DRC U-turns on cobalt, copper concentrate export ban; says could reimpose

The Democratic Republic of Congo (DRC) has lifted a ban on the export of cobalt and copper concentrates imposed in February but maintained the threat of its future enforcement.

In a letter to the National Federation of Enterprises (FEC) seen by Fastmarkets and dated March 20, Minister of Mines Henri Yav Mulang said the government will review every six months whether to reimpose the ban.

“I would like to remind you of the imperative necessity for the mining companies producing copper and cobalt concentrates, to make every effort to obtain, in terms of the treatment process, more advanced market products, to enable them, as well as the state, to derive the best revenue from mine production,” the letter reads.

The FEC had cited the country’s energy deficit as a reason why it would be difficult for companies to process concentrate domestically, according to the letter.

The DRC’s Ministry of Mines did not respond to repeated telephone and emailed requests to comment.

The abrupt policy change came after the DRC government re-enacted an export ban of metal concentrates in mid-February aimed at increasing domestic refined metal output, according to policy documents earlier seen by Fastmarkets.

The government’s rollback comes after it introduced a sweeping revision to its mining code last year including higher taxes and royalties on mining companies designed to ensure the country benefits from the rising price of cobalt, a key ingredient in electric vehicle batteries of which the DRC is the world’s largest miner.

Cobalt market sources had downplayed the impact of the ban, with DRC production and therefore exports of concentrates, already believed to be substantially lower than in 2018.

“Already the artisanal production is not what it used to be [but] the impact on production has already happened, and that’s been related to price,” one trading source said.

However, the government’s moves so far could signal an intention to more closely regulate artisanal production, a market which is still considered to have longer-term strength on the back of the growing battery sector, sources added.

Fastmarkets’ benchmark standard-grade cobalt price stands at $13.30-14.25 per lb, in-warehouse as of Wednesday March 20, levels believed to make most artisanal production unprofitable.

Cobalt prices were at $26.50-28 per lb at the beginning of the year.

The DRC exported 134,614 tonnes of cobalt ores and concentrates to China – the largest buyer of DRC-origin cobalt materials – in 2018, according to official but unconfirmed data from Fastmarkets’ sources. This equals roughly 13,000 tonnes of cobalt metal.

“The intention [of the ban] could be partly to curb illegal exporting, so those that do buy artisanal ores and export to China can do so again,” the second source said.

A ban on exports of copper concentrates would have effectively cut off trade of the product to Zambia, formerly a major trade partner.

“I am very surprised about the speed of the turnaround, it’s a new government so maybe some things will change,” a second source with business interests in the country said.

Domestic copper smelting production to be boosted in October
The DRC primarily produces solvent extraction and electrowinning (SX-EW) copper cathodes mainly from oxide ores, while electro-refined (ER) cathodes are produced in high-temperature furnace smelters from concentrates made mainly of sulfide ores.

An intermediate product of the ER process, blister copper, takes up less than 5% of local copper exports from DRC, a local source estimated.

“The new Chinese smelter in DRC [Lualaba] will not open until October this year. Other than Lualaba, there is barely any facility that can take up a bulk amount of concentrates. The export ban came too early, there’s no infrastructure support it,” a DRC producer source said.

The Lualaba facility will process over 400,000 tonnes per year of dry copper ore concentrates when it reaches full capacity, according to parent company CNMC, which also owns the Chambishi smelter in Zambia. Its major product will be blister copper with an annual capacity of 120,000 tonnes.

“This policy U-turn has slapped the face of the new government. It’s one of the first policy announcements since the new president took office,” the DRC producer source added.

In a contested election, Félix Tshisekedi become the DRC’s fifth president in January, making it the first peaceful transition of power in the country since its independence in 1960s.

DRC concs exports carried on despite earlier ban
One buyer of copper concentrates told Fastmarkets they still had access to DRC material even when the ban was in place.

Photos of DRC-origin copper concentrates exports in Zambia-bonded warehouses have been seen by Fastmarkets in early March despite the ban, which started in mid-February.

“ERG’s Frontier and China Railway’s Sicomines concentrates can’t be processed in any local facility in DRC. Output from these two major mines are therefore exempted from the ban. And these made up the bulk of the DRC output, ” a DRC copper producer source said.

ERG’s Frontier mine is expected to see little change in its annual production guidance in 2019, a company source earlier told Fastmarkets, despite the closure of its Chambishi refinery.

In 2018, it produced 102,058 tonnes of copper contained in concentrate and is a key contributor of African copper output.

In February, ERG decided to close down its Chambishi smelter in Zambia due to the extra costs arising from the 5% import duty introduced by the Zambian government in January.

The policy changes in the two biggest copper producing countries in Africa have set off ripples in the copper industry – leading to capacity cuts, operation closures and potential layoffs since the beginning of this year.

Additional reporting by Susan Zhou in Shanghai