China’s GEM is said to stop buying cobalt from Glencore
Chinese battery maker GEM Co. has halted buying cobalt from Glencore Plc after prices fell below the agreed level under a three-year contract signed earlier this year, according to a person familiar with the matter.
Cobalt prices have dropped more than 25 percent since a peak in April amid growing concerns that too much supply has been brought online in response to surging prices. Last week Glencore warned that some buyers in China reneged on contracts after seeing prices plunge, forcing the company to renegotiate the commercial terms of the deals.
Glencore, the biggest producer of the key battery ingredient, is now in the process of trying to negotiate with its contracted buyers, said the person who declined to identified as the matter is private. Reuters earlier reported that GEM had stopped buying from Glencore.
“GEM and Glencore are always strategic partners,” the Chinese company said in a statement posted on a website of the Shenzhen Stock Exchange. “The cobalt supply business with Glencore is always operating normally. We have never stopped our cooperation. Glencore and GEM are jointly actively coping with challenges in the cobalt supply market.”
GEM and its subsidiaries agreed in March to lock in 13,800 metric tons of cobalt contained in hydroxide from Glencore this year before rising to 18,000 tons in 2019 and 21,000 tons in 2020. The figures represented about 35 percent of Glencore’s planned cobalt production this year at the time of the announcement.
The company said last week that there could be an oversupply of the metal in the next two to three years, while Chief Financial Officer Steve Kalmin said a lack of hedging tools in the market could leave it exposed.
Last month, Glencore’s Katanga Mining Ltd. unit suspended sales of cobalt due to concerns about uranium contamination.
(By Thomas Biesheuvel)