Trader Concord Buys Cobalt Stash in Battery Metal Debut

By Jack Farchy

(Bloomberg) -- Concord Resources Ltd., the trading house that saw profits double two years ago by taking advantage of chaos in the aluminum market, is now making a bet on cobalt as it seeks to expand into the high-profile battery metal. The trading house last year made stockpile purchases worth $29.9 million from Sienna Metals Holdings Ltd., according to annual accounts filed at Companies House. In January, Concord bought a 3.9% stake in the cobalt-stockpiling company, which was formerly known as Cobalt 27 before it was taken private in 2019. It hasn’t disclosed how much the holding is worth. “The cobalt price is going to have to be higher given the constraints on production coupled with a rising demand from emerging consumer acceptance of electric vehicles,” Mark Hansen, chief executive officer of Concord, said in an interview. The company made the investments “with a view to developing a supply business to consumers as interest picks up in that space over time,” Hansen said. He added that Concord has sold some of the metal from inventory already while holding on to the rest in expectation of higher prices. The move into cobalt came as Concord reported net profit of $26.3 million last year, down 39% from 2018, when it benefited from extraordinary turmoil in aluminum and alumina markets caused by sanctions on Russian producer United Co. Rusal. Concord’s gross profit for the year fell 20% to $107 million. Hansen said the recent results were “acceptable” given limited opportunities in metals markets last year, and pointed to the trader’s gross profit margin of 2.5%, healthy in an industry where margins are razor thin. The company has been profitable so far in 2020, he said, despite the volatility caused by the coronavirus pandemic. “The first half of 2020 has provided the ultimate stress test for anyone operating in the global logistics and commodity trading business,” Hansen said. “It has been hard work.” Concord, which was founded in 2015 by a group of former Noble Group Ltd. traders with private equity backing, distributed capital to its shareholders for the first time, spending $10.7 million on a share buyback as well as paying a maiden dividend of $2.3 million, Hansen said.

Cobalt Mania

Cobalt 27 became a symbol of the cobalt-mania that gripped markets in 2017 and 2018 amid expectations of an electric vehicle boom, amassing the largest private stockpile of the metal on the planet. After prices crashed, it was taken private by one of its initial backers, Pala Investments, which is also a leading shareholder of Concord. Cobalt 27 paid $300 million to buy a stream of future cobalt production from Vale SA’s Voisey’s Bay mine in Canada -- a deal that came just before prices tumbled. Now that cobalt will be marketed by Concord, according to Hansen. He said he was optimistic about prospects for the metal supplied from jurisdictions like Canada, as consumer concerns grow over responsible sourcing. More broadly, Hansen offered a pessimistic outlook for metals markets after a blistering rally over the past few weeks. “We should not mistake shorter term disruption for true fundamental tightness,” he said, referring to worries about mine production in Peru and Chile. “Every LME metal is in surplus this year.”

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