BASE METALS

Cobalt price will drop as new mines come on stream in DRC

Analyst Robert Baylis from Roskill Information Services expects the cobalt price to fall to around $15 a pound as new mines come on stream in the Democratic Republic of Congo.

CAPE TOWN (Reuters)  - 

Cobalt prices should drop from their recent lofty levels as new production comes on stream from the Democratic Republic of Congo and other countries, a mining analyst said on Monday.

Cobalt , which is used to make batteries, superalloys and other industrial products, could drop to about $15 a pound as a result of mining projects in the DRC, predicted Robert Baylis, senior analyst with Roskill Information Services Ltd.

"If they do come on stream ... then we expect it to probably to drop to around $15 a pound," Baylis said in a presentation to the annual Indaba Africa mining conference in Cape Town.

Cobalt prices on the spot market in Europe are hovering around $49 per lb, on strong demand and scarce supplies.

This is an all-time high, according to Reuters data and the U.S. Geological Survey's website, but some veteran minor metals traders say cobalt for a short time traded at $50 a pound in 1978.

While some traders expect that cobalt prices could possibly go higher as the U.S. Defense Logistics Agency exhausts its stocks of cobalt, Baylis said that new production could help take the foam off the frothy market.

He forecast that up to 6,000 tonnes of new cobalt production could be added to global supply by 2010, continuing to rise after that point. Current annual production is about 58,000 tonnes.

Some of the new output would come from the DRC, where there are a number of nickel-cobalt mining projects expected to begin production. An increase in cobalt output from Zambia, which is experiencing a mining boom, also could top up supply.

"In the past the DRC and Zambia propped up the market, There is no reason why that can't be the case again," Baylis said.

(Reporting by Paul Simao, editing by Michael Roddy)

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