Hanrui Cobalt told the wire service it was unable to ascertain that its products did not involve the use of child labour in Africa.
Yantai Cash started buying from some of its cobalt from Hanrui mid-year and concerns about the metal had negatively impacted LME prices, volumes traded and open interest, Reuters reported.
"The market is worried Yantai's cobalt is sullied by child labour, the LME should take it off the deliverable list," a source on the exchange's cobalt committee told the news service.
Hanrui was audited by Resource Consulting Services (RCS Global) in November 2017 regarding its cobalt supply chain due diligence.
In a translated statement, the company said the inspector had "given certain recognition to Hanrui Cobalt's performance yet shortages and the direction to improvement were also pointed out."
"In accordance with the principle of continuous improvements and the company's policy, Hanrui Cobalt shall deepen and further the due diligence of a responsible cobalt supply chain," the company said.
It joined the Chinese-instigated Responsible Cobalt Initiative in October, which plans to become a legal entity and is designed to establish an inclusive, sustainable and responsible cobalt supply chain.
