Following the announcement by the Democratic Republic of Congo government to replace a months-long ban on shipments with a system of export quotas, set to begin in October, Project Blue's cobalt market experts have assessed the announcement and the impact on the market balance and prices.

Project Blue’s latest views on cobalt market balances and prices:

Project Blue anticipates a shift in the cobalt market from surplus to shortage, driven by the DRC’s newly implemented export quota system.

While supply and demand are expected to remain relatively balanced throughout 2025, tightening availability of cobalt hydroxide - especially in the latter part of the year - could lead to a supply deficit in 2026 and 2027. This projection assumes the DRC’s implements the annual export cap of 96.6kt of cobalt for the next two years.

Such constraints could push cobalt prices upward in the near term, potentially recovering to historical long-term real prices of over US$20 per pound in 2026 and 2027.

The announced quota levels came in below expectations for many market participants, though they align with Project Blue’s forecasts to balance the market. In our August 2025 analysis, our analysts estimated that at least 100kt of cobalt exports from the DRC would be necessary to maintain market equilibrium in 2026.

Factoring in shipping lead times of 3 months from the DRC to China and processing losses, only 85–90kt of cobalt are expected to reach end users in 2026. This shortfall is projected to create a structural deficit, offering continued support for elevated cobalt prices.

Policy interpretation:

Exporters now face a complex regulatory landscape to secure quota allocations, involving monthly volume approvals, strategic quota submissions, and strict compliance with ARECOMS. These administrative requirements introduce additional layers of bureaucracy, legal expenses, “regulation and control fees”, and potential delays depending on the number of departments involved, all of which contribute to rising operational costs for producers.

The EGC (Entreprise Générale du Cobalt) remains an unknown quantity in the supply landscape, having been assigned in 2019 by the DRC government as the sole entity authorized to purchase, process, and market all cobalt from ASM (artisanal and small-scale mining) operations.

To date, the implementation of this decree has not yet resulted in significant cobalt purchases by the EGC, but we note they are included as part of the quarterly allocation and fall outside the ‘pro rata’ basis for other miners. This gives ARECOMS the flexibility to allocate disproportionate export volumes to the EGC if artisanal activity picks up again, particularly in a higher cobalt price environment.

The quota system adds significant uncertainty to production planning, particularly for companies like CMOC that already reached their full quota in the previous year. It is particularly challenging given the co-production of copper at many operations, so working capital management becomes particularly complicated. To mitigate policy-related risks, exporters may need to adopt financial hedging strategies, further complicating their cost structures.

The quota system also adds significant uncertainty to supply chain planning, with buyers now having to allocate procurement decisions based on producer quotas and compete for limited hydroxide availability. Further, it is possible that traceability requirements by downstream consumers become more stringent depending on the leakage outside the quote system.

Quotas are determined based on historical export volumes, but the specific reference years remain undefined. While this ambiguity offers the DRC government flexibility in implementation, it poses risks for producers - especially those with fluctuating outputs. Some Chinese cobalt majors, in particular, could be disproportionately affected if quotas are calculated using earlier years when their production share were relatively low.

The clause stating that ARECOMS may purchase cobalt stocks exceeding a company’s quarterly quota underscores the DRC’s intent to assert greater control over its strategic mineral assets. This provision gives the regulator a powerful tool to influence global cobalt pricing, especially during periods of supply disruption or geopolitical tension.

However, Project Blue also notes that long-term storage of cobalt hydroxide products is not as viable as metal, meaning any stocks would need to have a relatively short-term plan for further refining.

With exports restricted and surplus cobalt subject to state purchase, companies may pivot toward domestic refining to circumvent raw material quotas. Others might opt to stockpile cobalt in anticipation of more favorable terms or regulatory shifts. These adjustments could lead to logistical challenges and increased storage costs across the supply chain.