The control of critical sectors for the economy of the future is a strategic priority for many actors in the international system. This is especially important when it comes to access to critical inputs in the creation of sophisticated and high-demand manufacturing: a competitive sector that is decisive in driving economic growth. Such is the case of cobalt, a key mineral in the energy transition and mobile technology market.
Cobalt is considered an essential material in the production of lithium-ion batteries, used in electric cars, mobile devices, laptops, etc. According to the International Energy Agency (IEA), the market for key minerals for the energy transition reached 320 million dollars (mdd) in 2022. Among them, the demand for cobalt grew by 70% between 2017 and 2022. Added to this and according to commercial trends, it is projected that the demand for technology that makes use of cobalt will continue to grow globally.
The Democratic Republic of the Congo (DRC) is currently the world’s largest producer of cobalt, with a recorded extraction of 130,000 metric tons of the mineral in 2022, representing approximately 70% of the global supply. Once extracted, the mineral is mostly exported to China, its most important trading partner and the country that leads its refining. This relationship allows China to dominate the cobalt supply, and with it, potentially the future of an entire industry.
According to information from Contracts for Differences (CFD), cobalt has shown a considerable reduction in its world price, lowering its price by 35.68% since the beginning of 2023. This reduction is not isolated and is part of a downward trend since its highest price in May 2022.
Simply put, the supply of cobalt is outpacing global demand, even considering the increase identified by the IEA. However, will this be a continuing trend or merely a temporary effect, due to the reduction in demand for mobile technology and the delays of the pandemic?
The control of critical resources by a single actor is worrisome enough, given the geopolitical ramifications of it. Added to this, we must consider China’s position as the largest economy in search of a multipolar world and, with it, its complex relationship with the United States.
Likewise, political instability persists in certain African states, including the DRC, which has received serious accusations of forced labor in its cobalt mines. All this could add to the instability in the world supply of cobalt and its role in supply chains for an entire industry.