DR Congo Prepares A New Cobalt Export System After Export Ban Recovers The Market
News Summary
The Democratic Republic of Congo's (DRC) cobalt export ban is set to expire on October 15, having significantly impacted market prices for the battery metal, which rebounded over 60% since February. The ban, implemented in February and extended twice, followed prices hitting a nine-year low near $10 per pound in early 2025 due to oversupply from copper-cobalt mines, mostly operated by Chinese companies, and weak demand from EV manufacturers. Kinshasa officials will replace the blanket ban with a quota-based system effective October 16. This system aims to curb oversupply without halting shipments entirely, setting annual export limits at 18,000 tons for 2025 and 96,600 tons for 2026 and 2027. This is a significant reduction compared to the country's nearly 220,000 tons produced in 2024. Cobalt prices have since rebounded to around $16 per pound on COMEX, while cobalt sulfate in China's EV supply chain reached $6,947 per ton in August, over 90% higher than at the start of the year. While Glencore, the second-largest producer, supports the quota system, top producer CMOC favors a full lifting of restrictions. The DRC's export strategy faces international scrutiny and is complicated by an ongoing conflict in eastern Congo, which authorities claim is funded by illegal mining. Geopolitically, both Washington and Beijing have been stockpiling cobalt, with the US seeking supply diversification and recently awarding funding for a feasibility study to expand a copper-cobalt mine in Zambia.
Background
The Democratic Republic of Congo (DRC) is the world's dominant cobalt producer, accounting for over 70% of global output and 80% of refined production. This metal is critical for electric vehicle (EV) batteries and other high-tech applications, making the DRC a pivotal player in the global energy transition. The cobalt market is notoriously volatile, with prices highly sensitive to supply-demand dynamics, geopolitical stability, and global economic conditions. In early 2025, cobalt prices plunged to a nine-year low near $10 per pound, driven by oversupply from copper-cobalt mines—many operated by Chinese firms—and softening demand from EV manufacturers. In response to this price collapse and to protect national revenues, the DRC imposed a blanket cobalt export ban in February 2025, subsequently extending it twice. The lifting of this ban and the introduction of a new quota system mark a strategic shift by the DRC to more actively manage its critical mineral resources to stabilize the market and maximize national benefits.
In-Depth AI Insights
What are the true drivers behind the DRC's new quota system, beyond simply stabilizing prices? - Ostensibly, the quota system aims to stabilize cobalt prices and capture higher revenues from global demand, a direct response to the price crash in early 2025. - However, deeper motivations likely include the DRC's strategic intent to assert greater control over its critical mineral supply chain, reduce over-reliance on foreign mining companies (particularly Chinese firms), and leverage its dominant position as a geopolitical bargaining chip. - It's also about maximizing mineral wealth and enhancing the country's negotiating power in international markets by controlling supply. Furthermore, internal divisions (e.g., Glencore vs. CMOC) suggest the quota system is also a tool for the government to balance the interests of major miners with national strategic objectives. What are the long-term implications of this policy for US-China strategic competition in critical minerals and the resilience of the global EV supply chain? - The DRC's quota system will accelerate both US and Chinese efforts towards diversifying critical mineral supply chains. The US has already signaled its intent to reduce reliance on single producers and is funding alternative sources like the Zambian mine expansion. China, despite recent stockpiling, may also re-evaluate its exposure to the DRC. - This will intensify competition for influence in other cobalt-rich African nations (e.g., Zambia) and could spur increased R&D and investment in alternative battery technologies (e.g., cobalt-free chemistries). - For the global EV supply chain, it signals greater, more structural uncertainty, forcing manufacturers to either secure more diversified supply channels or significantly invest in battery recycling, thereby increasing supply chain resilience but potentially also costs. How does this policy shift impact major mining companies operating in the DRC and their investment prospects? - For established large producers like Glencore, which supports a quota system, this could mean market share stability and potentially higher cobalt prices, boosting profitability. Quotas could effectively favor companies able to secure larger allocations and comply with new regulations. - Conversely, for companies like CMOC, which favors a full lifting of restrictions, the quota system may limit their expansion capabilities and output, forcing them to adjust operational strategies. This could lead some companies to reassess their long-term investment plans in the DRC and potentially trigger further negotiations with the government. - Overall, increased policy uncertainty might raise the risk premium for operating in the region, but for companies that can effectively manage political and geopolitical risks, it could also lead to outsized returns.