Just as cobalt traders were agreeing that spot prices were consolidating at a higher level based on moderate demand, they received a psychological boost from an unlikely source—Freeport McMoRan, the 56% owner of Tenke Fungurume, the copper/cobalt mine that has greatly added to cobalt supply availability.Freeport notified “certain of its cobalt hydroxide customers” that shipments will be temporarily reduced due to the adverse impact of intermittent power disruptions from the Democratic Republic of Congo’s national electric company. The power disruptions, Freeport said in a statement, affected the cobalt processing equipment but have not impacted copper production and shipments at Tenke.

 

Customers with year-long contracts said they received a letter from Freeport announcing that their shipments for the next two months would be reduced by 40% and that shipment reductions could last beyond the two-month period until the end of the year. Longer-term customers reportedly are receiving their full intakes. Analysts believe that roughly half of Freeport’s cobalt hydroxide customers have single year contracts.

 

Right now, the one-year contract customers are fairly confident that Freeport will be able to make up the lost shipments prior to the end of the year. Even so, market sources said that Freeport is not believed to be under any volume obligations for its short-term customers. This apparently is not the case for customers with multi-year contracts, which might explain why Freeport has not reduced shipments to long-term contract buyers.

 

The Tenke mine produced 6-million lb of cobalt in the first quarter of 2013, the same as in the first quarter of 2012. In April, Freeport said it expected to produce 28-million lb in 2013 compared to 25-million lb in 2012.

 

It is not clear whether a disruption of cobalt hydroxide shipments will have an immediate impact on cobalt metal. “Actually,” said a source, “hydroxide has been tight all year, while metal has been abundant.”

 

Meanwhile, nearly every trader last week reported raising prices for 99.8% Co to $15 per lb or higher, and all admitted that they had not yet concluded a $15 sale. “Spot pries are consistent with last week,” a trader said, “and there are no outliers.” Traders concede that there is not much spot business, but that has been the case throughout the year. In fact, several sellers remarked that so far the summer has been more active than they anticipated.