China is taking advantage of tumbling cobalt prices to build up its inventories of the metal used in electric-vehicle batteries and aerospace alloys.

The National Food and Strategic Reserves Administration, the government stockpiling body, may buy about 2 000 tons of cobalt, according to people familiar with the matter.

The agency invited three local refiners and a state-owned trader to a meeting in Beijing last week to discuss the potential buying agenda, said the people, who asked not to be identified because they’re not authorized to speak publicly. The purchases will likely happen in the second half if the tenders are accepted, they said.

The National Development and Reform Commission, which oversees the reserves administration, didn’t immediately reply to a faxed request for comment.

Global cobalt prices have tumbled more than 60% from May 2022 on rising output from the Democratic Republic of Congo and Indonesia. There could be a global surplus of 30,000 tons of the metal this year, which may widen further in 2024, according to Rystad Energy.

Chinese refiners, which dominate processing of cobalt, are heavily reliant on material that comes from DRC mines, although Indonesia is quickly emerging as an important source. Surging violence in the eastern DRC could further destabilize the country as it prepares for elections in December, a group of experts from the United Nations warned last month.

The falling cobalt prices have provided relief to manufacturers and automakers, but some are trying to phase out the metal from their batteries because of ethical concerns about DRC production, and after bouts of price volatility in recent years. However, the shift away from cobalt will likely be very gradual, meaning the metal will be required for years to come.

The last time China stocked up on cobalt was in 2020 when it bought 2 000 tons of the metal for its strategic commodity reserves, in order to counter supply disruptions in DRC due to Covid-19.