The Democratic Republic of the Congo (DRC) has extended its ban on exports of cobalt by three months as the world's dominant producer of the battery metal tries to convert its supply power into pricing power.
After rallying sharply in February, when the market was caught out by news of the original ban, the price reaction this time has been more muted.
Some sort of extension was widely expected. Moreover, it has become clear the physical supply chain has so much accumulated inventory that DRC's muscle-flexing is yet to faze buyers. Neither are investors buying into an imminent turnaround in the market.
Cobalt Holdings, which planned to list a physical cobalt investment vehicle, pulled its initial public offering on the London Stock Exchange earlier this month.
The DRC's cobalt dilemma is how to restrict supply of a metal that is mined as a by-product of copper, a bigger revenue earner for the resource-rich country. It might do better to focus on its own role in the supply chain.
It takes about 90 days to ship the DRC's intermediate cobalt product to China for refining, meaning the full impact of the February export ban is delayed.
China's imports of Congolese cobalt remained robust at more than 50,000 metric tons in March and April. Moreover, the Chinese supply chain is bloated from consecutive years of market surplus.
Consultancy Benchmark Mineral Intelligence (BMI) estimated stocks of cobalt outside the DRC amounted to eight to 10 months of global consumption in the second quarter of the year. Even with extended export controls by the world's largest producer, BMI said cobalt hydroxide stocks in China will only become physically low towards the end of next year.
The shift by Chinese electric vehicle manufacturers away from cobalt chemistry is compounding over-supply.
Enforcing export quotas rather than the blanket ban would be operationally tricky and would not tackle the inventory accumulating in the country
The country's consumption of cobalt sulphate by the battery cathode sector fell last year, according to analysis by Shanghai Metal Market compiled for the Cobalt Institute. Since the DRC has only stopped exports, and not production, stocks of intermediate cobalt are also piling up.
Cobalt's by-product status means the DRC cannot easily follow the lead of Indonesia, which has started using mine quotas to limit production of nickel, another battery metal with bombed-out pricing.
Any mining restrictions on the DRC's cobalt producers would inevitably impact production of copper, which is in hot demand.
The London Metal Exchange copper price is riding high at close to $9,900 (R177,360) per ton given tight markets for the raw material and refined metal.
Chinese operators in the DRC, such as CMOC Group, have every incentive to keep digging as much copper out of the ground as possible. The cobalt comes free with it. The DRC is the world's largest cobalt-producing country and CMOC is the largest producing company.
With limited leeway to force companies such as CMOC or Glencore to produce less cobalt without forfeiting copper revenues, the government has been considering an export quota system. Enforcing export quotas rather than the blanket ban, however, would be operationally tricky and would not tackle the inventory accumulating in the country.
The potential for a renewed flood of Congolese supply in the event of a policy change would weigh heavily on the cobalt price.
The DRC government looks set for a long stand-off with the cobalt market and it is not clear what price level it is targeting. If it aims too high, there is a risk it will accelerate cobalt's loss of market share in the battery sector.
The country is finding out that controlling supply and controlling market price are two very different things, particularly when the other end of the cobalt supply chain is thousands of kilometres away in China.
It could do worse than look at another Indonesian tactic, which is to link exports to commitments to build downstream processing capacity. Indonesia has successfully used the linkage in the nickel and copper sectors, where two new smelters are firing up this year as a result of tighter controls over exports of copper concentrate.
While the DRC is likely to struggle to exert lasting control over the cobalt price, it can use its dominant supply position to determine where it sits in the supply chain.
That will not solve the problem of over-production of what is a copper by-product, but it would mean more revenue for each kilogram of metal dug out of the country's rich resource base.
• The opinions expressed here are those of the author, a columnist for Reuters.
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