(This May 23 story has been corrected to add Kisanfu to the penultimate paragraph)

By Pratima Desai

LONDON (Reuters) - China plans to buy up to 15,000 metric tons of cobalt metal from local Chinese producers over the next few months for domestic stockpiles, three sources familiar with the matter told Reuters, adding that it would be a record amount for a single purchase.

The planned purchase would be a big increase as industry sources say China's state stockpiler - the National Food and Strategic Reserves Administration - bought 8,700 tons of cobalt metal last year.

China dominates the processing of cobalt, most of it from the Democratic Republic of Congo (DRC), where it is a byproduct of copper output. In metal form it is used in the defence and aerospace industries and also in magnets for communication.

Cobalt metal purchases by the National Food and Strategic Reserves Administration could offset some of the surplus in the market this year.

"It could be as much as 15,000 tons that would be the most I remember in one tender," one of the sources familiar with the matter said.

The National Food and Strategic Reserves Administration did not respond to requests for comment.

Two of the sources said some of the cobalt bought by the National Food and Strategic Reserves Administration could be for military equipment.

A second source familiar with the matter said no agreement had yet been reached between China's state stockpiler and local producers.

"They (China stockpiler) have asked Chinese producers for numbers on availability and price. They will negotiate until they come to an agreement."

The third source said a ballpark price producers were looking for was 205 yuan or around $12 a lb, close to current cobalt prices which are near five-year lows.

Industry sources say China's plans to acquire 15,000 tons of cobalt would narrow the surplus in the market this year to around 20,000 tons. That compares with surpluses of around 11,000 and 16,000 tons in 2022 and 2023 respectively and excludes the amounts China bought for its stockpiles in those years, based on research by Macquarie analysts.

"It will take some pressure off cobalt prices, but it won't make much difference to an oversupplied market, given the amounts coming out of Congo," one industry source said.

According to Darton Commodities, Congo supplies last year amounted to 77% of the global total at more 170,000 tons.

Ramping up production in Congo is China's CMOC. Its Tenke Fungurume and Kisanfu mines in Congo produced more than 55,500 tons of cobalt last year and 25,200 tons in the first quarter of 2024.

Chinese cobalt producers have seemed unfazed by oversupply and plummeting prices, with some said to benefit from state support for a sector seen as vital to China's electric vehicle industry and the energy transition.