https://www.miningweekly.com
Copper|Export|Mining|Power|PROJECT
Copper|Export|Mining|Power|PROJECT
copper|export|mining|power|project

Chinese battery firm halts purchases of cobalt from Glencore – sources

14th December 2018

By: Reuters

  

Font size: - +

LONDON/BEIJING – Chinese battery firm GEM has stopped buying cobalt from Glencore as the price of the battery material crashed below that agreed in a three-year deal between the two companies, sources close to the matter said.

GEM said in a March 14 regulatory filing that it would buy 52 800 tonnes of cobalt from mining and trading giant Glencore between 2018 and 2020, without revealing the price.

Cobalt prices on the London Metal Exchange have nearly halved to around $55 000 a tonne since late March, when they hit record highs on expected demand growth. Cobalt is crucial for the lithium-ion rechargeable batteries used to power electric vehicles, a growing sector of the auto industry.

Global prices tumbled due to a surplus of cobalt in China, the world's largest manufacturer of cobalt chemicals and electric vehicle batteries. The market is expected to struggle for some years to come due to expected oversupply.

"The price went down so much," one source said, adding that GEM had no alternative supplier but was using its inventories of cobalt and that the Chinese firm had not attempted to renegotiate the contract recently.

According to the filing, GEM and its subsidiaries were to purchase 13 800 tonnes of cobalt from Glencore in 2018, 18 000 tonnes in 2019 and 21 000 tonnes in 2020.

"GEM didn't buy because of what happened to the price. They didn't open the letters of credit and said to Glencore, sorry, but we can't take it at the agreed price," another source said.

One source said GEM had tried to renegotiate the price, but that was much earlier in the year when cobalt was nearer $70 000 a tonne. Another source said there had been some moves recently to try to renegotiate.

The sources said they did not know whether Glencore would try to sue GEM, but one said Chinese law meant "the odds are stacked against foreign firms" wanting compensation when contracts had broken down.

GEM, which did not respond to a request by Reuters for a comment, on Friday said in response to a question on an investor platform provided by the Shenzhen Stock Exchange that it had not stopped purchasing cobalt raw materials from Glencore.

The company continues to source nickel and cobalt raw materials through a dual strategy of "urban mining," or the recycling of scrap and spent batteries, and cooperation with major international players, it added.

Glencore declined to comment.

Letters of credit are issued by banks to guarantee payments made to specific companies or people so long as requirements such as the delivery of goods are met.

Sources say GEM wasn't alone in stopping purchases, as some other Chinese firms making cobalt chemicals or lithium-ion batteries for electric vehicles had also halted their buying.

Glencore in an investor update on Dec. 3 said some customers had reneged on contracts for cobalt.

"All the material they haven't sold is sitting in warehouses in Johannesburg," a cobalt industry source said.

While the industry typically talks about cobalt metal, the surplus is in cobalt hydroxide, used to make sulphates for the cathode part of lithium-ion batteries.

Hydroxide is a byproduct of copper in the Democratic Republic of Congo, which houses the world's largest reserves of cobalt. The DRC is expected to produce nearly 90 000 tonnes this year in a market estimated at 135 000 tonnes.

Prices for cobalt hydroxide, a percentage of the metal price also known as payables, hit levels above 90 percent last year and have since slipped to around 65 percent.

"Payables are still around the 65 percent level, despite the Katanga news," the cobalt industry source said.

Glencore in November said its subsidiary Katanga Mining had halted cobalt exports from the Kamoto Project in the DRC while it builds a facility to remove uranium.

Guidance for cobalt production from Katanga was 11 000 tonnes this year and 34 000 tonnes in 2019. Guidance for 2019 was revised down to around 26 000 tonnes after the export halt.

Edited by Reuters

Comments

Showroom

Universal Storage Systems (SA)
Universal Storage Systems (SA)

South African leader in Steel -Racking, -Shelving, and -Mezzanine flooring. Universal has innovated an approach which encompasses conceptualising,...

VISIT SHOWROOM 
Aqs image
AQS Liquid Transfer

AxFlow AQS Liquid Transfer (Pty) Ltd is an Importer and Distributor of Pumps in Southern Africa

VISIT SHOWROOM 

Latest Multimedia

sponsored by

Hyphen, Eva mine, ferrochrome price make headlines
Hyphen, Eva mine, ferrochrome price make headlines
27th March 2024
Resources Watch
Resources Watch
27th March 2024

Option 1 (equivalent of R125 a month):

Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format

Option 2 (equivalent of R375 a month):

All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.

Already a subscriber?

Forgotten your password?

MAGAZINE & ONLINE

SUBSCRIBE

RESEARCH CHANNEL AFRICA

SUBSCRIBE

CORPORATE PACKAGES

CLICK FOR A QUOTATION







sq:0.062 0.097s - 93pq - 2rq
Subscribe Now