Reuters reported that Chinese battery firm GEM has stopped buying cobalt from Glencore as the price of the battery material crashed below that agreed in a three-year deal between the two companies, sources close to the matter said. GEM said in a March 14 regulatory filing that it would buy 52,800 tonnes of cobalt from mining and trading giant Glencore between 2018 and 2020, without revealing the price.

Cobalt prices CBD0 on the London Metal Exchange have nearly halved to around USD 55,000 (43,447.35 pounds) a tonne since late March, when they hit record highs on expected demand growth. Cobalt is crucial for the lithium-ion rechargeable batteries used to power electric vehicles, a growing sector of the auto industry.

Global prices tumbled due to a surplus of cobalt in China, the world’s largest manufacturer of cobalt chemicals and electric vehicle batteries. The market is expected to struggle for some years to come due to expected oversupply.

One source said that “The price went down so much, adding that GEM had no alternative supplier but was using its inventories of cobalt and that the Chinese firm had not attempted to renegotiate the contract recently.”

According to the filing, GEM and its subsidiaries were to purchase 13,800 tonnes of cobalt from Glencore in 2018, 18,000 tonnes in 2019 and 21,000 tonnes in 2020.

Another source said that “GEM didn’t buy because of what happened to the price. They didn’t open the letters of credit and said to Glencore, sorry, but we can’t take it at the agreed price.”

One source said GEM had tried to renegotiate the price, but that was much earlier in the year when cobalt was nearer USD 70,000 a tonne. Another source said there had been some moves recently to try to renegotiate.

The sources said they did not know whether Glencore would try to sue GEM, but one said Chinese law meant “the odds are stacked against foreign firms” wanting compensation when contracts had broken down.

GEM did not respond to a request for comment. Glencore declined to comment.

Letters of credit are issued by banks to guarantee payments made to specific companies or people so long as requirements such as the delivery of goods are met.

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