Glencore signs massive cobalt sale deal with China's GEM

FILE PHOTO - The logo of commodities trader Glencore is pictured in front of the company's headquarters in Baar, Switzerland, September 30, 2015. REUTERS/Arnd Wiegmann/File Photo

(Reuters) - Glencore Plc, 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 Co Ltd, according to a filing by GEM on Wednesday.

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

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 a pound, from near $10 a pound in January 2016 and to their highest level since July 2008, before the financial crisis started.

According to the filing, GEM and its subsidiaries will purchase 13,800 tonnes of cobalt hydroxide from Glencore in 2018. They will buy 18,000 tonnes in 2019 and 21,000 tonnes 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 tonnes of cobalt in 2018 - equal to about 35 percent of estimated global production.

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

Reporting by Nicole Mordant in Vancouver; Editing by Matthew Lewis