Congo’s Extended Cobalt Export Ban is Unlikely to Yield Positive Results

As the biggest producer of cobalt on the globe, any action that the Democratic Republic of Congo takes is, on paper, expected to have a significant effect on the market for this metal. So, why didn’t Congo’s expiring moratorium on cobalt exports have the desired effect of shoring up cobalt prices on the world stage to the extent that the ban has been extended for another three months?

First, cobalt from the DRC takes at least three months to be shipped to the People’s Republic of China (PRC) where it is refined prior to its sale on the world market. This lag means that the previous export ban that the DRC imposed couldn’t yield the desired effect within the time in which it was in force because previous shipments were making landfall in China. This lagging effect means that for the DRC to see results from its export curbs, the duration of the curb has to be extended so that shipments landing in China dwindle or even stop altogether.

The other pitfall standing in the way of the export ban attaining the desired effect is that cobalt isn’t mined as a standalone mineral. Rather, it is a byproduct of the mining of copper. In effect, copper miners get cobalt as a free extra product that they can sell. What this means for the DRC is that while it can temporarily ban the export of the metal, stockpiles will keep accumulating domestically and these will, sooner or later, have to be released onto the global market.

To compound matters, copper is currently hot on the world market so all companies producing copper around the globe also have some cobalt available for sale. The incentive to mine more copper means supplies of cobalt will also remain high.

The kicker is that cobalt was in high demand for EV battery manufacturing, but many firms have since switched to other battery chemistries that require minimal or no cobalt in their products. So, while there are nearly endless supplies of cobalt on the market, the demand for the metal is declining or isn’t growing in tandem with the growth in cobalt supply around the world.

What option does Congo have to address the free-falling cobalt prices? Learn from Indonesia. Indonesia enacted laws that required nickel and copper to be processed domestically rather than being exported as an ore. By doing this, the country has been able to earn more revenue from these metals while establishing downstream operations that create jobs, earn local authorities tax income and elevate the country’s role in the supply chains of these metals.

Congo could borrow a leaf from the lead provided by Indonesia so that it can earn more from processed cobalt rather than trying to influence the market for the metal’s ore. Is this a switch that the country’s leadership can pull off? It depends on how their policymakers assess the current problem and the choices they make as lasting solutions to the problem.

For gold and copper exploration firms like Aston Bay Holdings Ltd. (TSX.V: BAY) (OTCQB: ATBHF), the current headwinds in the market for cobalt present learning moments that they can factor into their strategic planning processes so that their projections aren’t thrown out of whack in the long term.

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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