Green energy and electric vehicle is the future of a sustainable world, and one of the critical components powering the dream of a more sustainable planet is Cobalt. The blueish-grey chemical has risen to prominence as a vital component of lithium-ion batteries, the technology that will fuel the smart technology revolution.
As more countries electrify their vehicles, the Democratic Republic of the Congo (DRC) has become an increasingly important supplier of the vital energy source in EVs, Cobalt. Cobalt is a crucial component of electric car batteries, and Central Africa provides two-thirds of the world’s supply.
Often referred to as the fuel of the future, Cobalt is undoubtedly the key to the growing electric vehicle industry. But who controls cobalt?
Cobalt: The Fuel of the Future
The use of Cobalt in the green energy industry is as diverse as it is enduring. Having tripled in price in just a decade, Cobalt has formed the cornerstone of some of today’s essential applications, from hard metals, jet turbines, orthopedic implants, and electric vehicles.
However, the supply of this critical chemical element is expected to become increasingly complicated. In 2017, the DRC produced 67 percent of all worldwide Cobalt mined. Because the DRC is related to concerns of corruption, child labor, and human rights violations, this is a challenge for enterprises with customers that require high levels of supply chain due diligence.
Furthermore, the DRC’s new punitive cobalt tax policy may lead large miners like Glencore to halt or stockpile output in the nation until the government agrees to better conditions, resulting in further market shortages. Furthermore, Cobalt is produced as a by-product of copper and nickel mining, and the world’s sole primary cobalt mine exists.
But, China’s influence on the Cobalt industry has increased drastically over the years. So, how is China taking over the fuel of the future?
China is Taking Over the Fuel of the Future: Cobalt
China’s approach to financing state-owned enterprises may be causing significant inefficiencies in the economy. Still, it also gave them unrivaled supremacy in essential minerals necessary for new technology like Cobalt.
According to Darton Commodities, China now controls roughly 85% of global cobalt supplies.
This includes a three-year arrangement with Glencore, the world’s largest cobalt producer, to sell 52,800t of cobalt hydroxide to Chinese chemicals business GEM. This is almost a third of Glencore’s entire expected production for this period.
Furthermore, after purchasing the Tenke Fungurume Cu/Co mine (TFM) from Freeport McMoRan in 2016, China Molybedenum (CMOC) is the largest shareholder in the DRC’s Tenke Fungurume Cu/Co mine (TFM). The mine is the only supplier to Finland’s Kokkola refinery, distributing to Japanese and Western technological companies.
Several smaller Chinese companies own cobalt holdings, such as Comika Mining/Wanabao Mining, Congo Dongfang Mining, and Hunrui Cobalt. According to Darton Commodities, Chinese refinery output accounted for 58 percent of world refined cobalt output in 2017, with the remaining 98 percent imported, primarily from the Democratic Republic of Congo.
The DRC: China’s Key to Winning the Green Energy Race
Local Chinese upstream production and cobalt resource exploitation account for just 23% of the global electric car supply chain. On the other hand, China dominates one downstream and two mid-stream production stages. Moreover, China accounts for 66% of cathode and anode manufacture, 80% of chemical refining, and 73% of lithium-ion battery cell production in the worldwide EV supply chain. As a result, China relies on Congolese Cobalt to dominate the world market.
The importance of the DRC and the draught report’s consequences stem from the link between Cobalt, batteries, electric vehicles, and global politics. Over 70% of the world’s cobalt deposits are located in the DRC. Also, the DRC houses the world’s eighth-largest cobalt mines.
However, Chinese battery manufacturers will struggle to keep up with the country’s booming electric vehicle sector and the government’s geoeconomics aspirations if they don’t have an ample supply of Cobalt. In addition, the possibility of Congolese officials reopening the Sicomines investment agreement may throw global markets into a tailspin. However, the DRC is a vital link in a significant high-tech supply chain as one of the world’s poorest countries.
If China can acquire Cobalt in the DRC, it will control global supply networks for a material that is highly concentrated geographically. This will help China dominate the reusable battery materials and electric vehicles market. However, China’s Dual Circulation Plan and worldwide climate policy may suffer substantial defeats due to the discoveries in this new draught report.
The Hurdles Ahead for China
According to US Geological Survey estimates released in 2019, the DRC holds over 51% of world cobalt deposits.
Roskill forecasts that the central African country generated roughly 90kt Co in different intermediates in 2020, accounting for nearly 70% of global cobalt feedstock production.
Prior to the current declaration, Chinese businesses already owned over 40% of the cobalt mining capacity in the Democratic Republic of Congo as a consequence of decades of investment and development in the nation, with multiple resource-for-infrastructure deals inked and implemented since the 1990s.
China’s need to achieve a balance between internalizing supply chains and leading international investment is exemplified by the Sicomines incident.
The Dual Circulation Strategy tries to accomplish this by maintaining one foot in the global system and the other firmly planted in China. Sicomines are a key component of this method.
China can grow its EV market and local consumer culture by importing raw resources like Cobalt, which allows the country to be independent of international tides. Electric car production can also help Beijing gain an image as a climate change leader on the world stage.
The Congolese government’s examination of Sicomines is unlikely to jeopardize China’s geoeconomic goals. Still, it does provide insight into China’s essential sectors, economic strategy, and the challenges it will confront in securing strategic supply chains.