LONDON / BEIJING (Reuters) – The Chinese GEM battery company has given the best to buy cobalt from Glencore as the price of the battery material has been accidentally below agreed in a three-year agreement between the two companies, and said sources closely to the matter.
FILE PHOTO: Glencore's merchandise merchant logo is pictured in front of the company headquarters in Baar, Switzerland, July 18, 2017. REUTERS / Arnd Wiegmann / File Photo
GEM (002340.SZ) in a March 14 regulatory file that would buy 52,800 tonnes of cobalt from large Glencore mining and trading (GLEN.L) between 2018 and 2020, without revealing the price.
The Cobalt CBD0 prices on the London Metal Exchange almost halved to around $ 55,000 per tonne since the end of March, when they reach record highlights on the expected growth of demand. Cobalt is essential for the lithium ion rechargeable batteries used to power electric vehicles, a growing sector of the car industry.
Global prices are growing because of the remainder of cobalt in China, the world's largest manufacturer of cobalt chemicals and electric vehicle batteries. The market is expected to fight for some years to come because of the oversight.
"The price had fallen so much," said one source, adding that GEM had no other supplier but used its cobalt lists and that the Chinese company had not tried to re-negotiate the contract recently.
According to the filing, GEM and subsidiary companies bought 13,800 tonnes of cobalt from Glencore in 2018, 18,000 tonnes in 2019 and 21,000 tonnes in 2020.
"GEM did not buy because of what happened to the price. They did not open the credit letters and said to Glencore, we are sorry, but we can not take it at the agreed price," said source another.
(For graphics on Cobalt price price cover & industry & click tmsnrt.rs/2QMsfF0)
One source that GEM had tried to negotiate the price, but that was much earlier in the year when cobalt was closer to $ 70,000 per tonne. Another source said that some moves had been recent to try to re-negotiate.
The sources said they did not know if Glencore was trying to sue a GEM, but one said that Chinese law meant "the inconveniences are being rotated against overseas companies" who want compensation when contracts broke down .
GEM did not respond to a request for attention. Glencore refused to comment.
Credit letters are issued by banks to guarantee payments made to companies or specific people as long as requirements such as the provision of goods are met.
Sources said that GEM was not alone in the prevention of purchases, as some other Chinese companies that do cobalt chemicals or lithium-ion batteries for electric vehicles have also stopped buying.
Glencore in an investor update on December 3 said that some customers had recruited cobalt contracts.
"All non-sale material is sitting in warehousing in Johannesburg," said cobalt industry source.
Although the industry usually talks about cobalt metal, the cobalt hydroxide surplus, which is used to make sulfates for the cats part of lithium-ion batteries.
Hydroxide is a byproduct of copper in the Democratic Republic of the Congo, which is home to the world's largest cobalt reserves. The DRC is expected to produce almost 90,000 tonnes this year in an estimated market of 135,000 tonnes.
Cobalt hydroxide prices, a percentage of the metal price also called payable, reach levels above 90 per cent last year, and since then they have slipped to around 65 per cent.
"Payable payments are still around the 65 per cent level, despite Katanga news," says cobalt industry source.
Glencore in November said his mining subsidiary of Katanga (KAT.TO) has stopped cobalt exports of the Kamoto Project in the DRC while it is building a uranium disposal facility.
Guidelines for the production of cobalt from Katanga were 11,000 tonnes this year and 34,000 tonnes in 2019. Guidelines for 2019 were reviewed to approximately 26,000 tonnes after the export stop.
Report by Pratima Desai and Tom Daly; Edited by Veronica Brown and Dale Hudson