The escalating global demand for cobalt marks a significant shift in resource geopolitics. Driven by the expanding adoption of emerging technologies notably lithium-ion batteries crucial for the burgeoning electric vehicle (EV) market and sophisticated superalloys required for high-performance jet aircraft turbine blades the competition for this once-niche metal has intensified.
Countries and their manufacturers are vying for global market share in these advanced technologies, creating a potential race for the raw materials underpinning them. Amidst this landscape, and coupled with anxieties about potential international trade disruptions, China has positioned itself as a central figure, not only in the consumption and production of cobalt-containing goods but also in the strategic acquisition of the raw cobalt materials themselves.
China's role in the cobalt value chain is characterized by a fundamental asymmetry. Driven significantly by its strategic push into EV manufacturing designated as a strategic emerging industry supported by government funding, subsidies, and infrastructure development China dramatically ramped up its cobalt processing capabilities.
Between the years 2000 and 2016, its production of refined cobalt experienced an astounding thirty-four-fold increase. This surge propelled China's share of global cobalt refinery capacity from a modest 3% in 2000 to a commanding 50% by 2016 (representing an estimated capacity of 65,000 metric tons of cobalt content).
However, this refining prowess starkly contrasted with its domestic resource base. China simply did not possess cobalt-bearing ores in sufficient geological concentrations to support profitable extraction at the scale required, given prevailing prices and available technology.
Consequently, its domestic mine production in 2016 was estimated at only 1,920 metric tons of cobalt content, a mere 2% of the global total (111,000 metric tons).
This vast gap exposed China's cobalt refining industry to significant supply risk for the necessary mine ores and intermediate materials.
Recognizing this vulnerability, potentially years in advance, the Chinese government formally initiated its "Going Out Strategy" around the turn of the millennium (circa 2000). This policy explicitly encouraged Chinese firms, particularly State-Owned Enterprises (SOEs) which often received direct and indirect government support, to expand their Overseas Foreign Direct Investment (OFDI). The focus was often on securing mineral resources and developing infrastructure, especially in developing countries across Africa and Asia.
Academic literature frequently interprets this strategy as explicitly "resource-seeking." Chinese firms progressively invested in foreign companies, assets, and infrastructure involved in producing and transporting minerals critical to China's strategic goals, especially when domestic production was insufficient or uneconomical.
The often-cited "minerals for infrastructure" agreement between China and the Democratic Republic of the Congo (DRC), formalized around 2007, serves as a prime example. In this deal, Chinese state-owned banks extended favorable loans to the DRC government for infrastructure projects, reportedly in direct exchange for preferential access to develop the country's rich copper and cobalt deposits.
The consequences of China's refining boom and limited domestic supply were reflected in its import patterns. Net imports of cobalt mine and intermediate materials into China increased significantly between 2000 and 2016.
A notable trend during this period was the shift in the type of material imported: from predominantly mine ores and concentrates in the earlier years (2000-2011) to mainly hydrometallurgy intermediates (HMI) later on (2012-2016).
Crucially, China developed an overwhelming reliance on a single source: the DRC. Following the 2007 deal, although specific mines central to the agreement didn't begin production immediately, overall cobalt mine and intermediate exports from the DRC to China rose substantially.
By 2016, the DRC was the source for almost all of China's net imports of these raw cobalt materials, underscoring the strategic importance of the relationship cultivated through the Going Out Strategy.
Mine Production: China's domestic production was 1,920 tonnes (2% of global). Its ownership share of foreign mine production added another 14,010 tonnes. This combined influence (domestic + foreign ownership) represented 14% of global mine production. (Note: This foreign mine output is typically processed into intermediates near the source, not shipped as ore to China).
Intermediate Production Capacity: China's domestic capacity was 13,300 tonnes (11% of global). Its ownership share of foreign intermediate capacity added 25,640 tonnes. This combined influence represented 33% of global intermediate capacity.
The study also noted that China's foreign investments seemed to target facilities with progressively larger production capacities over time.
Refinery Production Capacity: China's domestic capacity alone represented 50% of the global total (estimated at 129,000 tonnes capacity worldwide in 2016). The study found no significant Chinese ownership of foreign refineries at that time.
These figures clearly show how OFDI substantially amplified China's influence far beyond its domestic capabilities, particularly in the upstream (mine) and midstream (intermediate) segments, primarily through assets located in the DRC.
China's dependence on external sources is starkly illustrated by its conventional Net Import Reliance (NIR). Calculated as (Apparent Consumption - Domestic Production) / Apparent Consumption, where Apparent Consumption (AC) is the sum of domestic mine production and net imports of mine and intermediate materials (AC = 1,920 + 10,470 mine imports + 46,370 intermediate imports = 58,760 tonnes in 2016), China's NIR was = 97% This indicates an almost complete reliance on foreign sources for the raw materials feeding its refineries.
However, this calculation doesn't factor in the potential security gained through ownership of foreign assets. An Adjusted Net Import Reliance (NIRA) attempts to incorporate this by subtracting the foreign production share controlled by Chinese entities (PF) from the numerator: NIRA = (AC - PD - PF) / AC.
For 2016, estimating PF required nuance. China's foreign mine production was processed locally into intermediates. Furthermore, part of its ownership share of intermediate production (specifically from the Tenke Fungurume mine, representing 9,020 tonnes of the 25,640 total foreign share) was subject to pre-existing supply agreements and thus not necessarily available for export back to China.
Excluding this portion, the usable PF was (25,640 - 9,020) = 16,620 tonnes. The first adjusted calculation (NIRA1) becomes: 68%
This substantial reduction from 97% to 68% quantifies the impact of OFDI in potentially lowering China's exposure to supply risk under existing market conditions. It highlights that Chinese ownership influenced approximately 29% of its raw cobalt material net imports in 2016.
The study further calculated a hypothetical NIRA2 based on potential future changes (like altered Tenke Fungurume contracts and updated ownership shares), suggesting reliance could fall even further to 47%, underscoring the strategic significance of that particular asset.
It's crucial to note, however, that while ownership likely reduces risk in normal circumstances (e.g., securing supply agreements), it may not insulate China from extreme events like widespread civil disorder in the DRC or naval blockades affecting maritime routes between Africa and China.
The findings suggest that China's concerted OFDI has profoundly increased its leverage within the global cobalt supply chain. Consequently, future studies assessing mineral availability and supply risk (criticality) for other countries may need to adopt a more nuanced approach than simple global analyses.
Production capacity under Chinese ownership, even if located abroad, might arguably be considered influenced by centralized Chinese mineral policies or potentially less available to the open market, especially during periods of geopolitical tension or strategic competition.
China's strategy in cobalt serves as a potential blueprint for other critical minerals where it faces domestic shortfalls. The effectiveness of its OFDI in reducing its apparent import reliance for cobalt demonstrates a powerful tool for resource security.
This raises broader questions: Does Chinese control over foreign resources ultimately stabilize global supply chains by ensuring throughput to its large refining sector (if products are then globally exported), or does it increase risk for other consuming nations by concentrating control and potentially limiting access in the future?
Either way, understanding the role and impact of Chinese foreign ownership is becoming an indispensable component of global mineral market analysis.