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Will Cobalt Continue Its Skyward Path?

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The price of cobalt was “parked” securely between $10 and $15 per pound from early 2013 through mid-2016. Then, it took off like a Tesla Roadster at full-throttle with the wind at its back. Currently the hottest of the hot metal investments, cobalt is used extensively in the production of electric car batteries and many other modern devices.

The benchmark index for the past year, Bloomberg Commodities, was down about 4 percent overall, while during that same time period the price of cobalt rocketed up more than 120 percent. Early 2018 saw further gains, from the $34/pound level to $36/pound in a few short weeks, and who knows where it’ll go from here.

Is Cobalt the Magic Metal of the Modern Era?

Some investors say, “Cobalt? What’s that? I’ll stick to silver and gold for my portfolio.” After uttering those words, they’ll possibly lose out on the fastest-moving metal of the modern era. The key term here is “lithium-ion batteries,” which contain large amounts of cobalt, and are seeing an upsurge in use in everything from all-electric and hybrid-electric cars to thousands of electronic devices. The stuff is in the top-selling Toyota Prius, every other hybrid car, smartphones, laptops, and any product that uses lithium-ion or nickel-cadmium battery power (that includes almost every moving object on earth excluding insects and rodents).

Here’s an electrifying fact for interested investors: The lithium-ion battery market stood at the $15 billion mark at the end of 2015. Those who know about such things say that market will reach the $75 billion level by 2024. Translation: Within six years, cobalt could easily be more popular than Taylor Swift and Channing Tatum combined. Meanwhile, back in the present moment…

Is Gold for Fools?

The year it all began to happen for cobalt was 2017, when those investors lucky enough to hold the metal in their portfolios watched it outperform gold, aluminum, copper, nickel, oil, lithium, lumber, palladium, cotton, Columbian coffee, sugar and hundreds of other commodities, stocks, and bonds. During a 12-month period that ended in February 2018, cobalt’s price more than doubled, soaring from $17 to well over $36 per pound.

I Want My Cobalt!

For those who can’t wait to buy into the current cobalt craze, here are the top three stocks and a futures contract you can get into rather easily: On the London Metal Exchange, cobalt futures use the ticker “CO.” Values are quoted in U.S. dollars and have been trading since 2010, with each contract lasting 15 months and less.

For the more somber approach, there are three well-known corporate stocks that offer good exposure to cobalt. Glencore, on NASDAQ’s over-the-counter board with symbol GLCNF, Freeport-McMoran is on the NYSE under “FCX,” and China Molybdenum, also on the NASDAQ OTC under “CMCLF” are the trio of large-cap firms that any cobalt enthusiast can choose from.

Where Does Cobalt Come From?

Why are there no “pure cobalt” plays? The answer to that involves a look at chemistry. No one mines cobalt directly. In fact, this popular investment-grade metal is nothing more than a by-product of copper and nickel mining. That means we have to take sort of a sideways approach to getting cobalt exposure. Recently, a few financial gurus have begun listing Tesla Motors as a cobalt play because founder Elon Musk’s cars uses hundreds of pounds of the stuff in every vehicle. Tesla is “TSLA” on the NASDAQ OTC board for those interested in yet another way to break into the cobalt market.

What? No ETFs for Cobalt?

That’s right. Currently there are no ETFs that offer direct cobalt exposure. This is likely to change very soon because thousands of brokers are tired of getting phone calls from potential customers who ask embarrassing questions like, “What? No ETF for cobalt?”

There is one constant about the financial markets: they will always find a way to ferret out profits from anything that remotely reeks of consumer demand. And right now, consumer demand for cobalt investments is higher than Grateful Dead fans at the Woodstock festival.

Charts and Graphs Tell the Story

{All charts courtesy of InfoMine.com}

Note that cobalt prices are not even close to their all-time highs, which is one reason cobalt-watchers think things might rise to the $53 level in the near future. Back in the 2006-2008 cobalt export restrictions (in Africa), the metal reached those dizzying plateaus, which means the trail has been blazed and could be traveled again when and if things continue to heat up for cobalt.

Recent price activity can be seen in the charts below:

Even after its surge had begun, the metal continued to climb since August of last year, when it stood at $25 per pound. It shot up more than $12 since then.

A one-year to date chart tells the big story of cobalt’s recent climb from modest prices in the teens up to its present levels.

Below, we can see the five-year activity of cobalt, from early 2013 until its recent flight in late 2017. With the exception of the export crisis in 2006, 2007 and 2008, cobalt prices have historically trended between $10 and $25 per pound. That’s a big range even in stable times, but the recent “green revolution” of lithium-ion batteries has changed everything for the once-boring metal.

Fascinating, and (Possibly) Useful, Factoids about Cobalt

Cobalt is considered a “transition metal,” which means it does not occur in nature alone, but only in compounds.

Historians believe that some of the most ancient cave paintings, from the Bronze Age, were done with cobalt as a pigment.

The most common modern uses of cobalt, other than in batteries, are in jewelry, certain kinds of paint, and specialty glass products.

What Germans used to call “goblin ore,” cobalt got its name from that language by translating those words into English. The German is “kobold,” which literally means “the ore of goblins.” How goblins got involved in this is a mystery, but the little fellows seem to turn up in all sorts of European etymologies.

More than 40 percent of all cobalt mined worldwide comes from the Republic of the Congo in Africa.

The first known chemical isolation of cobalt took place in 1735 and was achieved by Georg Brandt, a Swedish chemist who is credited with discovering the element.

The Long Term Might Be Best for Cobalt Enthusiasts

It’s always tempting to hope for a duplication of a trend. For those interested in making a profit on cobalt, perhaps the best time horizon is a longish one. The demand for cobalt should continue to grow for at least five to six years, so there’s no reason to go for a quick swing-trade profit when the big picture is so encouraging.

As with all other investment scenarios, keep in mind that the above analysis is for informational and educational purposes only, and should not be construed as advice. Always speak with a professional investment advisor before committing your funds to any kind of investment program.

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