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Glencore signs deal with China’s GEM Co for its annual cobalt production

Glencore, has signed a deal with China’s GEM Co, committing to sell approximately a quarter of its annual cobalt production over the next five years. The leading cobalt producer will sell at least 61,200 tonnes of cobalt hydroxide to GEM between 2020 and 2024. This is as Beijing moves to secure supplies of the critical metal needed for the batteries that power electric vehicles (EVs).

GEM’s chairman, Kaihua Xu, in a press statement said that the 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.

This deal comes less than a year after the Shenzhen-listed company walked away from a similar supply agreement due to a sudden slump in cobalt prices triggered by oversupply from the Democratic Republic of Congo.

According to research analysts, however, given the size of the off-take, the deal is likely to trigger “some scramble” from automakers and equipment manufacturers to lock in cobalt units for NCM cathode production.

Glencore’s decision to shut its Mutanda mine, the world’s largest cobalt source, has breathed new life into the market since August. However, prices have responded slowly, with the metal still trading at around US $18 per pound, according to Fastmarkets, less than half the over US $40 a pound it hit in early 2018.

The supply deal will see the Swiss giant sending 12.240 tonnes of cobalt per year or about a quarter of its expected total output, now mainly coming from the Katanga mine in the DRC.

Glencore expects its cobalt production to hit to 65,000 tonnes this year and dip to 63,000 tonnes in 2020.

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