Congo’s Economic Crises Could Cause Smartphone Prices To Rise

The Democratic Republic of Congo is highly sought after for its rich mineral resource cobalt, possessing 66% of global production.

It has become an important element used in building lithium-ion batteries for mobile phones. The rise of electric cars has also made cobalt more important than ever before.

Source: Benchmark Mineral Intelligence

In the past two decades the price of cobalt has soared and the world’s largest producer of the resource has a hand in it. Congo’s political instability and weak economic policies are crippling the economy, together with the civil unrest caused by President Joseph Kabila’s refusal to step down from power.

In the broader scheme of things, this has its huge influence on the price of cobalt and the industries where the resource finds use. For instance cobalt has become the most expensive element used in making portable lithium-ion battery for smartphones and electric vehicles.

The price of cobalt may be dropping since reaching a near-ten-year peak in March. In July, a surplus of cobalt chemicals in China – the world’s largest refiner of cobalt – caused prices to fall. The price has dropped from $89,000 a tonne to about $65,000 a tonne now but it doesn’t ease the Congo problem. In fact, the government has plans to increase royalty taxes paid on the metal to 10% from 3.5%.

This is such a massive leap and should the government go ahead with its plans, it’s sure to add negative pressures on the price of cobalt and industries could begin to seek alternatives.

CRU Group forecasts that DRC will account for 139,000 tonnes or 75 percent of global cobalt supply by 2020, from 70 percent this year. The metal’s extensive use across several industries also makes it difficult for interested industries to find quick alternatives.

Beyond the harm posed to Congo’s foreign exchange earnings, the overall economy stands at risk of imploding if the right economic policies are not enacted, but PwC believes proper policy execution can resolve Congo’s economic woes.

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