It came as no surprise when the government ban on copper and cobalt concentrate exports from the Democratic Republic of Congo early this month was followed by the governor of Katanga province announcing his refusal to enforce the ban. Agreeing that that more ore should be processed domestically, the governor pointed out that until the country has sufficient electricity, ore would have to be exported to bring in money. Other market sources noted that even with power, it would take years for the DRC to build a refinery. The DRC has tried unsuccessfully to regulate concentrate exports on many occasions during the last two decades. In fact, its last major crackdown resulted in a surge of cobalt concentrate shipments to China.

 

Even though DRC regulations have been honored more in the breach than in practice, cobalt sellers were able to use news of the export ban to nudge spot prices higher. A few producers reportedly were actively talking the market up. Spot sales of high-grade cobalt were reported at $12-12.75 per lb compared to $11-11.50 per lb the week before. One supplier said he sold 5 mt at above $13, while traders said they had had no opportunity to test the higher prices because there were no consumer inquiries. “This is a producer-led rally,” said a trader. “I haven’t seen a flood of consumers coming into the market because of a so-called export ban in the Congo.”

 

With thin demand, cobalt sellers do not expect a prolonged price rally. “All this means is that a few consumers who were going to buy three months from now bought early and they won’t be in the market later,” said one supplier.

 

Freeport McMoRan Copper & Gold (FCX) told analysts during its first-quarter earnings call that its Tenke Fungurume copper and cobalt operations in the DRC were not being targeted by the government restrictions. Tenke, said FCX’s CEO Richard Adkerson, is processing cobalt concentrate in the DRC.

 

Asked whether shipping cobalt hydroxide for further refining at the Finnish refinery FCX recently purchased from OM Group (Ryan’s Notes, Jan. 28, p1) would be a violation of the export ban, Adkerson noted that cobalt hydroxide is considered an intermediate product. Moreover, he said, the partners in the OMG cobalt business acquisition include Lundin Mining and Gecamines, the state-owned company of the DRC. In addition, Lundin and Gecamines are partners in Tenke Fungurume Mining, with 24% and 20% respectively.

 

The OMG acquisition propels FCX along with Gecamines into the downstream cobalt business. The DRC’s motivation is to make sure that profits from value-added cobalt and copper products do not exit from the country. The alliance of Gecamines with nearly every foreign-owned mining operation in the DRC shields these miners from government export bans, a trader stated, “and those operations that have no connection to Gecamines still manage to get around government regulations.”