Cobalt production in the Democratic Republic of Congo (DRC), which is the world's biggest producer of the metal, is expected to decline by 25% this year, says financial risk management, solutions and insights company Fitch Solutions Country Risk and Industry Research (Fitch Solutions).

This decline will be primarily driven by the idling of Glencore's Mutanda mine in late 2019. Mutanda had been a major contributor to the country’s cobalt output, accounting for about 25.1% of total output in 2019.

While the mine’s closure will be the major driver of output declines, increased governance of mining activity as a result of Covid-19 will add further headwinds.

The DRC was subject to a countrywide lockdown from March 31 through to May 18, when the government began to gradually lift restrictions. During this time, key mining companies such as China Molybdenum – owner of the Tenke Fungurume copper and cobalt mine – isolated its workers on site to prevent the spread of the virus to the mine.

On July 13, DRC Labour Minister Nene Ilunga Nkula ordered mines to stop confining workers on site within one month, raising the risk for local transmission on mining sites in the coming quarter.

Fitch Solutions indicates that the implications of the Covid-19 pandemic will limit the pace of capacity expansions in the Congolese cobalt sector in the short term.

One example is Dubai-based copper/cobalt producer Shalina Resources' subsidiary Chemaf, which on April 5 placed its Usoke copper and cobalt processing plant on care and maintenance.

This led to the ceasing of production at the Mutoshi artisanal cobalt mining site and halted construction of Mutoshi’s processing plant as a result of the Covid-19-induced market and operational conditions.

According to Fitch Solutions, although Shalina Resources’ production losses in 2020 will be offset by increased output at its Etoile mine and processing plant, the delay of the Mutoshi development will impact cobalt supply in the coming years when demand is expected to elevate above current levels.

However, Fitch Solutions expects construction at Mutoshi to continue in line with the vision to capitalise on future demand in the battery market, especially within the context of absent production from Mutanda. Once operational, the Mutoshi processing plant will have a capacity of 20 000 t/y of copper and 16 000 t/y of cobalt, equivalent to about 16% of the DRC’s total cobalt output.

Overall, Fitch Solutions says that, over the past five years, yearly cobalt production has averaged growth of 10% year-on-year. However, disrupting this trend, the firm forecasts average growth to slow slightly to 8.8% between 2021 and 2025.

However, Fitch Solutions points out that a new deal between electric vehicle and battery products company Tesla and Glencore highlights the need of battery manufacturers to establish a future supply of cobalt.

On June 23, Tesla announced a long-term supply contract for cobalt with Glencore, specifying a yearly purchase of 6 000 t.