The US Department Of Defense's Metal Cobalt Bidding Process Has Once Again Sparked Discussions On Reserves.

London, August 22 (Argus) - The US Department of Defense (DoD) has issued a five-year tender for up to $500 million worth of metallic cobalt, reigniting questions about Western inventories, alloy-grade cobalt supply, and the long-term feasibility of fixed-price contracts. The tender was announced on August 20 and seeks to provide metallic cobalt sheets or cobalt rounds under a fixed-price contract, with a minimum purchase amount of $2 million and a maximum of $500 million. The deadline for submitting bids is August 29, and the expected delivery time is 24 months. Market participants expect the tender to be limited to alloy-grade cobalt. A source said: "I think this will further tighten the alloy-grade market." This statement marks a shift from private hoarding to government direct procurement of cobalt in the West. Unlike speculative reserves, the DoD's tender outlines a structured, long-term metal cobalt procurement plan with a maximum purchase amount of up to $500 million. However, market participants have raised concerns about the structure of the contract. The agreement only guarantees a minimum purchase of $2 million and retains the option to purchase up to $498 million at a fixed price if the price rises - this setup may leave suppliers facing significant losses if prices increase. Most cobalt producers typically avoid long-term fixed pricing and prefer indexed or floating pricing. "I think suppliers won't be willing to lock in for five years," a trader said. A source said this move may tighten alloy-grade supply, especially considering the limited number of producers meeting the tender specifications and the high demand from the aerospace industry. Although most alloy-grade metals produced by producers such as Nikkelverk, Vale, and Sumitomo come from sources outside the Democratic Republic of Congo, such as Canada, Norway, and the Philippines, the impact of fluctuations in the Democratic Republic of Congo may not be completely irrelevant. In the United States, more and more non-space buyers are purchasing both alloy-grade and standard-grade cobalt simultaneously, meaning upward pressure in one sector may spread to another. If the Democratic Republic of Congo implements strict quota systems to drive up the prices of all grades of cobalt, then sellers selling cobalt to the DoD at a fixed price may ultimately receive much lower income than the market level. "I think we can see a 10-20% increase in the (alloy-grade) market, but it won't be too drastic," a trader said. "It's too early to judge what the long-term impact this will have on the market." On August 19, Argus assessed the off-shore price of alloy-grade cobalt in US warehouses at $18.50 - $20 per pound. Another trader said: "I estimate the price of metallic cobalt will rise to around $22."