Cobalt metal prices have stabilised near $56,290 per metric tonne as of mid-May 2026, more than doubling from a February 2025 low of approximately $20,000 per tonne, after the DRC's transition from an outright export ban to a structured quota regime produced administrative delays that drained Chinese inventories to critically low levels. Indonesia's HPAL-driven by-product ramp, forecast to add 39% in cobalt output to 53,318 tonnes in 2026, offers partial relief but falls well short of covering a projected 10,700-tonne structural deficit. The longer the high-price environment persists, the greater the incentive for battery manufacturers to accelerate substitution toward cobalt-free chemistries.
Introduction
Cobalt metal entered 2026 at $56,414 per metric tonne, a price that would have appeared implausible twelve months earlier when the same commodity was trading near nine-year lows of $20,000 per tonne. By May 12, 2026, the spot price had settled at $56,290 per tonne, essentially flat on the month but still 67% above year-ago levels according to Trading Economics benchmark data. The trajectory from trough to current levels represents one of the most abrupt reversals in the commodity's modern history, compressing what typically unfolds over several years into a single calendar cycle.
The mechanism behind this repricing is not a demand surge. Global cobalt demand is projected near 292,300 metric tonnes for 2026, according to Fastmarkets, a figure consistent with steady rather than accelerating battery deployment. The price move is supply-side and policy-driven: the Democratic Republic of Congo, which produced 74.5% of global cobalt supply in 2024 according to S&P Global Market Intelligence, imposed a full export ban in February 2025 and subsequently replaced it with a quota regime that has delivered materially less material to market than the system's nominal parameters suggest.
Indonesia, the world's second-largest cobalt producer, is ramping HPAL-linked by-product output at pace, with S&P Global CERA projecting a 39.1% increase to 53,318 tonnes in 2026. That growth trajectory is real and consequential, but it does not close the structural gap left by DRC export controls. Against a deficit projection of approximately 10,700 tonnes from Fastmarkets, and with Chinese exchange inventories already drawn down by more than 50% between January and March 2026, the cobalt market enters the second half of the year in a condition of sustained tightness with limited near-term relief mechanisms.
Building on my earlier analysis of the DRC quota system and its interaction with Chinese battery supply chains in "The Sovereign Turn" published in May 2026, this article examines the precise mechanics of the export delay, quantifies the Indonesian offset, and assesses the longer-term substitution dynamic that represents the most consequential strategic risk for the DRC's pricing ambitions.
From Ban to Quota: A Timeline of Regulatory Disruption
The DRC's intervention in the cobalt market began on February 22, 2025, when the Ministry of Mines imposed an outright export ban aimed at addressing what Kinshasa characterised as a structural oversupply that had depressed prices to nine-year lows. The logic was straightforward: global production surges from Indonesia's HPAL sector and CMOC's aggressive ramp-up at its Katanga operations had pushed cobalt from its 2022 peak of approximately $82,000 per tonne to around $20,000 per tonne by early 2025. An initial four-month ban was extended in June for an additional three months, with imports of cobalt intermediates into China slumping by more than 90% in August 2025 compared to a year earlier.
On September 21, 2025, ARECOMS, the DRC's minerals regulatory body operating under the Ministry of Mines, announced the transition to a structured quota system effective October 16. The parameters appeared credible on paper: 18,125 metric tonnes allocated for export in Q4 2025, followed by an annual cap of 96,600 tonnes for 2026 and 2027. That annual figure comprises an 87,000-tonne base quota allocated to companies and a 9,600-tonne strategic reserve. Monthly export volumes are capped at 8,050 tonnes, representing a 48% reduction compared to 2024 export levels.
The gap between announced policy and operational reality proved damaging to downstream supply chains. Fastmarkets reported that no material had left the DRC under the new regime through late December 2025, owing to requirements that royalties be prepaid in advance, that the system be tested first with smaller volumes from a single producer, and that export certificates be obtained before trucks could depart. The DRC's Minister of Finance stated on December 23 that exports had resumed, without disclosing volumes, exporters, or destinations. The first truck carrying cobalt under the new rules only left the country in January 2026.
The administrative backlog produced a formal rollover: ARECOMS extended the validity of Q4 2025 quotas through March 31, 2026, and subsequently through April 2026. Unused Q1 2026 quotas were granted validity through June 30, 2026, establishing what the regulator described as a rolling six-month validity window. Glencore's Q1 2026 production report confirmed that the company exported the greater part of its 2025 quota during Q1, with the balance cleared in April. The Swiss major's cobalt output fell 39% year-on-year in Q1 2026 to 5,800 tonnes, a deliberate production reduction to avoid accumulating inventory that exceeded its 22,800-tonne annual export allocation. "Our DRC assets are now prioritising copper production as existing finished cobalt inventories are sufficient to fully deliver into near-term quota levels," Glencore stated.
CMOC, which holds a 2026 export quota of 31,200 tonnes against 2025 production of 117,549 tonnes, faces the most acute mismatch between production capacity and export entitlement of any single operator. Citigroup noted that the quota is lower than market expectations relative to CMOC's recent output ramp, while simultaneously observing that CMOC benefits from the higher price environment the quota creates. Eurasia Resources Group, by contrast, slashed cobalt hydroxide output 70% to 5,700 tonnes in 2025, giving it scope to recover toward its 2026 entitlement of 12,325 tonnes from a depressed production base.
Inventory Depletion and the Chinese Supply Squeeze
The consequences of eight months of near-zero DRC exports fell most acutely on Chinese refiners, who process the overwhelming majority of DRC cobalt hydroxide. S&P Global analyst Alice Yu had warned in late 2025 that Chinese cobalt stocks could hit dangerously low levels by early 2026, with no inventory buffer remaining to cushion the impact of quota-constrained imports. That forecast proved accurate: S&P Global calculations indicated that Chinese cobalt inventories would be effectively depleted by January 2026.
The evidence from exchange data supports this characterisation. Inventories at the Wuxi Stainless Steel Exchange, a key barometer of Chinese market availability, fell from approximately 7,870 tonnes at end-January 2026 to 3,934 tonnes by March 2026, a drawdown rate that Fastmarkets described as among the fastest in the exchange's history. Chinese buyers withdrew over 3,250 tonnes by end-January alone, representing 37% of exchange inventory. Glencore, forced by DRC export restrictions to draw down Wuxi holdings to fulfil Chinese battery maker contracts, was a primary driver of the depletion.
Benchmark Mineral Intelligence projects that the quota system will reduce ex-DRC cobalt stocks to approximately one month of demand by Q4 2026, maintaining that level through most of 2027. Macquarie Group stated that "the market would run out of material before the middle of 2026" if quotas were strictly enforced. The Fastmarkets deficit estimate of 10,700 metric tonnes against demand of 292,300 tonnes may appear modest in percentage terms, but in a market where inventory buffers have already been consumed, even a small absolute shortfall carries amplified price consequences.
Fastmarkets principal battery raw materials analyst Olivier Masson has offered a partial near-term alleviation scenario: "We therefore expect additional material to reach China in the second quarter of 2026, representing the regular quota as well as the fourth quarter of 2025 quota backlog. This should alleviate the market tightness somewhat in the second quarter of 2026." Glencore's confirmation that its Q1 2026 exports cleared the majority of its 2025 backlog and that export processes are now established supports the view that Q2 2026 could see improved flow. The structural deficit, however, persists beyond any one-quarter normalisation. As a market trader told Fastmarkets: "The cobalt market is the tightest it has ever been."
Indonesia's HPAL Ramp: Scope, Scale, and Structural Limits
Indonesia has undergone a transformation in cobalt production over the past decade that few commodity analysts anticipated at its outset. Output rose from 1,300 tonnes in 2015 to approximately 38,324 tonnes in 2025 according to S&P Global data, establishing the country as the world's second-largest producer behind the DRC. S&P Global CERA forecasts a 39.1% increase to 53,318 tonnes in 2026, followed by a further 25.3% expansion in 2027. GlobalData's parallel estimate of 59,800 tonnes for 2026 is somewhat more aggressive, reflecting different assumptions about commissioning timelines for new HPAL lines.
The production mechanism is structurally different from the DRC. Indonesian cobalt is extracted as a by-product of nickel ore processing through high-pressure acid leaching technology, which produces mixed hydroxide precipitate as its primary intermediate. The economics are driven by nickel, not cobalt: with nickel prices languishing around $15,000 per tonne for much of 2025, cobalt by-product revenue at elevated prices effectively subsidises MHP production costs, reducing net costs to an estimated $11,500 to $12,500 per tonne and improving the economics of HPAL operations relative to nickel pig iron production. Argus forecasts Indonesia's MHP capacity to nearly double year-on-year to 862,000 tonnes per year in 2026 as multiple HPAL projects reach commissioning.
Key growth projects include the ongoing ramp-up of Ningbo Lygend Mining's PT Halmahera Persada Lygend facility, the continued expansion of Zhejiang Huayou's Huafei Cobalt-Nickel Project, which commenced production in Q1 2024, and the Indonesia Growth Project Pomalaa jointly owned by Zhejiang Huayou, PT Vale Indonesia, and Ford Motor Company, which is advancing construction toward a Q4 2026 commissioning target. Fastmarkets analysts project Indonesian cobalt-in-MHP production reaching approximately 67,500 tonnes in 2026, up 145% from around 46,300 tonnes in 2025, with the incremental supply difference between domestic refining absorption and export flows expected to reach Chinese battery refiners.
Despite this growth, Fastmarkets is unambiguous about the arithmetic: "This increase in supply will not be sufficient to offset the drop in supply from the DRC, leaving the market in deficit in 2026," Masson has stated. The distinction between Indonesian MHP and Congolese cobalt hydroxide also matters for downstream processing. Chinese refiners have adapted to MHP feedstock over recent years, but the payable structure and processing requirements differ from DRC hydroxide. Cobalt hydroxide payables surged from around 55% of metal price in February 2025 to 100% by early 2026 as buyers competed aggressively for any available feedstock, while MHP payables in Asia stabilised above 72% of contained cobalt as refiners diversified sourcing. The supply base is becoming more geographically distributed, but not yet deep enough to replace DRC volumes at scale.
Battery Chemistry Substitution: The Long-Run Threat to DRC Pricing Power
The DRC's quota strategy rests on a premise borrowed from OPEC-style supply management: that constraining output raises prices and therefore export revenue, without triggering sufficient demand destruction to undermine the long-term value of the resource. In the cobalt market, that premise faces a structural challenge that has no direct parallel in oil: battery chemistry is not fixed, and the cost penalty for switching away from cobalt-containing formulations has been declining steadily since 2020.
Lithium iron phosphate technology, which contains no cobalt or nickel, exceeded 50% of global EV battery deployments in 2025 for the first time, according to RhoMotion data. LFP demand grew 48% in 2025 alone. In China, NMC's market share fell to 18% in the first nine months of 2025 from 25% in 2024, while more than 80% of EVs sold in China between January and November 2025 were equipped with LFP batteries. LFP cells cost approximately $80 to $100 per kWh against $100 to $150 per kWh for NMC, a gap the IEA's Global EV Outlook 2025 quantifies at roughly 30% in favour of LFP.
The substitution dynamic is not uniform across segments. Premium long-range EVs in North American and European markets continue to depend on NCM and NCA chemistries for energy density reasons, and industry observers in 2026 have noted that LFP's limitations in cold climates and at high energy densities have reinforced cobalt-based chemistry's position in performance applications. Benchmark Mineral Intelligence's Roman Aubry offers a long-run demand view that is cautiously constructive: "While battery chemistries are expected to shift towards lower-cobalt or cobalt-free chemistries, the volume of EV batteries is expected to more than offset this. From all applications, cobalt demand is expected to grow almost 80 percent in the next decade."
However, the near-term substitution signal is already embedded in the market. CMOC CEO Kenny Ives acknowledged at LME Week 2025 that the "biggest challenge" for cobalt's long-term future is the risk of downstream consumers pivoting away, and that the reopening of DRC exports under quota comes at what he described as an important crossroads for the commodity. Fastmarkets has stated plainly: "Cobalt is mostly used in batteries, and the longer prices remain elevated, the more likely it is that EV manufacturers will seek to move to low-cobalt or cobalt-free chemistries where feasible. This could slow demand in the medium term."
For the DRC, the policy calculus is therefore time-sensitive. The quota system has achieved its price recovery objective, with cobalt rising more than 240% from its 2025 low. But the longer the constraint persists above price levels that make LFP substitution economically compelling, the more it risks permanently contracting the addressable market for cobalt-intensive chemistries. A European trader captured the core tension for S&P Global: "We are shackled to policy measures, not fundamentals anymore. So, the fragility and volatility are so ripe."
Supply Alternatives, Strategic Stockpiling, and Geopolitical Context
Downstream consumers seeking to reduce exposure to DRC supply constraints have turned to three alternative feedstock channels: Indonesian MHP, secondary cobalt from battery recycling, and strategic procurement from Western government programmes. None individually resolves the structural deficit, but together they are reshaping the supply chain's risk architecture in ways that will persist beyond the current quota cycle.
Recycled secondary cobalt production reached 30,000 tonnes globally in 2025 and is projected by Fastmarkets analysts to reach 36,000 tonnes in 2026, representing approximately 12% of projected demand. Wood Mackenzie projects recycled supply to grow 43% in 2026. Black mass and MHP have become active categories of inquiry as consumers attempt to replace restricted Congolese hydroxide flows. The transition is directionally significant but too small to function as a systematic substitute: secondary supply would need to approximately triple from current levels to cover the DRC's annual export quota reduction relative to 2024 volumes.
Western strategic stockpiling programmes have added a new price-supportive layer to market sentiment. In August 2025, the US Defense Logistics Agency issued a tender for approximately 7,480 tonnes of alloy-grade cobalt over five years, with annual purchases of around 1,500 tonnes, at a potential procurement value of up to $500 million, though the programme was subsequently paused. The EU has initiated a parallel 1,000-tonne reserve programme. These volumes are small relative to global demand but disproportionately affect market psychology given cobalt's thin liquidity.
The Lobito Corridor infrastructure project, linking the DRC and Zambia's Copperbelt to Angola's Atlantic coast, represents a longer-duration structural variable. The US International Development Finance Corporation has committed hundreds of millions of dollars to rail and port modernisation, with projections suggesting transport capacity could increase by an order of magnitude and costs could fall by as much as 30%. Benchmark Mineral Intelligence's Aubry has identified the corridor as central to the US securing non-China-processed DRC supply. Full operationalisation remains years away, but the directional signal is consistent with a broader Western effort to construct alternative cobalt supply pipelines that do not route through Chinese refiners.
The DRC's own long-term industrial ambitions are embedded in the quota structure itself. Kinshasa has retained a 9,600-tonne annual strategic allocation for projects of national importance and has announced plans to build a cobalt sulphate refinery operational from 2030. For the first time in its modern mining history, the DRC is attempting to capture value downstream of raw material extraction, a strategic posture that Benchmark has described as analogous to OPEC's swing producer role. Whether that ambition is realised depends heavily on whether the international investment required for refinery construction materialises under conditions of sustained policy uncertainty.
Conclusion: Deficit Arithmetic and the Limits of Supply Management
The cobalt market's current configuration can be summarised with precision. Prices at approximately $56,290 per metric tonne reflect a policy-engineered supply constraint, not a demand acceleration. The DRC's annual export quota of 96,600 tonnes for 2026 represents 48.2% of the country's 2024 production and 33% of projected global demand of 292,300 tonnes. Administrative delays in implementing the quota system during Q4 2025 and Q1 2026 drained Chinese exchange inventories from 7,870 tonnes to 3,934 tonnes in two months. Fastmarkets projects a structural deficit of 10,700 tonnes for the year, with Benchmark projecting ex-DRC stocks at approximately one month of demand by Q4 2026.
Indonesia's HPAL ramp is the market's most credible near-term relief mechanism, with S&P Global CERA projecting output of 53,318 tonnes in 2026, a 39.1% increase from 38,324 tonnes in 2025. Fastmarkets' more detailed MHP production estimate of 67,500 tonnes of cobalt-in-MHP underscores the scale of the Indonesian expansion underway. But Fastmarkets is explicit that this increase does not close the deficit, and the processing, feedstock, and quality characteristics of Indonesian MHP mean it is not a straightforward substitution for Congolese hydroxide in all refining configurations.
The BMI/Fitch Solutions forecast of an average cobalt price of $25 per pound ($55,150 per tonne) in 2026 implies that current spot levels are broadly consistent with where analysts expected the market to settle under the quota regime. The uncertainty centres not on whether prices will be elevated but on whether the DRC will adjust quotas in response to the substitution pressure accumulating in the battery sector and on whether Q2 2026 quota backlog clearance translates into durable normalisation of supply flows.
The substitution risk is the variable that changes the long-run character of the market most decisively. As Fastmarkets has noted, elevated cobalt prices accelerate the incentive for EV manufacturers to reduce cobalt loading or adopt cobalt-free LFP chemistries, a dynamic that could permanently contract the demand pool even as long-term projections from Benchmark Mineral Intelligence suggest overall demand grows 80% over the next decade. LFP's share exceeding 50% of global EV battery deployments in 2025 and NMC's Chinese market share falling to 18% from 25% in a single year are not abstract forecasts; they are revealed preferences operating at industrial scale. The DRC has demonstrated that it can move the cobalt price. The question it cannot yet answer is whether that power can be exercised without accelerating the structural erosion of the market it is attempting to protect.