Cobalt, which is not produced in the U.S., is essential to a number of
industries. (Defense accounted for 17% of the cobalt production in 1979.)
Most cobalt comes from central Africa, a politically unstable region. The
Strategic and Critical Materials Stockpiling Act of 1946 requires a cobalt
reserve that will carry the U.S. through a three-year war. The government
built up a cobalt stockpile in the 1950s, sold most of it in the early 1970s, and
then decided to build it up again in the late 1970s, with a stockpile goal of
85.4 million pounds. About half of this stockpile been acquired by 1982.
Build a mathematical model for managing a stockpile of the strategic
metal cobalt. You will need to consider such questions as:
- How big should the stockpile be?
- At what rate should it be acquired?
- What is a reasonable price to pay for the metal?
You will also want to consider such questions as:
- At what point would the stockpile be drawn down?
- At what rate should it be drawn down?
- What is a reasonable price at which to sell the metal?
- How should sold metal be allocated?
Below we give more information on the sources, cost, demand, and
recycling aspects of cobalt.
Useful Information on Cobalt
The government has projected a need of 25 million pounds of cobalt in
1985.
The U.S. has about 100 million pounds of proven cobalt deposits. Production
becomes economically feasible when the price reaches $22/lb (as
occurred in 1981). It takes four years to get operations rolling, and then six
million pounds per year can be produced.
In 1980, 1.2 million pounds of cobalt were recycled, 7% of total consumption.
Please see Figures 1-3, whose source is Mineral Facts and Problems, U.S.
Bureau of Mines (Washington, DC: Government Printing Office, 1980).
Figure 1. U.S. primary demand for cobalt, 1960-1980.
Figure 2. Cobalt prices in the U.S. market, 1960-1982.
Figure 3. Producers of refined metal and/or oxide, 1979. An asterisk denotes a country with
domestic production.
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