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The Democratic Republic of Congo announced Monday a temporary ban on cobalt exports. The measure is in place for at least four months and is intended to address global overproduction. Congo is the world's largest producer of the metal crucial for electric cars and cell phones.

Key Takeaways

  • The export ban took effect Feb. 22 and is subject to review after three months.
  • Cobalt prices have fallen sharply due to a surge in production and declining demand.
  • Chinese companies such as CMOC, which doubled their cobalt production in Congo, are badly affected.

Congo is taking drastic measures to stabilize the cobalt market. Cobalt prices have fallen sharply due to surplus production and declining demand. The export ban applies to all cobalt from the country.

"This measure is intended to regulate supply on the international market, which is struggling with a production surplus," Patrick Luabeya told Reuters. He is the president of ARECOMS, Congo's strategic minerals regulator.

Chinese producers hit

The ban directly affects Chinese companies. CMOC Group, the world's largest cobalt producer, doubled its production last year to about 114,000 tons. CMOC's shares fell 1.3 percent following the news.

Other major producers such as Glencore and Eurasian Resources Group have not yet reacted to the news. Cobalt futures on China's Wuxi Stainless Steel Exchange did rise immediately to their highest levels.

Tighter regulation

ARECOMS also announced stricter regulations on the domestic cobalt industry. Mixing artisanal and industrially mined cobalt will be banned. The regulator issued a decree to ensure compliance.

"The situation required immediate action. Years of illegal mining and uncontrolled exports have led to an oversupply," Luabeya said.

Impact on battery market

Congo holds about two-thirds of the world's cobalt reserves. The metal is essential for producing rechargeable batteries for electric vehicles and consumer electronics.

However, the rise of lithium iron phosphate (LFP) batteries, especially in China, has reduced demand for cobalt. Analysts say the Congo ban could reduce the predicted oversupply for this year.

Opportunities for Indonesia

The export ban may benefit Indonesia, the world's second-largest cobalt producer. The country is seeing its share of the global market grow thanks to Chinese investment.

According to Xu Aidong, analyst at Beijing Antaike Information, the Congolese policy could reduce global cobalt supplies by about 20,000 tons. "However, the market has enough supply to fill the gap," she explained at a conference in Shanghai.

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