In 2018, Trafigura published a whitepaper setting out the significant challenge ahead in meeting rapidly growing and forecast future demand for electric vehicles (EVs). Namely, that demand for electric vehicles was fuelling increased requirements for cobalt – and to meet it, artisanal and small-scale mined (ASM) production from the Democratic Republic of Congo (DRC) would need to be regulated, legitimised and responsibly sourced.
That challenge has only become more severe in the four years since our 2018 publication. Demand for EVs is stronger than ever and continues to grow, buoyed by generous government incentives and consumer climate concerns. The need for greater energy security and less reliance on fossil fuels – together with higher gasoline and diesel prices at the pump – have been thrown into sharp relief by Putin’s war in Ukraine, further accelerating the shift to e-mobility.
Enthusiastic EV buyers are, however, having to confront ever-longer waiting times for new vehicles as manufacturers experience a range of supply constraints. Today, the most pressing is a shortage of semi-conductors, compounded by post-pandemic supply chain congestion. But today’s semi-conductor shortages could easily become tomorrow’s battery metals supply shock, unless mined and refined production of key metals can respond quickly enough to meet demand – and ESG concerns are addressed in the process.
Supply of cobalt, a critical component of lithium-ion batteries, is particularly vulnerable. Around 70 percent of global cobalt production comes from the DRC, a country with extraordinary mineral wealth, most of which mined by a few large-scale mining groups and processed primarily by China. The richness of its resources and the poverty of many of its communities mean that artisanal and small-scale mining is rife – as well as scarcely regulated and dangerous too.
Efforts to marginalise or outlaw artisanal and small-scale mining – or to refuse to buy ASM or even DRC-origin cobalt – have, by any measure, been unsuccessful. According to our analysis, today ASM cobalt accounts for more than 10 percent of global supply and from around 20 percent to as much as 40 percent of total production from the DRC.
In fact, the world now depends on ASM cobalt. Without it, global supply would have fallen short of demand over the past two years, severely curtailing lithium-ion battery production and impeding the uptake of electric vehicles.
International initiatives to address responsible sourcing of DRC cobalt have had no greater success either, having neither managed to deter huge numbers of artisanal diggers or provide alternative livelihoods; nor to improve their treacherous working conditions or the risks of exploitation. More than 200,000 men, women and in some cases children are thought to earn their living from ASM in the country. And while working conditions and the involvement of children are wholly unacceptable, it cannot be denied that ASM represents an important and hard to replace source of income in deprived, remote communities.
Our updated research, published in a new whitepaper today, makes it clearer than ever that large-scale mining alone cannot meet current cobalt demand - let alone the strong demand growth we are forecasting to 2030 and beyond. Even including ASM production, current and expected new large-scale mined production, we estimate that global demand will outstrip cobalt supply by 2025 and the supply gap grows year on year to 2030.
The solution remains, in our view, incontrovertible. The world needs responsibly-sourced ASM cobalt production from the DRC to avoid stalling the energy transition to a low-carbon world. And the lives and livelihoods of many thousands of people need to be protected by a safe, regulated ASM sector, supported by international cooperation and supply chain transparency.
This was the conclusion we reached in our 2018 whitepaper – a somewhat controversial one at the time. And we backed up our thesis with action on the ground, establishing a pilot project to formalise artisanal and small-scale mining of cobalt at the Mutoshi mine, in conjunction with international NGO Pact and concession owner Chemaf. Our shared objective: To demonstrate what is possible and motivate action at scale, up and down the global supply chain.
From this small but significant start, Trafigura was selected to work with the DRC government, to put into practice its 2019 decrees to formalise ASM cobalt through a new state entity, Entreprise Générale du Cobalt (EGC). As part of an offtake and marketing agreement with EGC, Trafigura’s role includes helping to establish controls and traceability for the cobalt produced by regulated, accredited ASM collectives, working at approved sites.
Overseen by an independent regulatory body, ARECOMMS, and working to international standards, as set out in the EGC Responsible Sourcing standard, EGC aims to establish controlled zones where production can be semi-mechanised and safe working conditions established. Selling and buying of ASM cobalt will be transparent and traceable from mine to customer gate.
Progress towards a fully formalised ASM sector in the DRC will, however, require far greater cooperation between industry participants – from large-scale miners to traders and downstream industrial consumers, with governments, civil society groups and communities, and, crucially, with the DRC government and its newly established state enterprise and regulator.
As we set out in this whitepaper, the challenge may be great, but the opportunity is enormous: A formalised, regulated ASM sector safeguards human rights, supports the livelihoods of thousands of people, sustains a just transition and helps meet decarbonisation goals. 2022 needs to be the year that we make it happen.
Read the whitepaper here.