Chinese battery giant GEM seals huge Glencore cobalt deal

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‍Glencore, the world’s biggest producer of cobalt, has agreed to sell around a third of its cobalt production over the next three years to Chinese battery recycler GEM, according to a filing by GEM on Wednesday.

Glencore will sell 52,800 tons of cobalt hydroxide to GEM between 2018 and 2020 as demand for cobalt, a critical metal in lithium-ion batteries, soars on an expected boom in electric vehicle sales.

China is by a long distance the world's biggest producer of and market for electric vehicles. /VCG Photo

Reuters reported last week that Glencore was in talks to sell around a quarter of its cobalt output in a one-year deal to GEM, according to sources. Price was a sticking point as the Swiss-based global miner and other major producers are now able to exert more influence in negotiations.

Expectations of supply shortages have fueled a cobalt rally that has taken prices to around 39 US dollars per pound, from nearly 10 dollars per pound in January 2016. Current prices are at their highest level since July 2008, before the financial crisis started.

According to the filing, GEM and its subsidiaries will purchase 13,800 tons of cobalt hydroxide from Glencore in 2018. They will buy 18,000 tons in 2019 and 21,000 tons in 2020.

Glencore, whose cobalt is mined as a byproduct from its copper and nickel mines in the Democratic Republic of Congo, Canada and Australia, expects to produce around 39,000 tons of cobalt in 2018 – equal to about 35 percent of estimated global production.

Glencore expects its cobalt production to rise to 65,000 tons in 2019 and dip to 63,000 tons in 2020.

Source(s): Reuters