"This rally will not continue for long. European traders have been stirring up prices," a trader at a Japanese trading house said.

Another trader at a foreign trading house said deals have been scarce during the past two weeks, and that rising prices seem to have lost momentum.

High-grade cobalt was quoted on Tuesday at about $20.00/$25.00 per lb, up from $19.00/$21.00 two weeks ago.

Low-grade cobalt was also firmer at about $18.00/$21.00 per lb, up from $17.25/$18.25 two weeks ago.

"Japanese users will not buy cobalt at more than $20.00, because when setting their budgets for this year the majority set the purchasing price at about $15.00 or less," the first trader said.

The market was viewed as tight, mainly on limited supply from African producers and uncertainty over Australian supply, traders said.

Anofficial at the Tokyo branch of Swiss trading group Glencore International on Tuesday declined to comment on this year's cobalt output from the Murrin Murrin nickel/cobalt deposit in Western Australia.

He said nickel shipments began gradually in June, however.

Glencore markets all of Murrin Murrin's nickel and cobalt production.

Traders said that at the beginning of the year they had expected Japanese demand for cobalt in 1999 to remain largely unchanged from the previous year at about 7,000 tonnes.

"There could be a rise in demand for (rechargeable) batteries in the latter half of the year, but the difference will not be drastic," the first trader said.

They also said they expected a slight pick-up in demand in the molybdenum oxide market from July.

"The original forecast was for (demand of) about 40 million tonnes for 1999, about 10 per cent less than last year," said a trader at another Japanese trading house.

"But now we expect an increase of one million to two million tonnes due to a likelyrecovery in the consumption of stainless steel and pipe," he said.

Molybdenum oxide prices were quoted at about $2.75/$2.85 perlb on Tuesday, unchanged from two weeks ago.

Chinese magnesium was also unchanged from two weeks ago at $1,700/1,800 per tonne, traders said.