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Combination deals may re-emerge in cobalt market

Data:2014-01-02 19:38hit:92
Combination deals threatened to make a return to the cobalt market last week, as Chinese consumers were encouraged to buy metal, along with their intermediates. 
Several sources attending last week’s Antaike Conference in China noted that at least one producer had encouraged Chinese consumers, typically intermediate buyers, to purchase metal. 
“One producer wants to bond raw materials and metal together to sell in contracts,” a Chinese source said. 
“If they sell 100 tonnes of intermediates, they may want to sell 10-20 tonnes of metal,” the source speculated. 
Demand for intermediates in China, where many chemical producers are expanding capacity, is strong, while supply is limited. 
This has put hydroxide and concentrate suppliers in a good negotiating position this season. 
The cobalt metal market is considered to be in surplus, however, with several metal makers increasing output. 
This may have prompted at least one producer to encourage Chinese customers to use both products to make chemicals. 
The cobalt market is no stranger to combination deals, which were common some years ago. 
“These combi-deals were going on a few years ago, but they could be back again,” a second source added. 
“If you do take metal, the payable [on intermediates] will probably drop,” the source added. 
Liquidity crisis 
Cobalt producers were last week mooting higher payables for their intermediate products in 2014.  
But few contracts were thought to have been signed at the conference, largely, some said, due to limited availability of cash in China. 
“Producers are holding out for higher numbers. The Chinese are desperate for intermediates, but they’re not booking. They don’t have the money at the moment. They’re actually selling inventory,” said the second source who had attended the conference. 
“It’s coming towards year end and they need to show banks that they have cash and no debt. The government’s tightened up on credit, and sent a message to banks to tighten up. The Chinese are liquidating some of their stock,” the source added. 
Producers may be wary of buyers in this situation, sources said. 
“The Chinese want intermediates, but for some of them, their credit profile is not looking great. There’s a balancing act to be done by producers,” a third source said. 
“The problem of credit is very acute. We’ve seen this before at the end of the year, but this is earlier [than usual]. Now there’s a price war going on to get some cash and they’re selling salts,” the source added. 

From London Metal Bulletin