For years the preserve of globe-trotting merchants and secretive financiers, the trade in rare and valuable minerals known as minor metals is now on the radar of hedge funds searching for profits.
Huge amounts of money have been ploughed into higher-profile commodities such as copper and oil since the start of the decade, but the outlook for less well-known metals is fundamentally very strong, traders and fund managers say.
Cobalt, a metal mined in countries including the Democratic Republic of Congo, Zambia and Russia for use in aerospace engineering and in power station components is increasingly popular.
Nick French, a cobalt dealer at London trading firm SFP Metals, said cobalt is attracting a lot of attention from the investment community.
This year there has been hedge fund interest, the logic being that if you can push the price of cobalt up to $40 per lb from $20, then the share price of a cobalt mining company will double, French said.
High-grade metal (COB-CATH-LON: Quote, Profile, Research) is trading around $30 per lb, up only slightly from the start of the year but more than 60 percent higher than its price in October 2006.
Investment bank Credit Suisse (CSGN.VX: Quote, Profile, Research) predicts it could cost $40 by the end of the year. The bank itself broke into the market this year when it launched a financially-settled cobalt contract.
The Credit Suisse contract is backed by its alliance with Glencore, so between them they have the financial clout, the physical backing and the necessary market intelligence, French said.
In theory, it gives the market a whole new layer of liquidity, and opens up the market to people who wouldn't otherwise be able to use it by overcoming the problems of lack of liquidity and lack of transparency.
There are also plans afoot at the London Metal Exchange (LME) to examine the possibility of a futures contract for cobalt, which could theoretically make it as easy to invest in the minor metal as it is to invest in copper (MCU3: Quote, Profile, Research), one of the most popular assets in this decade's commodities boom.
In cobalt and molybdenum, we do have interest, LME Chief Executive Martin Abbott said.
There has been contact from members of the minor metals trade ... which was on the positive side. We will do some proper research in the first few months of next year.
Though cobalt is one of the highest-profile of the so-called minor metals, it's not the only one to draw the eyes of hedge funds.
Mark Mobius, head of Templeton Emerging Markets (TEM.L: Quote, Profile, Research), said his firm had price targets for several minor metals.
Generally we are optimistic that metals like antimony, bismuth, molybdenum and others will remain high and could even go higher.
Bismuth (BIS-LON: Quote, Profile, Research) prices have doubled this year, while antimony (ANT-HG-LON: Quote, Profile, Research), used to make plastics and fibers fireproof, is trading around 13-year highs as China, which supplies around 90 percent of the world's metal, shifts to being both a producer and consumer rather than just a source of metal.
Chinese domestic use of the metals it in the past exported in greater quantity to processors and end users in Europe and the United States, will continue to be a major theme in the minor metals markets.
Beijing imposed export quotas on indium and molybdenum in June and is believed to speeding up a scheme to build up a national reserve of minor metals including indium, a key material for flat-screen TVs, in order to support domestic hi-tech industries.
The reserve will come sooner or later, I believe the quota is just the first step, said a trading manager at a smelter in China's Liaoning province.
Feng Juncong, analyst at state-run research agency Antaike, said building reserves could mean higher prices for metals such as indium.
The government wants to support its flat panel TV industry, whose development is facing a bottleneck as the country's indium processing industry is quite weak, Feng said.
I think a title of national reserve will raise the metal's profile and there will be more policies to encourage Chinese indium high-end production.
A senior official at the Mines and Metals department of the China Chamber of Commerce of Metals, Minerals & Chemicals Importers & Exporters said the government had started discussing reserve-building with major producers.
It has not yet entered into a practical period, but it is an urgent issue, he said.
It is easy to understand -- China is in the middle of its industrialization and needs plenty of resources.