DR Congo to support cobalt prices by buying ‘artisanal’ supply

DR Congo to support cobalt prices by buying ‘artisanal’ supply

The Democratic Republic of Congo will create a state-owned company to buy all the cobalt mined by hand in the country, in an effort to support the price of the key battery material used in electric cars. The government said it wants to “control the entire value chain” of the informal mining sector in order to boost state revenues, according to a decree signed by the prime minister and posted online on Thursday.

The move is a sign of an effort to clean up a supply chain that is dominated by Chinese traders, who buy from thousands of individual miners, including children, who dig for cobalt by hand without any safety protection and earn between $1 and $3 a day. The DRC produces more than 60 percent of the world’s cobalt, with an estimated 10 percent coming from individual miners.

The metal is mostly exported to China and processed into battery materials. In 2018 the government declared cobalt a “strategic” metal and increased the taxes that large miners in the country had to pay to the state. But the price of cobalt has fallen from $40.50 a pound in 2018 to $16.70 after a flood of metal from the country hit global markets last year, most of it mined by hand in the southeastern part of the country around the town of Kolwezi.
 
The government will create an entity under Gecamines, the state-owned mining company, which will be in charge of buying “strategic” minerals. These include cobalt, germanium and coltan, according to the decree. Albert Yuma, the head of Gecamines, has previously complained that uncontrolled mining by so-called artisanal miners has caused the country to lose revenues.

“Much of the artisanal sector is a sort of ‘wild west’ of open markets and depots, where unregulated buyers source cobalt with very few checks,” said Tyler Gillard, a senior adviser at the OECD. “The decree may help the government establish more control and oversight provided that the new buying entity adopts strict due diligence measures and is transparent about its risks, processes and commercial counterparts.” The Congolese action is likely to lead to higher cobalt prices, according to Caspar Rawles, an analyst at Benchmark Minerals Intelligence in London. Artisanal supply of cobalt has historically acted “as swing supply in times of market tightness,” he said.

"Depending on whether Gecamines will have the balance sheet to bear it they might use this to hold material and not let out as much as in the past,” he said.
“It might lead to longer episodes of higher prices.” One of the largest buyers of cobalt from the DRC is Shanghai-listed Huayou Cobalt, which supplies battery companies including Korean battery maker LG Chem, which in turn supplies car companies. Switzerland-based commodity trader Trafigura also sources cobalt from individual miners in the country.