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Cobalt hamstrung by Congo uncertainty

cobalt

Cobalt is becoming an increasingly important resource in the renewable energy transition, yet it is facing growing uncertainty from its primary supplier, the Democratic Republic of Congo (DRC).

In April, Bloomberg reported that Glencore’s Mutanda copper–cobalt project was being considered for renegotiation by the DRC Government, meaning the future of an operation that was only recently restarted is up in the air.

This comes as DRC President Felix Tshisekedi, elected in January 2019, scrutinises deals that were made under the administration of former President Joseph Kabila.

Mutanda produced 103,200 tonnes of copper and 25,100 tonnes of cobalt hydroxide in 2019 before it was placed on care and maintenance in November of that year.

Fitch Solutions’ senior commodities analyst Sabrin Chowdhury said that resource nationalism continued to hamper cobalt’s outlook.

“Cobalt supply is still very concentrated on the DRC … so supply depends a lot on the DRC’s mining policies,” she told Australian Resources & Investment.

“Recently, the major mine in the DRC – Glencore’s Mutanda mine – is facing a renegotiation of contracts with the government. Resource nationalism is a hot topic these days with commodity prices rallying and economic hurdles rising in these cash-strapped but resource-rich governments.

“So with cobalt production being highly concentrated in just one country, the supply outlook, while it’s still very positive – with new projects in the DRC – it’s still risky.”

Chowdhury said that if DRC chose to renegotiate any Mutanda-related contracts and supply is disrupted as a result, this could have a direct impact on commodity prices.

“In case during the renegotiation of Glencore’s mining licence the contract gets cancelled, or the mine is given up to the government, then we would see some supply disruption which would push cobalt prices to higher levels,” she said.

“But at this point, that is still only a risk, so it really remains to be seen what goes on there.”

According to Trading Economics, cobalt futures were trading at $US82,000 ($117,353) per tonne on May 17, an 86 per cent increase from a year ago.

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