China's CMOC calls on Congo to lift cobalt export ban, sources say

CMOC Group, a leading cobalt miner, urged the Democratic Republic of Congo to lift its export ban on cobalt, citing depleting Chinese inventories and the risk of automakers switching to cobalt-free batteries. Glencore, another major cobalt producer, suggested Congo and Indonesia manage oversupply, potentially through export quotas, to stabilize prices. Congo is currently evaluating the ban's impact and considering an extension or a transition to export quotas after the ban expires in late June, a move expected to support cobalt pricing.

Analysis

The cobalt market faces significant uncertainty as China’s CMOC Group, the world's largest cobalt miner, has urged the Democratic Republic of Congo (DRC) to lift its four-month cobalt export ban, set to expire in June. The ban was initially imposed in February due to nine-year low prices around $10 per pound. CMOC, which anticipates producing 100,000-120,000 metric tons of cobalt this year—nearly double its 56,000 tons in 2023—argues that Chinese pipeline inventories are depleting and that export restrictions risk accelerating automakers' shift to cobalt-free Lithium Iron Phosphate (LFP) batteries, a technology already adopted by some Chinese EV makers like BYD. This statement was reportedly perceived as a threat by Congolese officials, who are concerned China aims to depress prices for strategic stockpiling. Notably, Chinese battery maker CATL holds a 30% stake in CMOC. Conversely, Glencore, another major producer, supports measures to manage oversupply, including potential export quotas, to achieve price stability before the ban is lifted. Chinese smelters currently hold cobalt stockpiles estimated to last between two weeks and six months. The DRC government is evaluating the ban's impact, weighing lost tax revenue against market stability, and considering extending the ban or transitioning to an export quota system. Benchmark Mineral Intelligence suggests either scenario—an extended ban followed by quotas or a direct move to quotas—would likely support cobalt pricing. The overall market sentiment is neutral with a tone of uncertainty, reflecting the precarious balance between supply management and demand dynamics.

Key Decisions for Investors

• Closely monitor the DRC government's decision regarding the cobalt export ban expiration in late June, as an extension or implementation of quotas could significantly tighten supply and support prices.
• Evaluate positions in cobalt producers like CMOC and Glencore (OTC:GLNCY), considering their divergent strategies regarding supply management and the potential impact of DRC policies on their operations and profitability.
• Assess the long-term risk of cobalt demand destruction from the accelerating adoption of LFP batteries by EV manufacturers, particularly if supply restrictions or price volatility persist.
• Consider the implications of CMOC's substantial production increase on market balance, even if export restrictions are eased, and factor in CATL's significant stake in CMOC which signals strong Chinese interest in cobalt supply.
• Be prepared for continued price volatility in the cobalt market, influenced by DRC policy, Chinese inventory levels, and the pace of LFP battery adoption.