The price of cobalt — a key metal in electric cars — has plummeted 65 per cent over the past year, putting a strain on the economy of the world’s largest producer, the Democratic Republic of Congo.
Economic growth in the DRC, one of the world’s poorest countries, is likely to fall to 4.3 per cent this year from 5.8 per cent in 2018 — in part due to lower cobalt prices, according to the International Monetary Fund.
The DRC produces more than 60 per cent of the world’s supply of cobalt, a metal that is used in lithium-ion batteries for smartphones and electric cars. Last year the country’s former president Joseph Kabila declared the metal “strategic” and launched new regulations that require miners to pay 10 per cent of their revenues on sales of the metal to the state.
But having soared to a 10-year high of over $40 a pound in early 2018 prices have sunk back to about $14 a pound, according to Fastmarkets.
The market has been overwhelmed by a surge in supply of the metal from the DRC, especially from small-scale individual miners who dig up the metal by hand and who react quickly to higher prices, according to traders.
As a result there are large stockpiles of cobalt currently sitting in the port of Durban in South Africa and in China, and traders in the DRC are struggling to sell cobalt to Chinese buyers.
A cut in subsidies to electric vehicle producers in China this year has also reduced demand for batteries in the world’s largest car market, they said.
Small-scale miners in the DRC have begun to reduce their activities, or have started to mine for copper instead, according to Darton Commodities. They estimate cobalt supply from small-scale miners has fallen 70 per cent from a year ago, to well under 5,000 tonnes.
The DRC government is also looking to better regulate the informal mining sector, following regular deaths and injuries. Last week the army was sent to clear small-scale miners from one of the largest copper and cobalt mines, Tenke Fungurume, according to media reports.