Cobalt Is the New Oil

Cobalt Is the New Oil
Photo: Samir Tounsi, Getty Images

The U.S. and China may be on a collision course over scarce resources, the fallout of which could have a massive impact on developing countries.

Superpowers fighting worried over valuable goods might sound familiar in the context of oil and gas. But the new resource struggle is over the metals and minerals that will power the future from electric vehicles to clean energy technology.

That’s according to a recent New York Times investigation, which used formerly classified diplomatic cables and interviews with more than 100 people spread across three continents to paint a picture of the fight for cobalt. The investigation zeros in specifically on the southwest region of the Democratic Republic of Congo called Kisanfu, which is home to one of the world’s largest cobalt reserves. Congo as a whole is responsible for producing over 70% of the world’s cobalt supply, according to Reuters.

The report traces Chinese companies ramping up cobalt extraction in Congo back to 2016, when a major U.S. mining firm sold off two massive cobalt reserves to a Chinese conglomerate China Molybdenum. Chinese mining firms have since been on a buying spree in the county, locking up much of the global cobalt supply chain.

According to the Times, 15 of the 19 cobalt-producing mines in the country are now owned by Chinese companies that have received at least $US12 ($17) billion in loans and financing from state-backed institutions. The five biggest companies have a line of credit hovering around a whopping $US124 ($171) billion. The U.S., meanwhile, has fallen behind — and even let cobalt assets slip out of its grasp. That’s set the stage for a major fight for the energy of the 21st century, with Congolese workers and residents caught in the middle. 

Congolese officials have accused one of those mining companies, China Molybdenum, of withholding payments to the government. As cobalt production has rapidly increased since the Chinese firms took over, at least a dozen employees and contractors at a Tenke Fungurume mine complained of a “drastic decline in safety and an increase in injuries, many of which were not reported to management.”

The report comes as the U.S. Senate prepares to vote on the Build Back Better bill, which would include $US320 ($442) billion in expanded tax credits for renewable energy and electric vehicles and another $US110 ($152) billion to improve U.S. renewable energy technology supply chains. Those investments will be crucial if the country and carmakers have any shot at meeting EV and clean energy targets outlined for the next decade. For some context, President Biden has promised to decarbonize the grid by 2035 and set a target of making half of all new U.S. car sales electric by 2030. He has used the weight of the federal government to start the EV transition, and Build Back Better would add more juice to it and the clean energy goals. But there’s a lot of work to do between now and then; a report from LMC Automotive suggested that that share is expected to be less than 4% this year.

But analysts and experts are already warning of a coming EV battery shortage that could resemble the current global semiconductor scarcity rattling supply chains. In the U.S., EV carmakers like Tesla as well as traditional brands like General Motors and Ford are gearing up to dramatically increase their cobalt and lithium demand in coming years as they ramp up EV production. That could strain already shaky supplies.

Some of those effects are already being felt according to a report released last month by Benchmark Mineral Intelligence, which found an increase in battery cell prices in tandem with an increase in raw material prices, especially for lithium. If countries continue towards their path of meeting needed climate goals, the International Energy Agency warns supplies from existing mines may only be able to meet half of lithium and cobalt requirements by 2030.

Biden, for his part, made clear his administration’s ambition to ramp up the mineral race with China during a visit at a General Motors facility last week, the Times notes.

“We risked losing our edge as a nation, and China and the rest of the world are catching up,” Biden said. “Well, we’re about to turn that around in a big, big way.”

So far, the global push towards renewable energy technology appears poised to follow a familiar script, with a handful of large players fiercely competing on the global stage to extract valuable resources, likely at the expense of local geography, ecology, and communities.