Thursday , April 22 2021

Exclusive: Chinese battery company ceases acquisition of Glencore cobalt – sources



LONDON / BEIJING (Reuters) – The Chinese battery company GEM stopped buying Glencore from the battery because the price of the battery dropped below that agreed by the sources indicated during the three year deal between two companies.

FILE PHOTO: The Glencore logo for the merchandiser is displayed in front of the company's headquarters in Bar, Switzerland, on July 18, 2017. REUTERS / Arnd Wiegmann / File photo

GEM (002340.SZ) Stated on March 14th that he would purchase 52,800 tonnes of cobalt from the mining and trading giant Glencore (GLEN.L) during the period from 2018 to 2020 without disclosing the price.

Cobalt prices CBD0 on the London Metal Exchange has almost halved to around $ 55,000 per ton since the end of March, when it reached record high demand growth. Cobalt is a decisive factor in the lithium-ion rechargeable batteries used for electric vehicles, which are a growing automotive industry.

World prices fell due to cobalt surplus in China, the world's largest producer of cobalt chemicals and electric vehicle batteries. It is expected that the market is expected to fight in the coming years due to the expected surplus.

"The price dropped so much," said one source, adding that GEM had no alternative suppliers but used its own cobalt stocks and that the Chinese company had recently tried to revise the contract.

According to the application, GEM and its subsidiaries from Glencore purchased 13,800 tonnes in 2018, 18,000 tonnes in 2019 and 21,000 tonnes in 2020.

"GEM does not buy prices that were priced. They did not open credit letters and said Glencore, sorry, but we can not accept it at an agreed price," said another source.

(To display the timetable "Cobalt price collapse encumbered industry", click tmsnrt.rs/2QMsfF0)

One source said that GEM was trying to revise the price, but it was much earlier in the year when the cobalt was closer to USD 70,000 per tonne. Another source said that recently there have been some steps to try to renegotiate.

Sources said they did not know if Glencore would try to sue GEM, but said that Chinese law meant that "rates are set against foreign companies" who want compensation when contracts fail.

GEM did not respond to a comment request. Glencore declined to comment.

Letters of Credit are issued by banks in order to guarantee payments to certain companies or individuals, as long as requirements such as delivery of goods are met.

Sources say that GEM was not the only one to stop purchases, as some other Chinese companies producing cobalt chemicals or lithium-ion batteries for electric vehicles also stopped their purchases.

At Glencore Investor Update on December 3, some customers were freed from cobalt contracts.

"All material that they are not sold seating in warehouses in Johannesburg," said the source of the cobalt industry.

Although the industry usually speaks of cobalt metal, the surplus is cobalt hydroxide used to make sulfates a part of cationic lithium-ion batteries.

Hydroxide is a copper by-product in the Democratic Republic of the Congo, with the world's largest reserves of cobalt. It is expected that the DRC will produce nearly 90000 tons this year, with a market value of 135,000 tons.

Prices for cobalt hydroxide, which are part of the metal price, also known as payables, exceeded 90% last year and dropped to around 65% since then.

"Despite the Katanga news, creditors are still around 65 percent," said Cobalt's industry source.

Glencore said in November its subsidiary Katanga Mining (KAT.TO) had stopped exports of cobalt from the Kamoto project to the DRC, while creating a uranium eradication facility.

The guidelines for producing cobalt from Katanga this year were 11,000 tons and in 2019 – 34,000 tons. Following the suspension of exports, 2019 directions were revised to around 26,000 tonnes.

Messages from Pratima Desai and Tom Daly; Editing Veronika Brown and Dale Hudson

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