exclusive: chinese battery firm halts purchases of cobalt from glencore - sources - lithium ion rechargeable battery

BEIJING/LONDON (Reuters)-
China battery company GEM has stopped buying cobalt from Glencore as the price of battery materials has fallen below the agreement in three years
People familiar with the matter said the annual deal between the two companies.
Gem said in a regulatory document in March 14 that it will buy 52,800 tons of cobalt from mining and trade giant Glencore between 2018 and 2020, but did not disclose the price.
Since the end, the price of cobalt on the London Metal Exchange has almost halved to about $55,000 a tonne, when prices hit a record high due to expected demand growth.
Cobalt is critical to lithium
Ion rechargeable batteries for electric vehicles, a growing sector in the automotive industry.
Global prices have fallen as China, the world's largest maker of cobalt chemicals and electric vehicle batteries, has seen a surplus of cobalt.
Due to the expected oversupply, the market is expected to struggle in the next few years.
"Prices have fallen so much," said a source, adding that there are no other suppliers on gem but are using its cobalt inventory and that Chinese companies have not recently tried to renegotiate contracts.
According to the document, gem and its subsidiaries will purchase 13,800 tons of cobalt from Glencore in 2018, 18,000 tons in 2019 and 21,000 tons in 2020.
"GEM did not buy for price reasons.
"They did not open a letter of credit and said to Glencore, sorry, we can't accept it at the agreed price," another source said . ".
A source said the gem had tried to renegotiate prices, but earlier this year the price of cobalt was close to $70,000 a tonne.
Another source said there have been some recent moves to try to renegotiate.
Sources say they don't know if Glencore will sue gem, but a person familiar with the matter said Chinese law means that when the contract breaks down, "there is a high probability of competition with foreign companies.
GEM did not respond to Reuters's request for comment, saying on Friday that it did not stop buying cobalt raw materials from Glencore when answering a question on an investor platform provided by the Shenzhen Stock Exchange.
The company added that it continued to access nickel and cobalt raw materials through the dual strategy of "urban mining", or recycling waste and used batteries, as well as cooperation with key international players.
Glencore declined to comment.
The letter of credit is issued by the bank, and as long as the requirements such as delivery of goods are met, payment to a specific company or individual can be guaranteed.
The gem is not the only company to stop buying because some other Chinese companies that produce cobalt chemicals or lithium-the source said --
Ion batteries for electric cars also stopped buying.
Glencore's investors were updated in December.
He said that some customers had violated the contract for cobalt.
"All the materials they did not sell were placed in the warehouse in Johannesburg," said a cobalt industry source . ".
While the industry usually talks about cobalt metals, the rest is cobalt hydroxide, which is used to prepare sulfuric acid for the cathode part of lithiumion batteries.
Hydroxide is a by-product of Congo (gold) copper, which has the largest cobalt reserves in the world.
It is estimated that Congo will produce nearly 90,000 tons this year, with a market size of about 135,000 tons.
The price of cobalt hydroxide, a percentage of the metal price also known as payables, reached a level of more than 90% last year and has since dropped to around 65%.
"Despite the news of Katanga, the amount payable is still around 65%," said a cobalt industry source.
On November, Glencore said that its subsidiary, Katanga Mining, had stopped the cobalt export of the Kamoto project while building uranium removal facilities.
The production of cobalt in Katanga this year was 11,000 tons, compared with 34,000 tons in 2019.
2019 of the guidance was revised to about 26,000 tons after the export was stopped.