Cobalt Prices Skyrocket, U. S. Defense Agency Reevaluates Stockpile Plans
The U.S. Defense Logistics Agency (DLA) is taking a step back to rethink its cobalt purchasing strategy amid surging prices. With cobalt prices increasing by 50% since August, the agency is reassessing its plans to stockpile this crucial metal.
Initial Tender Canceled
The DLA's initial tender, which aimed to purchase 7,480 metric tons of cobalt over five years, was canceled in October after several amendments. The agency has not yet set a new timeline for reissuing the tender.
Importance of Cobalt
Cobalt is vital for national security and industrial resilience, especially as global competition for strategic minerals intensifies. The U.S. is also looking to reduce its dependence on China, which dominates the processing of this metal. Cobalt is used in various defense applications, including missiles, aerospace parts, and communication systems.
Challenges with the Original Tender
The original tender faced challenges, particularly the requirement for companies to commit to fixed prices over the five-year period. Industry sources suggest this approach didn't account for price fluctuations, which could lead to losses for producers. The DLA initially sought offers from only three companies:
- Vale's plants in Canada
- Japan's Sumitomo Metal Mining
- Glencore's operation in Norway
Price Surge and Market Dynamics
Cobalt prices have been on the rise, currently trading around $52,910 per metric ton, up from $35,275 in August. This price surge follows a nine-year low in February, when the Democratic Republic of Congo banned cobalt exports. While Congo has since imposed quotas, producers are still awaiting government approval to resume exports.
DLA's Next Steps
The DLA's spokesperson emphasized that the need for cobalt remains valid, but the agency is still evaluating its acquisition strategy. As the situation unfolds, the DLA's next steps will be crucial in ensuring a stable supply of this essential metal for national defense.
