VINACHEM

The US Defense Department is seeking to buy cobalt for its strategic stockpiles for the first time in decades, the latest move to bolster domestic supplies of critical metals.

The Defense Logistics Agency is seeking offers for up to 7,500 tons of cobalt over the next five years in a contract worth up to $500 million, according to tender documents published this week. It’s the first time the DLA has sought to buy cobalt since 1990, according to a person familiar with the purchase.

Demand for cobalt has risen dramatically in recent years because of its use in batteries, but it is also crucial for a range of applications in military systems. Cobalt-based alloys are used in munitions and jet engines, while the metal is also critical for making magnets used in flaps, landing gear and the flight control surface on an airplane.

The Pentagon’s purchase highlights a shift in government thinking about such metals and would be a major intervention in the cobalt market, accounting for about one sixth of non-Chinese supply of alloy-grade cobalt, according to a Bloomberg calculation. It comes after prices have already been driven higher by an export ban from the metal’s top producer, the Democratic Republic of Congo.

For many years, the DLA was a seller rather than a buyer of cobalt, as budget cuts in the 1990s and 2000s led it to sell off what had once been a giant stockpile of the metal built up during the Cold War.

In recent years, however, securing supply chains for metals like cobalt has become a political priority, as officials seek to reduce reliance on China. Beijing dominates processing of cobalt and other battery metals, and has built up a significant state stockpile of its own through the National Food and Strategic Reserves Administration, more commonly known as the State Reserve Bureau.

The Pentagon did not immediately respond to a request for comment.

In its tender documents, which were first reported by Fastmarkets, the DLA said it was seeking offers for alloy-grade cobalt supplies from only three producers: units of Vale SA in Canada, Sumitomo Metal Mining Co. in Japan, and Glencore Plc’s Nikkelverk plant in Norway. It asked suppliers to propose fixed prices for the supplies over five years.

Traders said the move was likely to drive prices of cobalt higher, particularly for alloy-grade metal, which is a small subset of the overall market. Cobalt has jumped 42% this year after the government of the Democratic Republic of Congo imposed an export ban to prop up prices.

Still, it wasn’t clear whether the DLA would be successful in buying the full 7,500 tons. Traders said there were very few suppliers that would be able to meet the DLA’s requirements. The tender documents stated that the government was intending to spend a minimum of $2 million and a maximum of $500 million on the contract. At current prices, 7,500 tons of cobalt is worth about $313 million.

The solicitation for cobalt comes amid a flurry of published tenders by the Pentagon in less than a month, an indication that the department’s arm that handles critical supply chain purchases is charging ahead with its newly minted spending power authorized under President Donald Trump’s signature tax-and-spending legislation. That fiscal package appropriated about $2 billion for the Defense Logistics Agency to purchase materials the US deems essential and critical to national security.

The Biden administration had also sought to bolster procurement of critical minerals, and in late 2023 Congress passed a new National Defense Authorization Act which gave the DLA greater freedom to make long-term purchases without the congressional approval it had previously needed. It also guaranteed $1 billion a year in funding.

The cobalt tender is one of more than a half a dozen tenders for critical materials published since July 30, and includes niobium, graphite and antimony — industries dominated by China.

The Defense Department has published more tenders to acquire materials this fiscal year than during any since the Cold War ended.