, at a fixed price. For the first time anybody can recall they have come to market for a whole year's worth — 240 tonnes — on a formula basis," a cobalt industry source said, adding it showed "consumer anxiety".
Cobalt is used in steels and superalloys for its anti-corrosive properties and ability to withstand high temperatures, ideal for use in jet engines, gas turbines and power plants.
"Boehler use cobalt in their superalloys, they want supplies from January for a year," another cobalt source said, saying Boehler had till now bought at a discount to published prices because they did not need high grade metal.
"It's a seller's market at the moment … The market has been rising for a while and they may have found themselves paying a significant premium," the source said.
Sources said the price formula would probably be subject to a non-disclosure agreement as it is commercially sensitive information and could impact Voestalpine's share price.
Cobalt prices <COB-CATH-LON> recently climbed through the $30 a lb barrier or more than $60,000 a tonne. They have tripled since December 2015 and are at their highest since late 2008.
The gains since January 2016 are due to expectations of growing demand from makers of rechargeable batteries used.
Volkswagen plans to invest more than 20 billion euros ($24 billion) in zero-emission vehicles by 2030 and make three million EVs a year by 2025 to challenge pioneer Tesla.
CRU consultant George Heppel expects global demand for cobalt metal at nearly 136,000 tonnes in 2021 and more than 161,000 tonnes in 2025 from roughly 102,000 tonnes this year.
Demand for batteries used in electric vehicles and mobile appliances is expected to account for 46 percent of that in 2021, up from about 40 percent this year.
Cobalt demand for superalloys is expected to grow, but at a more sedate pace. CRU expects this segment to account for 43 percent of demand this year and roughly 26 percent in 2021.
(Reporting by Pratima Desai; Editing by Veronica Brown).