Aniket PujariLONDON, – It’s been almost 10 months since the Democratic Republic of Congo, the world’s dominant cobalt supplier, halted exports of the battery metal.
February’s export ban was replaced with a quota system in October but the country’s producers are still awaiting the green shipping light from Congo’s minerals authority ARECOMS.
The withdrawal of supply from the country that accounted for 70% of global mine production last year has been a booster for the bombed-out cobalt price.
The CME spot cobalt metal has risen from $10 to $26 per lb since February. Cobalt hydroxide, the form of the metal exported by Congo, has surged from $6 to $23 per lb over the same time-frame.
Higher pricing is of course one of the core goals of Congo’s new export quota scheme but a sustained supply shock isn’t going to help a metal that is already facing challenges in the electric vehicle battery market.
It takes around three to four months to ship cobalt hydroxide from the Congo to China, where it is processed into cobalt sulphate for battery manufacturers.
The long supply chain is why Chinese imports of cobalt intermediaries from the Congo initially held up well in the months after the February suspension of shipments.
But imports have fallen sharply since May. Volumes of 50,000 metric tons over June-September were less than what previously passed through Chinese customs every month.
As the supply hiatus lengthens, the impact on the cobalt processing chain grows. Even if Congo’s exports resumed tomorrow, the material would only arrive in China towards the end of the first quarter of next year.
A drawdown of Chinese cobalt hydroxide stocks was always anticipated, given Congo’s allocated export quotas for the next two years are around half the country’s previous shipping levels. But the seven-week delay since the quota announcement will serve only to accentuate the inventory depletion.
There is an option of converting cobalt metal to sulphate, if the price differential covers the reverse-smelting costs. But, according to analysts at BNP Paribas, “only very few plants” have the environmental permits to process cobalt in that way.
The best-case scenario, one where exports resume in the next few days, is a severe but short supply squeeze in the early months of 2026 before deliveries to China arrive.
But there is also the growing risk of a more profound supply crunch, generating another swing of cobalt’s boom-and-bust pricing cycle.
That is the last thing cobalt needs when it comes to holding its place in a fast-changing EV battery materials market.
As Chinese battery manufacturers such as CATL seek to produce ever more efficient, cheaper products, the chemistry of what is used to power an EV is constantly shifting.
The Chinese EV market, the world’s largest, has already pivoted to lithium-iron-phosphate batteries, which need neither cobalt nor nickel. They are cheaper and safer and the performance gap with cobalt-nickel-manganese chemistries is closing.
Macquarie Bank now thinks that LFP’s share of the vehicle battery market will rise from 48% in 2024 to 65% in 2029, a significant rethink from a previous forecast that LFP would flatten out around 49%. Moreover, cobalt is also vulnerable to ratio shifts in nickel-intensive batteries.
The EV revolution isn’t looking as positive for cobalt as it was a couple of years ago.
Cobalt use in EV batteries rose by a marginal 2,300 tons last year, less than the extra 2,700 tons used in the portable electronics sector, according to Benchmark Mineral Intelligence’s quarterly report for the Cobalt Institute.
EV battery demand is forecast to grow by a more robust 6,800 tons this year due to rising Western sales of electric and hybrid vehicles.
But cobalt’s share of the battery metals market is declining. The average amount of cobalt deployed in new passenger vehicle sales in September was down 6% year-on-year at 2.2 kg, according to consultancy Adamas Intelligence.
MORE CONTROL, LESS VOLATILITY
Cobalt’s challenges in the EV battery sector are compounded by automakers’ concerns about human rights in Congo’s artisanal mines and the metal’s history of volatile pricing.
Congo’s grand vision is to use its control over global cobalt production to manage the market in a way that benefits both its own people and the broader cobalt user base.
Key to that ambition is learning how to apply supply leverage without adding to the price volatility that has plagued buyers in the past.
It’s understandable that ARECOMS is taking its time to introduce a completely new export regime but in terms of the impact on the country’s biggest cobalt buyer, time is running out. Andy Home is a Reuters columnist. The opinions expressed are his own Enjoying this column? Check out Reuters Open Interest for thought-provoking, data-driven commentary on markets and finance. Follow ROI on LinkedIn, opens new tab and X, opens new tab.
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