Investors are running up cobalt prices as automakers and suppliers stock up on the raw material for lithium-ion batteries as they prepare for an increase in electric vehicle production.

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Reuters reported that Shanghai Chaos Investments and Switzerland-based Pala Investments as two of the companies that invested heavily in cobalt last year, although the amount they’ve stockpiled is unknown.

On Dec. 1, cobalt was just around $30,000 per metric ton on the London Metal Exchange. As of Monday, one mt of cobalt was trading around $49,000. That’s an increase of 63% in three months.

Report: Trump Will Scrap EPA Clean Power Plan Next Week

President Trump is expected to issue orders next week that will begin the process of striking the Clean Power Plan and ending a moratorium on new coal mining on federal lands.

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The plan was largely opposed by manufacturers and metals producers. Its end will most likely bring a sigh of relief from utilities with coal-dominated generation mixes, as well, since they won’t have to alter their generation mixes within any deadlines.

An interesting article in the Financial Times recently reviewed the acquisition by China Molybdenum of the Tenke copper-cobalt mine in the Democratic Republic of Congo from Freeport-McMoRan.

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As the FT points out the purchase at a price of $2.65 billion is the largest single private investment in the DRC’s history and will be the largest purchase of copper assets since China’s purchase of Glencore’s Las Bambas mine in Peru for $6 billion in 2014.

Cobalt Control

The article examines the risks not to the copper market but to the co-product produced at Tenke, cobalt. The article focuses on risks to the cobalt supply chain of China gaining a dominant position in the global chain for this increasingly critical metal. Read more

The British National Health Service has banned the use of metal-on-metal (MOM) hip replacements, after evidence of unacceptably high failure rates. Regulators insist that the NHS stop using any hip replacment implants with a failure rate higher than 5% over five years.

According to the Telegraph, the warning from the National Institute for Health and Care Excellence (Nice) was issued after research uncovered failure rates as high as 43% among some of the implants. MOM resurfacing models made by the likes of DePuy, Smith and Nephew, and Zimmer (including the Adept, Cormet 2000, Durom, Recap Magnum, and Conserve Plus) have been banned, in addition to the Corail/Pinnacle ceramic on metal devices.

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The British Medical Journal has been much absorbed by this topic and has an interesting paper on its website. According to the BMJ, the conventional total hip replacement consists of a metal head with a polyethylene cup. But these joints don’t last forever. Over time the plastic cup wears away against the hard metal head. Younger, more active people are especially likely to require early revision surgery to replace the worn-out joint.

So attention turned to more durable MOM joints that use a combination of cobalt and chromium. And the fear that metal ion would contaminate the bloodstream and damage  surrounding tissues was countered by assertions that more precise engineering around the sphericity, surface finish, and metallurgy would mitigate the risks. Cobalt ions in particular have been shown to be carcinogenic and to cause destruction of tissue and bone around the joint between the head and stem of the implant.

DePuy (a division of Johnson & Johnson) is quoted as saying that in patients with well functioning devices, levels should be no higher than 2 μg/L. However, studies show that blood cobalt concentrations generated through wearing these newer MOM total hip prostheses can reach over 300 μg/L. This is 600 times higher than physiological levels of cobalt (most healthy people have about 0.5 μg/L of cobalt in their blood).

More than 60,000 patients in England and Wales have received metal-on-metal devices since 2003, when the National Joint Registry first began to record procedures. In the US, the figure is closer to a million, and although manufacturers knew of these toxicity issues as far back as 2007, the procedure was still being marketed up to 2012.

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LME volumes base and minor metals

Source: Reuters

Compared to molybdenum and cobalt contracts, as we laid out in Part One, the loser has been the steel billet contract (see graph above) — loser in the sense that while both steel and molybdenum contracts have declined, steel is the largest globally traded metal and as such, demand for a hedging product should be widespread.

For the LME to have lost traction and be slipping so badly suggests the contract is failing to meet the industry’s needs.

Worse for the LME, competitors are on their heels.

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Could we be seeing the beginning of the end of the LME billet contract?

It may be a little early to call time on the oft-maligned steel billet contract — it is by some measures the fourth-most traded product in the ferrous space after the Shanghai rebar contract, SGX iron ore swaps and CME’s iron ore portfolio, according to a Reuters article.

And arguably, as two of those at least are raw materials for which physically traded volumes are almost by definition larger, the LME contract could be said to be doing rather well. The main problem, though, is that volumes are heading in the wrong direction.

Read more

Continued from Part One.

The MOM surfaces are cast and then machined to size and finally polished to a mirror finish to create a perfect fit. The idea is, a perfect fit means the surfaces should never touch each other, according to Dr. Timothy Wright, Kirby Chair of Orthopedic Biomechanics: “Just like the cylinder in an engine block,” he said.

But controversy has also arisen about the way surgeons fit these devices. The femoral head may be polished to a mirror surface, but then the ball surface is hammered into the thigh bone with a mallet, raising the question: how perfect is that fit going to be on assembly of the ball into the socket after such a process?

Nor is the problem confined to full hip replacements. The “replacement light” option of applying a metal coating to the patient’s existing femur and a metal lining to the pelvic socket has suffered similar problems of metallic ion contamination of the blood, suggesting heavy-handed surgery work on the full hip replacements is, at best, only part of the problem.

The use of MOM hip replacement devices has been dramatically reduced with DuPuy’s ASR model, along with others, since being removed from the market in September 2010. The worry for the industry is toxicity caused by MOM joints may cause a backlash against use of metal components and hasten development of ceramic and plastic alternatives. Already new ceramic materials are far less brittle than earlier types, opening up the prospect of extremely close tolerance viable ceramic joints in place of metal on plastic designs.

Joint manufacturers and the medical profession knew of these problems as far back as 2006 and have since done little more than monitor rejections and failures; so one has to say, if the repercussion is a dilution of a metals-dominant role, the medical industry will have done the metals industry a considerable disservice.

The metals industry is rightly proud and producers understandably value the successful application of metal alloys in the medical implants industry. From high-purity refining through forging and casting operations, machining, coating and treating the use of titanium, cobalt, chrome and stainless steels in addition to a number of less common metals, this has been a source of considerable profit for the sector over recent decades.

So the current furor about metal-on-metal (MOM) hip implants has understandably stirred up a lot of debate and not a little media hype into the bargain.

Here in the UK, a recent BBC Newsnight program and British Medical Journal (BMJ) report have thrust the debate into the public domain and a flurry of articles have played up the potential risks — risks that could ultimately lead to a sharp decline in the use of metal alloy implants if subsequent research supports early fears.

The procedure of hip implants has been around since the 1970s, but over time the materials and designs have changed as lessons have been learned. Earlier problems with stainless steel and post-operative dislocations have encouraged a move to cobalt-chrome and titanium alloys for the femoral head (the ball-shaped section with a spike that fits in the femur or thigh bone) and gradually larger femoral heads to counter the tendency to dislocate.

To reduce wear rates found in earlier metal-to-plastic joints, metal-to-metal joints were developed by a number of producers, but notably Johnson & Johnson’s subsidiary DuPuy. As a result, possibly of the larger surface area resulting from larger heads, tests have revealed that minute metal particles worn from the metal-to-metal contact are finding their way into the surrounding tissue and bloodstream.

An article in the Independent says metal ions appear to break off from the implants and leak into the blood, causing local reactions that destroy muscle and bone, cause severe pain and even long-term disability. Studies have shown that the metal particles can seep into the bloodstream, spreading to the lymph nodes, spleen, liver and kidneys before being excreted in urine. There are also concerns about damage to chromosomes, leading to genetic changes that could increase the risk of cancers.

The BMJ report is probably the best source of impartial information on the topic, even giving measured toxicity levels for cobalt and chromium blood tests. The Telegraph recently reported that in the US, experts studied 46 MOM implants retrieved from 44 patients at the Hospital for Special Surgery, in New York, where all implants removed from patients are kept for study.

They found that 98 percent of the cups of the implant and 93 percent of the heads showed moderate to severe scratching. Moderate to severe pitting was found in 43 percent of the cups and 67 percent of the heads; and near the cups and heads, the implants had completely lost their sheen.

Continued later today in Part Two.

MetalMiner gave reader Dominic Daly, who studies at Durham University, a chance to respond to one of our past posts about cobalt, “Conflict Minerals and Their Derivatives: Where Cobalt Fits In. In the spirit of giving the metal’s image (and the DRC) a fair shake, MetalMiner welcomes Daly’s guest commentary.

Cobalt is a strategically important metal in the modern world: it serves several different functions, such as its use as a super-alloy, its use in lithium-ion batteries and also as a catalyst in many important chemical reactions. Cobalt is normally a by-product of nickel or copper mining, and the cobalt is separated from base metals in different locations around the world.

Cobalt has recently come under some scrutiny, as it is mined in the Democratic Republic of Congo (DRC), which is infamous for its conflict mines. These are mines where the minerals extracted from them are sold to buy weapons that feed the conflict in these areas. This is, of course, a genuine industry, which is still being funded by businesses worldwide and is still causing suffering for many people in these areas.

This problem is recognized worldwide and is addressed within the Dodd-Frank Act, which talks about the problem of “conflict materials coming from the DRC and how companies should seek to find alternative supplies of material from areas that aren’t helping to fund the conflict in the DRC. [Ed. note: For a comprehensive run-down on this issue, see Lawrence Heim’s excellent series, published by MetalMiner.]

This is all very well, but a lot of people have been confused as to what materials this act refers to. In the Dodd-Frank Act, “conflict minerals are described as:

(A) columbite-tantalite (coltan), cassiterite, gold, wolframite, or their derivatives; or

(B) any other mineral or its derivatives determined by the Secretary of State to be financing conflict in the Democratic Republic of the Congo or an adjoining country.

In reading this, it is clear that cobalt is not explicitly mentioned as a “conflict mineral, nor has it been determined by the Secretary of State to be financing conflict in the DRC or an adjoining country and it won’t be for several reasons.

Firstly, the cobalt mined in the DRC is found as a by-product of the copper mining in the copper belt of the country’s southeast Katanga region, on the border with Zambia. This location is more than 1,000 kilometers away from what are considered to be the “conflict mines in the northern Kivu region. The cobalt is not handled, produced or sold for profit by the people who are creating the current conflict in the DRC. Secondly, if authorities find the cobalt in the DRC to be funding any sort of conflict, which is highly unlikely, then copper would have to undergo the exact same classification.

Another thing to consider is how the classification of cobalt as a “conflict mineral would affect the DRC’s people, as it provides them with legitimate work and foreign investment. Further, it would affect the global cobalt industry, as approximately 75 percent of the world’s cobalt is mined in the DRC. Not only would the price of cobalt skyrocket, but it would also create a large drop in the available cobalt to use in the world. This creates problems for many important businesses (such as shortages of super-alloys and lithium ion batteries); those businesses in turn would then have to pay the alternative price of cobalt, which would be astronomical, or switch away from cobalt, leading to inferior products.

In conclusion, Dodd-Frank doesn’t mention cobalt as a “conflict mineral for a reason: it isn’t one and if it ever was, not only would it implicate a lot of other metals, but it would also completely destroy any chance the DRC has of an economy that is beneficial to its citizens.

–Dominic Daly

There has been a lot of coverage of the Dodd-Frank Wall Street Reform and Consumer Protection Act, specifically Section 1502, which outlines the broad objective of controlling the trade of so-called conflict minerals. MetalMiner has taken the lead on explaining what the future may look like for companies that must go through an auditing process. (Check out our previous coverage beginning with this post. Also feel free to plug in “conflict minerals” into our site search!)

For a recap of the a conflict minerals and which ores and their derivative metals fall under the full definition:

Conflict MineralIts Common Derivative(s)
Columbite-Tantalum (“coltan)Columbium (Niobium) and Tantalum

Only if the source of any of the above conflict minerals was determined to be located in the DRC or adjoining countries (Angola, Congo, Central African Republic, Sudan, Uganda, Rwanda, Burundi, Tanzania, and Zambia) would reporting to the SEC be required, along with the audited and certified due diligence report.

As we’ve written about before, it is also possible that cobalt might be considered a derivative of a conflict mineral in the future, as cobalt is produced as a byproduct of the mining of laterite ores, containing copper and nickel, from the copper deposits in the Katanga Province of the DRC. These deposits that stretch into Zambia are home to over 44 percent of the world’s cobalt production, and hold over half the global reserves of cobalt. It is widely feared that these deposits and their use could require reporting to the SEC.

The US may not import cobalt ores directly from the DRC, but as it produces no cobalt of its own, apart from recycled, it is dependent on imports, mostly from China. According to Richard Mills at, China has little in the way of domestic naturally occurring cobalt resources and needs to import concentrates in large amounts every year. Following a US$9 billion investment in the DRC in return for copper and cobalt ores, China is the world’s largest producer of refined cobalt with 39 percent of global production, followed by Finland (15 percent) and Canada (8 percent).

Cobalt Investing News said human rights campaign The Enough Project estimates that 60 percent of the minerals in the DRC are mined illegally, in dangerous underground conditions, with long hours and often by child laborers. It’s also been documented that the profits from these illegal mining operations are being used to fund various conflicting armed groups.

The US is the world’s largest consumer of cobalt, considers cobalt a strategic metal and is 85-percent reliant on imports. This begs the question: if Chinese cobalt cannot be proved conflict-free to the satisfaction of the SEC, what is this going to do for supplies of the metal to the world’s largest consumer? Arguably the US has enough alternative sources of tantalum, tin, gold and tungsten — some of them even domestically — but is not so fortunate when it comes to cobalt.

–Stuart Burns

*Please click here to download the MetalMiner Conflict Minerals Legislative Guide, covering the details of the new Dodd-Frank Wall Street Reform and Consumer Protection Act and how mandated audits will affect companies that purchase tin, tantalum, tungsten and gold.

In the short time since its soft launch on February 22 of this year and its full launch on May 21, cobalt has had a pretty volatile time. From a low of around $37,000 (16.78/lb) to a high of over $43,000 per ton ($19.50/lb) the metal has since fallen to around $39,000 per ton today. A large part of the volatility can be put down to the early life of the contract and low liquidity, but there is a lot going on outside in the real world too.

Demand has been good, particularly from Asia where demand for hybrid batteries, catalysts and machine tools has been robust, but also from OECD markets where super alloys particularly in aerospace has been strong. On the supply side, availability has been a major transformation from just 12 months ago as this table taken from data supplied on the excellent Cobalt Development Institute website shows.

In the first half of 2010, China has increased supply by 125% from the same period last year to 15,532 metric tons. Africa is by far the largest source of raw material with both concentrates and refined metal coming from not just west African states of the Congo and Zambia, but also South Africa, Morocco and Botswana. A Dow Jones report identifies several significant expansion projects underway in Africa and elsewhere which will add high quality supplies to the market in the year ahead. Indeed as a significant portion of cobalt is produced as a by product of copper and other metal concentrate mixes, the strength of those markets will spur new mine development and expansion regardless of the position for cobalt. Tony Southgate a trader with Standard Bank is predicting prices will fall next year as a result. Catherine Virga, director of research at CPM Group is reported in a Reuters Africa article as predicting prices will rise late this year to around $25/lb on supply disruptions in the DRC but then fall next year as oversupply predominates to $18/lb. Subject as it is to applications in fast moving technologies and with supply driven more by demand for mainstream base metals than the demands of the cobalt market, the metal looks set for as a volatile year in 2011 as it has had in 2010.

–Stuart Burns