(The opinions expressed here are those of the author, a columnist for Reuters.)
* Graphic: tmsnrt.rs/2nZRORf
By Andy Home
LONDON, April 10 (Reuters) - Lithium was the super-hot metals story of 2016.
A spectacular price rally propelled lithium out of the metallic shadows onto the global investment stage.
This year it is the turn of cobalt.
The price of cobalt traded on the London Metal Exchange (LME) has exploded from $33,000 per tonne to $55,000 since the start of January.
This time last year, the price was bombed out at multi-year lows below $25,000 per tonne.
As with lithium, cobalt's story is all about batteries and the green technology revolution.
The lithium-cobalt battery is already standard in many electronic applications and both metals are expected to see usage accelerate thanks to the rapidly evolving electric vehicle and grid storage sectors.
And as with lithium, stellar demand projections have led to increased scrutiny of the supply chain.
Which is where cobalt may turn out to be even more of a rollercoaster market than lithium.
Graphic on the LME cobalt price: tmsnrt.rs/2nZRORf
The scale and speed of the cobalt price surge over the last few months reflects a scramble for units.
The cobalt market has been transitioning over the last year or so from a state of oversupply to one of shortfall, with most analysts forecasting a supply deficit in 2017.
That expectation coupled with all the excitement surrounding the lithium story seems to have led to several high-profile funds such as Switzerland's Pala Investments and China's Shanghai Chaos Investment buying up physical stocks of cobalt.
Which in turn seems to have triggered panic buying by cobalt users along the manufacturing chain.
The cumulative effect has been a near straight-line price rally since the fourth quarter of last year.
As ever with such rapid and violent price action, though, the drivers have in all probability abated just as the rest of the world sits up and pays attention.
That was how lithium played out last year and that's how analysts think cobalt will play out this year.
With the immediate panic about availability over, the upside price impetus should fade, leading to a period of consolidation or mild retreat over the second half of this year.
But cobalt's supply chain is much more fragile than that of lithium, with its big, established players operating brine lakes in the relatively stable environment of the "Lithium Triangle" straddling Chile and Argentina.
Cobalt, by contrast, is massively dependent on one highly unstable African country, the Democratic Republic of Congo (DRC).
The U.S. Geological Survey (USGS) estimates that last year the DRC accounted for 66,000 tonnes of global mined cobalt production of 123,000 tonnes.
In terms of reserves the country is estimated to have 3.4 million tonnes of cobalt, around half of the world's identified resources, again according to the USGS.
Cobalt mining in the DRC is dominated by Swiss trade house Glencore and a variety of Chinese players, all of which extract the metal as a copper by-product.
That's another kink in the cobalt supply chain since there are hardly any pure cobalt mines, leaving global production dependent on the economics of other metals such as copper and nickel.
Glencore's decision in late 2015 to suspend production at its Kamoto copper operations, for example, has also taken around 3,000 tonnes of cobalt out of the supply picture.
It will bring that production back on line next year but other short-term boosts to supply are likely few and far between because of the resource spending freeze that followed the low base-metals price environment of 2014-2015.
One producer, however, is probably able to react to higher prices and it's a particularly problematic player.
Artisanal mining is the "known unknown" in the DRC and global cobalt supply chain.
It may account for anything up to a fifth of the country's output but is difficult to quantify since it exists in the shadows of the official sector.
Like artisanal mining everywhere, production tends to be highly sensitive to price.
It's worth noting that despite the explosive rally towards the end of the year, 2016 was a period of low average pricing.
China's imports of cobalt raw materials shrank by 35 percent to 150,000 tonnes (bulk weight), with supply from the DRC falling by a harder 41 percent to 132,000 tonnes.
Some contraction in artisanal output was almost certainly in the mix.
This year, however, with prices at multi-year highs and China needing to restock raw materials again, it is the artisanal part of the supply chain that will act as swing supplier.
In essence, the current structure of the cobalt market means the key determinant of market balance and price will be the least transparent component of global production.
And also the most controversial component, given the increasing focus on ethical supply chains.
Cobalt has so far escaped the same level of scrutiny as, say, tin and tantalum, both of which also come from the DRC.
But it is only a matter of time before that changes, meaning even more pressure on the artisanal contribution to global supply.
Cobalt's problematic supply chain, with too much coming from one country and too much coming from the "grey" artisanal sector, may yet hobble its longer-term usage profile.
But right now it and lithium are two of the front-runners in the green revolution materials race.
It's partly that calculation that persuaded funds to get involved in cobalt as a lithium catch-up trade.
Cobalt is also easier to buy and store than lithium, which remains tightly controlled by a small oligopoly of producers.
The flip side, though, is it's also easier to short sell on an exchange such as the LME.
The LME's cobalt contract has been trading since 2010 and has done no more than tick quietly over for most of that time.
Volumes really started picking up late last year, though, as the price rally gathered momentum. Activity in the first two months of this year jumped to 2,396 lots from just 620 lots last year.
For now, it's the only exchange-traded cobalt contract. But that's one more than exists in the lithium market.
It's that tradeability that makes cobalt a potentially more volatile commodity than lithium. And given the nature of the cobalt supply chain, there may be no shortage of reasons for price volatility.
Editing by Dale Hudson