The DRC’s four-month cobalt export ban temporarily raised prices but won’t fix the oversupply issue, reports Andy Home of Reuters. Increased global production and declining demand for electric vehicles have the market flooded. Home writes:
The Democratic Republic of Congo’s four-month suspension of cobalt exports is a sign that even the world’s largest producer is now feeling the pain of historically low prices.
The news has given the cobalt market a fillip and the impact is already rippling through the supply chain with one Congolese operator, Eurasian Resources Group (ERG), declaring force majeure on deliveries of the electric vehicle battery metal. […]
The cobalt price was languishing at multi-year lows of $10 per lb prior to the Congo’s surprise decision to suspend all exports.
In most commodity markets such rock-bottom pricing would have already caused a major supply response.But the impact in cobalt has been limited. […]
The problem is that 98% of the world’s cobalt comes as a by-product to either nickel or copper, meaning the metal has no independent floor price or self-correcting supply mechanism.
Production has continued booming because of surging nickel output in Indonesia, the world’s second largest cobalt producer, and rising copper output in the Congo itself.
China’s CMOC Group (603993.SS), reported a 55% year-on-year increase in copper output from its Congo operations last year. Along with the copper came an extra 60,000 tons of cobalt, flooding an already over-supplied market. […]
The Congo government has already mooted a Ukraine-style minerals deal with Western countries as it struggles to fend off the M23 rebel group, which is expanding its control of the country’s eastern province of Kivu.
Negotiating a long-term supply deal with the West might be the country’s best hope of finding a home for its excess production.
A four-month export ban is not going to do the trick.
Read more here.
