China Ramps Up Cobalt Mining Despite Price Decline, Aiming to Dominate Market
Aggressive Expansion in Cobalt Mining
Chinese companies, undeterred by the recent crash in cobalt prices, are significantly expanding their cobalt mining operations in Congo and Indonesia. This move aims to increase market share for the metal, which is crucial in battery production for electric vehicles (EVs).
CMOC's Rising Dominance
China's CMOC Group has dramatically increased its cobalt output, with a 144% boost during the first three quarters of 2023. This surge puts CMOC on track to surpass Glencore as the world's largest cobalt producer. Jorge Uzcategui, an analyst at Benchmark Mineral Intelligence, predicts CMOC's global market share to rise from 11% in 2022 to nearly 30% by 2025. The company's Kisanfu mine in the Democratic Republic of Congo (DRC), partially owned by CATL, contributes significantly to this growth.
State Support and Low-Cost Operations
CMOC's ability to maintain low operational costs is attributed possibly to receiving cheap financing from the Chinese government, suggesting a strategic move to control a larger market share and influence prices in the medium to long term.
Impact of Declining Prices on Production
Despite weaker prices, CMOC and other Chinese firms like MMG Group and Jinchuan Group International Resources continue to expand their operations in Congo. CMOC, in response to queries, highlighted the positive aspects of rising cobalt production, focusing on long-term contracts rather than short-term market fluctuations.
Global Cobalt Market Dynamics
Cobalt, once a critical component in EV lithium-ion batteries, has faced a decline in demand due to slowing EV sales, high prices, and ethical concerns regarding mining conditions in Congo. Innovations in battery technology have also led to a reduced reliance on cobalt.
Indonesia's Rising Role in Cobalt Production
Indonesia has emerged as a major player in the cobalt market, with many mines owned by Chinese companies. The country is expected to quadruple its cobalt production in the next decade, contributing to a potential oversupply and keeping prices low.
Future of Cobalt Mining
Analysts predict that the current expansion in cobalt mining, particularly in Indonesia, will lead to an oversupply in the market, keeping prices low for the foreseeable future. This trend may impact the strategies of major producers like Glencore, which has already faced challenges with depleting ore grades and temporary mine closures.
Strategic Implications
This aggressive expansion by Chinese firms in the cobalt market reflects a broader strategic push to dominate crucial raw materials for the EV industry. The developments in Indonesia and the DRC are reshaping the global cobalt market, influencing both supply and pricing dynamics in the years to come.
