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Andy Home: Cobalt limits in the Congo expose China's weakness with critical metals

China's dominance in critical mineral supply chain is not as absolute it might appear.

Cobalt is a good example.

According to the International Energy Agency, China will account for 78% global refined production of battery metal by 2024. It lacks significant mining capacity and is therefore highly dependent on imported raw materials.

The export controls of the Democratic Republic of Congo have exposed this vulnerability. This is the biggest source of cobalt products for Chinese processors.

Congo suspended exports of cobalt in February and implemented a quota-based system in October.

The fourth quarter of the year saw a near-standstill in shipments to China, and local prices are now surging due to an intense scramble to get units.

As the U.S. attempts to loosen China’s grip on Congolese mineral wealth, the competition for Congolese Cobalt will only heat up.

EXPORT CONTROLS

The Congo has set export quotas of 18,125 metric tonnes for the fourth quarter 2025, and 96.600 tons including 10% strategic allocation for this year.

Export shipments were completely halted in the last three months of the year due to delays in implementing this new scheme.

According to Benchmark Mineral Intelligence, BMI wrote for The Cobalt Institute that the first truck with cobalt left the country only in January.

Operators can?roll over their Q4 quotas for 2025 into this year, but because export shipments to China typically take three months to arrive in the country, China is experiencing a period of severe supply shortage.

PINCH POINT

Congo's export restrictions have pushed up the price of refined cobalt traded on the CME from $10 per lb to $25 in early 2025.

But this is just part of the story.

The cobalt content of intermediate products, such as Congolese Hydroxide, is used to determine the price. In February, this "payable" traded at about 55% of metal prices. Now, it is regularly quoted at an unheard of 100%.

Wuxi Stainless Steel Exchange in China, the country's leading cobalt trading platform, has been forced to sell its cobalt metal stocks due to a shortage of intermediate products.

At the end of January, more than 3,250 tonnes of cobalt, or 37%, of the exchange stocks were removed from Wuxi registered storage warehouses.

The Congo is the only alternative supplier of China.

Indonesia is the main cobalt producer, as it is a nickel by-product. BMI says that even with increased Indonesian production in this year, the amount won't fill the void left by Congo's limited export flows.

COMPETITION

China was the dominant player in Congo until recently, sourcing copper and cobalt for its domestic refineries and smelters.

That's changing.

The Congo's export controls on cobalt are part of the larger restructuring of its mineral sector, as it seeks to make more money from its natural resource wealth.

The U.S. helped mediate between Kinshasa, Rwanda and other parties to end the violence that has been raging in eastern Congo.

The deal opened up the country to U.S. investments. The U.S. International Development Finance Corporation announced in December that it would take a stake of a joint venture that will market the government's portion of copper and cobalt. The U.S. government will be able to sell its copper and cobalt through a joint venture.

The new rail link linking the Angolan Port of Lobito to the Congo is central to U.S. - policy in Central Africa. It's a strategic corridor that rivals the Chinese-backed alternative railway to Dar es Salaam, Tanzania.

Chinese cobalt purchasers face not only lower imports, but also increased competition from what's being mined.

ACHILLES' HEEL

China's Achilles heel is its mining industry, which controls the global cobalt supply chain.

Rare earths and other minerals are also critical.

China, the largest rare earth miner in the world, is not self-sufficient. It imports raw materials such as dysprosium and Terbium from Myanmar.

China will be more dependent on other countries to provide mining inputs as its own demand for raw materials increases.

China's cobalt purchasers are discovering that this dependence will become increasingly problematic.

Andy Home is a journalist. His opinions are his. You like this column? Open Interest (ROI), a data-driven, thought-provoking commentary on the markets and finance is available. Follow ROI on LinkedIn, X and X.

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(source: Reuters)