Rare Earth Miner Stocks Slammed After U.S. Defense Department Cancels Cobalt Purchase

Rare earth and battery metal stocks are tumbling today after the U.S. Defense Department abruptly canceled a high-profile tender to buy cobalt – at least for now – cutting short a torrid rally that had lifted the sector over the past several months.

Cobalt producers and related mining stocks had surged as prices more than doubled since February, fueled by export restrictions in the Democratic Republic of Congo — which supplies about three-quarters of global output — and renewed optimism over Western efforts to secure critical minerals.

The Defense Logistics Agency (DLA) had sought bids since mid-August for up to 7,500 tons of cobalt over five years — a contract worth as much as $500 million — as part of Washington’s broader effort to rebuild domestic supplies of critical minerals, according to Bloomberg. After repeatedly extending the bid deadline from Aug. 29 to Oct. 15, the agency has now scrapped the tender altogether.

“There are outstanding issues with the Statement of Work that need resolution before offers may be solicited,” a notice on a U.S. government website said Wednesday. “Upon resolution, solicitation will be re-issued with a new opening and closing date.”

The cancellation marks a setback for U.S. plans to reduce reliance on China for key inputs in electric vehicles, batteries, and defense systems. Cobalt is used in rechargeable batteries, magnets, munitions, and jet engines, and Beijing dominates global processing while maintaining a significant state stockpile.

Bloomberg writes that the now-abandoned tender followed a sharp rebound in cobalt prices, which have doubled since February after the Democratic Republic of Congo imposed export restrictions.

The DLA had been courting suppliers including units of Vale SA in Canada, Sumitomo Metal Mining Co. in Japan, and Glencore Plc’s Nikkelverk plant in Norway, seeking fixed prices for alloy-grade cobalt over five years. The U.S. had planned to spend between $2 million and $500 million under the program.