A dramatic fall in prices for cobalt, a key element in the production of electric vehicles (EVs) and the main commodity mined in the Democratic Republic of Congo, is forcing the country to speed up efforts towards diversifying its economy away from mineral resources.
Prices for the metal last summer exceeded $40 per pound, but have since declined to $12.70, according to MINING.COM Markets, hindering the DRC’s economic growth.
The Central African country generates about two thirds of the global supply of cobalt and it also is one of the top miners of coltan.
Mining, in turn, accounts for 80% of its export revenues, making the DRC economy extremely dependant on the prices of its main raw material shipments. According to a report by the International Monetary Fund released earlier this month, GDP growth in the DRC, one of the world’s poorest countries, is expected to fall to 4.3% this year from 5.8% in 2018, due to a slowdown in mining activity triggered mainly by lower cobalt prices.
In November last year, Prime Minister Bruno Tshibala and Mines Minister Martin Kabwelulu declared the commodity a “strategic mineral resource”. Through that decree, royalties on cobalt and two other minerals almost tripled to 10%.
Higher royalties, however, have not been enough to offset the decline in cobalt prices, especially as the market continues to get flooded by small-scale individual miners, who normally dig up the metal by hand and who react quickly to prices changes.
Another factor weighing on the commodity’s present weakness are, as reported by FT.com, increasing stockpiles of the metal at the port of Durban in South Africa and in China, and a cut in subsidies to electric vehicle producers in China this year, which has also reduced demand for batteries in the world’s largest car market.
According to Shanghai Metals Market, the situation is set to get worse as expectations of even poorer demand from the power battery market will extended the decline not only in prices for cobalt, but also for lithium.
While the current cobalt market is depressed, there’s still rosy views about the future. Automakers are still planning to roll out electric-car models and Glencore, one of the top producers of the coveted metal, could start clearing its cobalt backlog in 2020, by which time car sales are expected to start picking up.