DR Congo, the largest producer of cobalt in the world, has imposed a temporary freeze on exports of the mineral in order to curb the glut which has caused prices to go into freefall. Last month, the government issued a 4-month moratorium on cobalt exports, which is essential in the manufacture of EV batteries. The temporary ban will be reviewed in three months before the next steps are announced.
According to available statistics, DR Congo supplied at least 76% of the global cobalt production last year. However, the prices of this mineral have nosedived by 75% in a period of three years, and they are currently at their lowest level recorded in eight years.
Robert Searle, an analyst employed by Fastmarkets, cautions that the temporary ban poses serious risks. He explains that Chinese firms have invested heavily in the DR Congo’s mining industry and the freeze sends bad signals to other investors considering Congo as an investment destination. Additionally, the moratorium could, in the long term, trigger innovations aimed at making batteries without cobalt or designing those that require minimum amounts of this mineral, Searle says.
As a result of this freeze, cobalt prices spiked by 12% at the start of this week in China and trading in the mineral was halted. Given that the inventory held by Chinese firms is unlikely to last for the entire duration of this export ban, there is a high likelihood that prices could spike further since the DR Congo dominates cobalt production and alternative sources can’t make up for the supply shortfall resulting from the export freeze.
The glut in the market resulted from an increase in cobalt production in DR Congo after CMOC, a Chinese company, ramped up production at its two cobalt mines in Congo. These mines are the largest producers of the mineral in the country. Additionally, the rise of the global prices for copper also contributed to oversupply in the cobalt market since cobalt is a common by-product of copper extraction.
It is noteworthy that the mining sector is responsible for 70% of DR Congo’s GDP. The plummeting prices of cobalt on the world market could therefore have dealt a major blow to the country’s economy, hence the decision to halt exports. The country is also embroiled in a raging civil war in the east, which is putting a further strain on the economy. Only time will tell how all these challenges will be resolved.
As other entities like Aston Bay Holdings Ltd. (TSX.V: BAY) (OTCQB: ATBHF) make progress in their programs to create new sources of cobalt and other minerals in North America, the stranglehold that the Democratic Republic of Congo has on the global supply of cobalt could be gradually weakened.
NOTE TO INVESTORS: The latest news and updates relating to Aston Bay Holdings Ltd. (TSX.V: BAY) (OTCQB: ATBHF) are available in the company’s newsroom at https://ibn.fm/ATBHF
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