Good news for China, not so much for the western technology industry

The Democratic Republic of Congo (RDC) has established a measure that will affect cobalt exports.

No more cobalt? The market regulation and control authority of strategic mineral substances (Arecoms) has announced that cobalt exports will be detained for at least four months. According to He explained Its president, Patrick Luabya, the decision seeks to control the supply of cobalt in an international market that is facing an overproduction of metal.

The importance of cobalt. There is a common metal that both electric vehicles and mobile devices and other technologies share: cobalt. In this century, I know has promoted its demand. However, the production of cobalt in the RDC, which represents around 70% of the world supply, has fallen together with the lithium. This has caused other cobalt producers, such as Russia and Australia, to win more prominence.

The reason for the oversupply has been the increase in production by From the Chinese company CMOCsince he has doubled his extraction in two large mines in the country. This situation has had an impact on supply and demand, causing a price drop. In fact, according to Fastmarkets data, cobalt reference prices They have dropped out of 10 dollars per pounda level that had not been seen in more than 20 years.

The current impact on the global market. Despite this fall, the markets have entered into tension with the measure taken by RDC. But they have been able to breathe calm because the suspension of exports have not meant an immediate change in the price of cobalt. However, market experts consider that, in the short term, this action could generate a market stiffnesssince cobalt stocks will accumulate in the RDC instead of going to Chinese deposits, as is often the case.

China. Although the suspension of exports has not yet affected prices, this can benefit the Asian country. Chinese companies, which They already control A significant part of the offer and cobalt production may be strengthened from this crisis. In fact, China It has access to other cobalt sources Like Australia, Russia and Indonesia. Particularly the latter has great cobalt reservations and has experienced significant growth in its production.

In addition, the Congo decision has reinforced China’s domain, while the West faces greater difficulties in ensuring essential materials for technological and energy sectors. In this way, the Asian country has taken a dominance position in front “The war of tariffs” against Donald Trump. It should be added that the latter You will need many materials That has China.

The western technology industry. The measure has directly affected the technological sector of Europe and the United States, since they depend on the cobalt to make batteries of electric vehicles and electronic devices. However, the Democratic Republic of the Congo seeks to redefine its role in the global market And he has asked Europe and the United States for help through an agreement. In this approach, the African country has established an agreement by which they offer strategic minerals in exchange for support for the stability and development of the country.

This proposition starts from the RDC is facing internal tensions. In particular, the east of the Congo is being the scene of armed conflictssome with alleged relationship with Rwandawhich has intensified the violence in rubber and bukavu, both border cities with Rwanda are known for their mines rich in different elements. With this proposal, the RDC expects to attract Western investment and reduce its dependence on China in the mining sector. It remains to be seen if the United States and Europe will accept the agreement, which would allow them to ensure more stable access to these strategic resources.

Copper. It should be noted that the cobalt is mainly extracted as an byproduct of copper in the Congo. The suspension of cobalt exports It will not affect Production or copper exports, another key mineral that Congo also produces in large quantities. This means that, although the export of cobalt is limited, copper exports will follow its normal course, without important changes.

The suspension of exports will continue for three more months and will be revalued. During this period we will have to be attentive to future actions of the West and as China will redraw the energy map.

Image | The International Institute for Environment and Development (IED)

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