DRC to slap export quotas on cobalt

The Democratic Republic of Congo (DRC), the world’s largest cobalt producer accounting for three-quarters of output, plans to place export quotas on the battery metal after setting a four-month ban last month.

The export ban has already lifted cobalt prices by two-thirds from around US$9.77 per lb. during most of February to $16.30 per lb. as of Tuesday, a level last seen two years ago.

The quota program, first reported by Reuters on Wednesday, aligns with expectations following DRC’s cobalt ban announcement on Feb. 22, BMO Capital Markets said in a note on Thursday. DRC Prime Minister Judith Suminwa Tuluka said the quota is to be rolled out in two parts, one focused on exports and the other on local mineral transformation.

DRC’s February ban was estimated to remove about 65,000 tonnes of supply and shoot up cobalt prices in the near-term, BMO analyst George Heppel wrote last month.

“While this ban is ostensibly ‘temporary’, it strongly signals the DRC’s desire to capitalize on its monopoly position in the cobalt market,” he said. “We fully expect to see further supply control in the coming years, with the most likely mechanism being production or export quotas.”

The export bans come in the context of cobalt’s oversupply and slowing demand from the battery sector, pushing prices to their lowest level in history on an inflation-adjusted basis. DRC is also in discussion with Indonesia, the second-biggest cobalt producer, on how to manage the metal’s supply globally.

Indonesia talks

DRC, which produces 76% of global cobalt supply, had reportedly begun speaking with Indonesia about the collaboration before its export curbs were announced. The Southeast Asian country is the globe’s top producer of nickel and also outputs 10% of the global supply of cobalt, often mined as a byproduct of nickel and copper.

Cobalt’s oversupply pushed some firms such as Australian Jervois Global, which owns the only U.S. cobalt mine, to shutter. Supply concerns also spurred General Motors in October to promote lithium iron phosphate technology, which uses less cobalt and cuts costs by up to $6,000 per vehicle.

Meanwhile, M23 rebels continue to push into eastern DRC and on Thursday captured the mining hub town of Walikale, in restive North Kivu province. The area is reportedly rich in minerals including gold and tin, and last week Alphamin Resources (TSXV: AFM) suspended its Bisie tin mine due to the instability. Tin prices then rose to their highest level in eight months, touching $34,996 per tonne on the London Metal Exchange (LME).

Congolese President Félix Tshisekedi has called on other countries to buy minerals directly from DRC instead of from Rwanda, which is accused of sourcing smuggled metals from its neighbours. Tshisekedi has also reportedly floated a proposal for a minerals-for-arms deal like the United States is proposing for Ukraine.