Political tensions amidst the wider slump in global commodity markets, look set to continue the onslaught on cobalt production in the Democratic Republic of Congo (DRC) moving into H2 2016.
Cobalt production in the DRC, home to over 60% of the world’s mined output, is estimated to have fallen by over 20% in Q1 2016 in reaction to falling copper prices.
Now, as battery consumers begin to increase efforts to lock in cobalt chemical supplies for production expansions due to begin as early as next year, the country faces more upheaval as political pressures rise on the incumbent leader, President Joseph Kabila.
Kabila has failed to confirm national Presidential elections following the end of his constitutionally limited two terms in charge, leading to heightened political tensions within a country which has suffered from ongoing civil war since the mid-1990s.
From a cobalt perspective, this is likely to cast more doubt over the sustainability of supplies from the country’s struggling mining sector which has suffered significantly at the hands of the global decline in commodity prices.
At a time when cobalt production is expected to require significant increases, copper mines, from which cobalt is produced as a by-product, are being taken offline – the most prominent of which, Glencore’s Katanga copper mine, is now expected by some analysts to remain inactive past the 18-month suspension period outlined in 2015.
This intensifies the debate around where lithium ion battery producers will source the raw material for the cobalt-based cathodes which are expected to lead the increases in battery demand post-2017, with greater uptake of electrified vehicles.
According to Benchmark Mineral Intelligence forecasts, three-quarters of lithium-ion battery cathode capacities are expected to contain some volume of cobalt by 2020, with NCA and NMC cathodes benefitting from the growth in automotive battery applications.
This is projected to see significant growth in cobalt consumption from the battery sector over the coming years – demand which today’s industry appears badly placed to supply.
Despite the turbulent environment for cobalt producers in the DRC, years of social and political upheavel have failed to outweigh the appeal of the country’s mineral rich landscape.
Major mining companies from across the world have continued operations in the country despite decades of unrest, cementing the country’s critical position in the cobalt market.
This position is unlikely to change in the near future, with few producers pursuing capacity expansions elsewhere, and those targeting new production still attempting to raise funding.
The complex nature of cobalt production makes this financing especially troublesome due to the occurrence of cobalt as a by-product.
The DRC government looked to ease pressures on existing miners earlier this month, with the suspension of VAT on mining imports for 12 months. This followed fiscal policy adjustments earlier in the year targeted at decreasing pressures on the domestic currency.
These policies alongside ongoing foreign investment in assets, such as the Tenke Fungurume mine which Freeport McMoRan sold to Chian Molybdenum in a deal worth $2.7bn, will likely preserve the DRC’s position as the capital of cobalt mining.
Whether this proves to be a capital able to supply the fast-growing demands of the lithium-ion battery market remains to be seen. One thing is almost certain though – cobalt capacities will need to start growing rather than contracting if the industry is to meet projected demand over the coming 5 years.