An ongoing economic crisis in the Democratic Republic of Congo (DRC) has seen the price of cobalt skyrocket over the past two decades. This is according to one of the latest reports from international consultancy, PricewaterhouseCoopers (PwC).
The crisis stems from the country’s broader political climate, civil unrest, and poor economic policies as DRC President, Joseph Kabila has stayed in power beyond his constitutionally mandated two-term limit. Though the DRC is rich in natural resources, economists have argued that it needs a stable government at the helm to steer the country towards prosperity.
The DRC’s cobalt industry has been highlighted as one of the sectors affected by instability.
Cobalt has become the most expensive material in the portable lithium-ion battery used in smartphones and electric vehicles. The industries now represent about half of the market for the metal. These revelations come at a time when the DRC has 69% of the global cobalt production share.
In June this year, the global average price of cobalt was down 7% since hitting near 10-year peaks in March to sell for $89,000 a tonne. The price is now hovering around the $65,000 mark having jumped from about $20,000 a tonne in 2016.
In September, 2018, DRC’s government confirmed plans to declare cobalt a strategic metal, a move that will increase the royalty tax on the metal to 10% from 3.5%.
“Some 16 years after the enactment of the initial version of the mining code, an economic crisis has hit the Democratic Republic of the Congo,” PwC researchers explained in a statement issued this week.
The organisation, which has a presence in 34 Africa countries, noted that regulatory changes in the DRC would greatly affect the country’s cobalt mining industry.
As the use of lithium batteries continues to rise as a result of an increasing demand for this energy storage system, the use of cobalt, an element that arises as a byproduct of copper and nickel mining procedures, has also increased.
This is according to a report from Azo Mining, a leader in information for the global mining industry.
While cobalt is a useful metal for lithium ion batteries, it is an extremely expensive metal that in 2017 experienced a 129% surge in prices, explained Azo Mining’s Benedette Cuffari.
“Additionally, the acquisition of cobalt has been associated with violating a number of human rights violations, such as child mining, around the world. Therefore, researchers in major industries such as Tesla and Panasonic have become increasingly interested in investigating batteries that do not require cobalt parts within their structure,” Cuffari continued.
In light of these developments, a new mining code has been drafted in the DRC for stricter regulations, more transparency, opportunities for local development and an equitable fiscal regime in the DRC. However, the final version signed into law in March 2018 is unsupported by many mining companies.
Economists, PwC researchers included, believe that well-enacted policies could help stabilize the cobalt mining industry. Investors and stakeholders are currently waiting to see how this will all play out.