GEM signs five-year, 61kt cobalt hydroxide supply contract with Glencore [UPDATED]

Chinese cobalt producer GEM Co Ltd has signed a cobalt supply contract with Switzerland-based miner-trader Glencore, locking in cobalt hydroxide supply for the next five years, the companies announced on October 7.

Glencore will supply GEM, including four of its wholly-owned subsidiaries, with at least 61,200 tonnes of cobalt (contained in hydroxide) between 2020 and 2024.

According to the agreement, GEM will purchase 13,200 tonnes of cobalt (contained in hydroxide) in 2020, and 12,000 tonnes per year in the following four years.

Furthermore, Glencore will give priority to GEM to supply the latter with additional cobalt hydroxide outside the above strategic procurement scheme, GEM said in its announcement dated September 30 and published on its website on October 7.

The supply agreement will meet GEM's increasing demand for cobalt raw materials due to its business expansion on battery raw materials for the next five years, GEM said.

“This agreement represents a major cornerstone in GEM’s cobalt sourcing strategy as it will support GEM’s continued contribution to the Chinese new energy market…GEM truly appreciates Glencore’s long-term approach and its support in establishing a stable and sustainable cobalt supply chain,” GEM chairman Mr Xu said.

Cobalt hydroxide prices are typically settled as a percentage payable of Fastmarkets’ benchmark standard grade cobalt price assessment.

Fastmarkets’ cobalt hydroxide payable indicator, min 30% Co, was last assessed at 68-70%, payable of Fastmarkets’ standard-grade cobalt price (low-end), rising from lows of 59-60% in July, mainly in response to the news that Glencore will close its Mutanda mine in the Democratic Republic of Congo at the end of the year.

The cobalt standard grade in-whs Rotterdam price stands at $17.65-18.15 per lb, according to Fastmarkets’ October 4 assessment, down from $26.50-28.50 per lb at the beginning of the year.

Some cobalt buyers were reluctant to lock-in long-term contracts for the supply of cobalt at the end of 2018, due to rising production, good availability, and concerns over real consumption by the battery sector, preferring to buy in the spot market or on short-term contracts.

“This long-term partnership provides Glencore with a stable outlet for a significant portion of its expected future cobalt hydroxide production,” Glencore’s head of copper and cobalt production, Nico Paraskevas, said.

Production of cobalt (in hydroxide) is ramping up at Glencore’s Katanga, also in the DRC, and is expected to total 14,000 tonnes in 2019.

Mutanda which is slated to produce about 25,000 tonnes of cobalt this year, will be placed on care and maintenance at the end of 2019.

[This is an updated version of an article originally published at 10.26 UK time, now with statements from GEM and Glencore, and with details on Glencore’s cobalt production.]

Charlotte Radford

charlotte.radford@fastmarkets.com

Susan Zou

susan.zou@metalbulletinasia.com

Published

Charlotte Radford

Susan Zou

October 07, 2019

13:42 GMT

Shanghai, London