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Chinese Cobalt Dominance Sparks U.S. Energy Security Concerns and Market Tensions

Hannah Perry | October 10, 2024

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This Chinese Miner Dominates Global Cobalt Supply. The U.S. Is Crying Foul.

A Chinese mining company, CMOC Group, has successfully commandeered over a third of the world’s cobalt supply, igniting concerns among U.S. officials regarding the implications for national security and energy independence. Cobalt is an essential mineral used in high-tech industries, notably in the production of jet fighters, munitions, drones, and notably, electric vehicle (EV) batteries.

The Accusations Against CMOC

U.S. officials have expressed apprehension that CMOC is engaging in predatory market strategies aimed at undermining competition. Jose Fernandez, a State Department undersecretary responsible for international energy policy, articulated that CMOC’s maneuvers are “hurting not only the competition but also jeopardizing America’s energy transition.” In response to the growing geopolitical tension, industry analysts are questioning whether CMOC’s market flooding is part of a broader strategy to stifle Western investment in cobalt production.

CMOC’s Response

In its defense, CMOC claims that the increase in cobalt production primarily stems from its concurrent boost in copper mining operations, as both metals are commonly extracted together. The company has stated that it is acting conscientiously in the market. CMOC’s rapid advancement in cobalt mining can be tied directly to its significant investments in the Democratic Republic of Congo (DRC), having acquired major assets from Freeport-McMoRan in high-profile deals totaling over $3 billion.

The Expansion of Chinese Influence

CMOC’s meteoric rise in the cobalt space reflects a larger trend of Chinese companies expanding their reach to sustain the country’s formidable manufacturing sector. Significantly, CMOC’s growth story is intertwined with the emergence of electric vehicles and EV battery production, as cobalt is pivotal for enhancing performance due to its high energy capacity. China’s largest EV battery manufacturer, CATL, is a significant stakeholder in CMOC, owning nearly 25% of the company through a subsidiary.

Market Impact and Concerns

The consequences of CMOC’s dominance extend beyond market share; cobalt prices are currently plummeting to eight-year lows, reflecting a buyer’s market. Western officials, including executives from smaller mining companies, allege that CMOC’s strategy of ramping up sales rather than consolidating stockpiles is stifling investment opportunities. For instance, Jervois Global, an Australian mining company holding the only cobalt-focused mine in the U.S., struggles with profitability due to the excess supply led by CMOC.

The Global Landscape of Cobalt Mining

Despite CMOC’s argument that stockpiling leads to inefficiencies, analysts warn that cobalt remains an essential material for many EV battery chemistries, particularly among Western manufacturers. The recent restrictions imposed by China on the export of critical minerals such as gallium and germanium serve as a poignant reminder of the geopolitical implications surrounding mineral resources.

U.S. Response and Strategic Initiatives

In light of these challenges, the U.S., with allies like Canada and Australia, has initiated partnerships aimed at securing supplies of critical minerals. Vice President Kamala Harris has pitched the idea of establishing a national stockpile of essential minerals to counter the dynamic influence of global competitors like China. As the competition heats up, some analysts contend that the U.S. should consider more direct interventions to secure stable domestic sources.

CMOC’s Historical Context and Future Outlook

Founded in 1969, CMOC initially specialized in molybdenum processing. Following a shift in ownership to a private-equity firm in 2004, the company has evolved into a mining behemoth worth over $20 billion, garnering global operations in countries rich in natural resources. Under the leadership of Yu Yong, the company is not only focused on cobalt but also aims to be a leading copper producer amid the growing demand for electric vehicles and AI technologies.

Conclusion

The swift rise of CMOC in the cobalt mining sector epitomizes China’s strategic ambition to dominate critical mineral supply chains. As U.S. concerns grow around energy independence and national security, the question remains: how will the U.S. respond to ensure its competitive standing in the global market for critical materials? Ongoing dialogues among industry players and policymakers will be crucial in shaping the future landscape of cobalt and related resources.