The Democratic Republic of Congo dominates global cobalt export and accounts for 70% of global cobalt reserves. This means that the country plays a crucial role in controlling prices and meeting the growing needs of the battery industry.
Last month, the Committee of the Regulatory and Control Management Authority for the Strategic Mineral Market in the Democratic Republic of Congo (ARECOMS) introduced a four-month temporary ban on cobalt exports.
In 2024, Cobalt prices hit a 7-year low amidst oversupply and a glut. With this ban, the DRC attempts to stabilise the market and curb oversupply and plummeting prices.
This article is written to answer critical questions, help you understand the rationale behind this decision, and highlight its effects on Global cobalt supply.
Why the Cobalt Export Ban?
Although Approximately 70% of mined cobalt originates from the Democratic Republic of Congo (DRC), Chinese companies refine about 70% of the global cobalt supply. A halt in export volumes could significantly impact local processing of Congolese Cobalt.
The primary motivations behind the cobalt export ban include;
Stabilizing Cobalt prices
The DRC has witnessed a significant drop in cobalt prices. This is due to an oversupply in the global market. With this export ban, the DRC can reduce this surplus and drive prices upwards, thereby increasing revenue for the country.
Increasing National Economic Benefit
Although the DRC is the largest producer of Cobalt, China remains the largest processor of this commodity. This means the DRC can maximise the value of its mineral resources. The export ban is the first step in ensuring greater economic returns from its cobalt reserves.
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Formalising the Artisanal Mining Sector
Despite its global dominance, it was reported in 2022 that nearly three-quarters of the DRC’s population lives on less than $2.15 daily. With this ban, the DRC can regulate and formalise the artisan mining sector and gain better control over the cobalt supply chain.
Although Approximately 70% of mined cobalt originates from the Democratic Republic of Congo (DRC), Chinese companies refine about 70% of the global cobalt supply. A halt in export volumes could significantly impact local processing of Congolese Cobalt.
What Effects would DRC’s Cobalt Export Ban have on the Global Supply Chain?
As expected, the ban has sent ripple effects across markets. It has triggered market disruptions and forced stakeholders to take strategic shifts within the industry. However, more importantly, it shows the role of government in optimising resource value chains.
Some effects of DRC’s export ban include;
Supply Chain Strain
Cobalt refining companies typically hold 1-3 months of cobalt inventory. However, with this four-month ban, downstream producers will likely increase their inventory holdings to 6 months or more, which may strain their finances. For example, due to the ban, Eurasian Resources Group (ERG), the third largest cobalt-producing company in Congo, declared force majeure on deliveries. The Luxembourg-based company resorted to this because it has no stocks outside Congo.
This is just one of many key stakeholders within the industry who are impacted by the ban. Producers may resort to sourcing from other Cobalt producers in Africa, such as Zambia, South Africa, Madagascar, Morocco, and Zimbabwe, to ensure supply chain efficiency.
Price Volatility
As expected, Congo’s cobalt export ban will have some effect on the price of the commodity. Within a month, the London Metal Exchange reports that prices have surged by more than 50%, reaching US$33,560 per tonne.
The Search for alternatives
Congo’s export ban is also bound to accelerate the development of low-cobalt or cobalt-free batteries. Moreover, Chinese companies and other major stakeholders are exploring cobalt sources in Australia, Canada, Russia, etc.
Is Congo’s Export Ban enough to stop the Cobalt Glut?
Increased mining volumes in the DRC are one of the key drivers of oversupply in the cobalt market.
In 2024, CMOC—a Chinese mining company in the DRC and the world’s largest producer of cobalt—recorded a 178% year-on-year growth in cobalt metal production.
For context, the annual output guidance for 2024 was set at 60,000 to 70,000 tonnes at the start of the year. In 6 months, the company had already done 83% of that number (54024 tonnes).
It is also crucial to note that cobalt pricing is tied to the dynamics of the copper and nickel industries. This is because Cobalt is a by-product of nickel and copper. Hence, it has no independent floor price or self-correcting supply mechanism.
This is not the first time the DRC has halted exports. In 2022, the DRC government temporarily halted exports, disrupting nearly 10% of global cobalt production.
However, a ban on exports is only a short-term solution. If the ban is lifted, it may build up carbon hydroxide stocks and crash prices again. This happened in 2023 when CMOC didn’t stop production during the nearly year-long export halt. It simply accumulated more inventory at its factories.
The DRC must prioritise cobalt processing to increase the value of Cobalt exports in its economy.
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In conclusion, a just and sustainable global economy requires more than simply extracting resources. Africa needs to increase local value creation to position itself as a vital partner, not just a supplier.
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