China-based battery recycler GEM Co. Ltd. ceased the purchase of cobalt from Glencore PLC, as the price of the battery metal tanked below the agreed price under a three-year deal, Reuters reported Dec. 13, citing sources familiar with the matter.
In March, GEM said that it will purchase 52,800 tonnes of cobalt from Glencore between this year and 2020, representing about a third of the Swiss trader's forecast production during the period, at an undisclosed price.
Prices for the commodity crashed to US$55,000 per tonne on the London Metal Exchange since late March, as a result of excess supply in China. The market for the battery metal is expected to take a hit in the coming years due to the expected surplus.
GEM tried to renegotiate the price twice, with the first instance said to have occurred when cobalt prices dropped to US$70,000/t. The Chinese firm was said to have made recent moves to attempt price negotiations.
In addition, some other Chinese firms producing cobalt chemicals or lithium-ion batteries for electric vehicles have also pulled back from purchasing the battery metal, Reuters sources said.
Earlier this month, Glencore lowered its adjusted marketing EBIT guidance for the full year to US$2.7 billion, plus or minus US$100 million, from the previous guidance of the top half of US$2.2 billion to US$3.2 billion. The trader partially attributed the downward revision to the nonperformance from cobalt contracts.