Congo's Cobalt Export Quota Reforms and Their Implications for the EV Supply Chain

The Democratic Republic of the Congo (DRC) has long dominated the global cobalt market, producing over 70% of the world's supply. In 2025, the country's government implemented a dramatic policy shift, replacing a four-month export ban with a quota system to manage supply and stabilize prices. This reform, effective October 16, 2025, allocates annual export caps of 18,125 tons for 2025 and 96,600 tons for 2026–2027, while reserving 10% of future volumes for strategic national projects. The move reflects a calculated effort to reduce market oversupply, capture higher value from domestic processing, and assert geopolitical influence over a critical mineral for the electric vehicle (EV) revolution.

Policy-Driven Supply Constraints and Market Volatility

The DRC's export ban, initially imposed in February 2025 and extended in June, triggered a 50% surge in cobalt prices, with hydroxide prices spiking by 116%. This volatility exposed the fragility of global supply chains reliant on the DRC, which accounts for 76% of global cobalt production. The quota system aims to temper such shocks by introducing predictability, but its phased implementation has created uncertainty. For instance, the delayed physical market impacts-due to a three-month shipping lag from Africa to China-mean the full effects of the ban will materialize in late 2025.

Strategic Responses from Downstream Battery and Materials Companies

Faced with constrained supply and price instability, downstream battery and materials firms are recalibrating their strategies. Key adaptations include:

1. Diversification of Supply Chains
   Companies are accelerating efforts to source cobalt from alternative regions, such as Indonesia (the world's second-largest producer) and Canada. For example, US Strategic Metals recently partnered with Glencore and Chilean Cobalt to establish localized cobalt and copper processing in North America, reducing reliance on DRC and Chinese supply chains.

2. Investment in Local Processing
   The DRC's push for domestic processing has incentivized partnerships between international firms and Congolese entities. The U.S. Minerals Security Partnership (MSP), which includes the DRC as a key partner, is funding projects to develop refining and recycling infrastructure, aiming to create a more resilient supply chain.

3. Recycling and Circular Economy Initiatives
   With primary cobalt supply constrained, firms like CMOC Group have announced plans to scale recycling operations. This shift aligns with broader industry trends toward circular economies, though challenges remain in scaling technology and cost-effectiveness.

4. Strategic Stockpiling and Hedging
   Some manufacturers have resorted to stockpiling cobalt to buffer against short-term shortages. However, this approach carries risks, as the DRC's quota system may eventually stabilize prices, reducing the urgency for such measures.

Long-Term Implications for the EV Industry

The DRC's reforms underscore a broader trend: resource-rich nations leveraging policy tools to maximize economic value from critical minerals. While the quota system may stabilize prices in the medium term, it also raises concerns about supply chain concentration. For instance, the closure of the DRC's Mutanda mine-a 20% global supplier-has further tightened supply, prompting companies to accelerate diversification.

Investors should monitor how firms adapt to these dynamics. Those prioritizing vertical integration, recycling, and partnerships in politically stable regions may outperform peers reliant on DRC exports. Conversely, companies unable to secure alternative supplies or invest in processing capabilities face heightened exposure to price swings and geopolitical risks.

Conclusion

The DRC's cobalt export quota reforms mark a pivotal moment for the EV supply chain. By curbing oversupply and promoting domestic processing, the DRC is reshaping global market dynamics. Downstream companies are responding with strategic diversification, localized processing, and recycling initiatives-moves that could redefine the industry's resilience. For investors, the key lies in identifying firms that align with these structural shifts, ensuring long-term viability in a resource-constrained world.