US defense agency push to stockpile cobalt hits pause as price soars

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By Pratima Desai

LONDON, Dec 4 (Reuters) – The U.S. Defense Logistics Agency still intends to purchase cobalt for the National Defense Stockpile but is reassessing its strategy and has no target date for reissuing the tender, a DLA spokesperson told Reuters on Thursday.

Any purchases of cobalt are likely to cost the agency a lot more as prices have already risen 50% since the original tender was launched in August.

This is the DLA’s first cobalt stockpiling effort in more than three decades. The United States needs cobalt to safeguard national security and industrial resilience as competition for strategic minerals intensifies around the world. 

The U.S. is also aiming to reduce reliance on China, which dominates processing of the metal used to make missiles, aerospace parts, magnets for communication and radar and guidance systems.

“DLA is currently reevaluating its acquisition strategy for cobalt. The requirement is still valid, and DLA still intends to purchase the material for the National Defense Stockpile,” the DLA spokesperson said. “At this time, the agency does not have a target date for reissuance of the solicitation.” 

The tender originally announced on August 19 with offers due by August 29 went through several amendments before it was cancelled in October.

Cobalt prices are currently trading around $24 a lb or $52,910 a metric ton, compared with $16 a lb or $35,275 a ton in August. They have been climbing since hitting a nine-year low around $10 a lb in February after top producer Democratic Republic of Congo banned exports.

Congo has since imposed quotas, but producers are still waiting for government approval to resume exports.

In the original offer, the agency detailed plans to purchase 16.49 million lbs or 7,480 metric tons of cobalt metal over a five-year period for the National Defense Stockpile.

It was initially looking for offers from only three companies – Vale’s Port Colborne and Long Harbour plants in Canada, Japan’s Sumitomo Metal Mining and Glencore’s Nikkelverk operation in Norway.

Cobalt industry sources say part of the problem with the tender was the DLA wanting companies to commit to fixed prices for the entire five-year period which doesn’t account for price swings that could leave producers facing losses.

(Reporting by Pratima Desai; editing by Kirsten Donovan)