BCC data let a reader separate price, volume, import and financing effects at the end of 2021.

By Kanisa Magazine · December 2021

Cobalt quoted on the London market ended 2021 at US$70,195 a tonne, more than double the US$32,000 of 31 December 2020. Congo’s cobalt tonnage over the same period grew 8.3 per cent. The distance between those two numbers is the whole story of the DRC’s external account at the turn of the year: price did most of the work, volume did the steady part, and imports and the IMF decided how much of it stayed.

The BCC’s digest of 29 December allows each of the four effects to be separated, which matters because they behave differently in 2022.

Price: cobalt more than doubled, copper rose a quarter

Year-end quotes sit far above the starting line, and cobalt moved nearly five times as far as copper.

LME copper stood at US$9,710 a tonne on 31 December, against US$7,803.50 a year earlier, a gain of 24.4 per cent. Cobalt cathode quoted in London was US$66,556 a tonne, or US$30.15 a pound, and the LME-linked quote was US$70,195, up 119 per cent. Brent crude finished at US$78.36 a barrel, 52 per cent above its end-2020 level. Marubeni’s head of non-ferrous trading, quoted by Zoom Eco, expects cobalt at around US$63,000 a tonne to keep rising moderately in 2022, on electric-vehicle demand.

Volume: copper passed its 2020 total in eleven months

Tonnage grew more slowly than price, but it kept rising and it compounds.

Copper output reached 1,652,190 tonnes between January and November, 13.5 per cent above the same months of 2020 and already above the 1,601,208 tonnes of the whole of 2020. Cobalt reached 85,449 tonnes, up 8.3 per cent and within about 1,100 tonnes of the 2020 full-year figure. These data are provisional.

The large operators account for most of it. Glencore says it has invested US$8 billion in Congo since 2008, and cites annual capacity of about 300,000 tonnes of copper at Kamoto Copper Company and 200,000 tonnes at Mutanda, with US$424 million paid to the government in 2020, in an account carried by Zoom Eco. Those are the company’s own figures.

The route from tonne to reserve is long. Operators sell concentrate and hydroxide on contracts priced off quotes like these, bank the proceeds with Congolese banks, and pay royalties and taxes to the Treasury, and part of the dollars end up sold to the central bank. The BCC’s own purchases in 2021, US$1.23 billion in the digest’s FX table, came out of that chain, and they are the figure that turns a price rise into reserves.

Imports: the price effect that cuts the other way

Fuel is a cost, and Brent rose faster than copper.

Congo’s crude output was 7.73 million barrels in the first eleven months, 3.6 per cent below a year earlier. The country is therefore a fuel importer in substance, and a Brent price 52 per cent higher raises the import bill that copper and cobalt receipts must cover. Strict reserves covered 3.29 months of imports at the end of December, up from 3.13 months at the end of November, so the cushion widened even as the bill grew.

Financing: the Fund’s tranche and the cover it buys

A US$212 million disbursement sits on top of export receipts and is not part of them.

The IMF board completed the first review of the Extended Credit Facility on 15 December and released US$212.3 million, citing a rebound stronger than projected on higher-than-envisaged mining output. Strict reserves closed the year at US$3.47 billion, from US$709 million at the start of it. That total was built from three components: higher prices, higher tonnes and official money. Only the second is permanent.

The close: price the 2022 plan on tonnes

Treat the price premium as a variable and the volume line as the base case.

A trader, bank or contractor exposed to Congolese export receipts should plan 2022 on tonnage at 2021 levels with copper and cobalt prices falling a quarter below their year-end quotes. If the plan holds, the cushion of US$3.47 billion is surplus. If it does not, the year-end scorecard was a price event, and prices belong to somebody else.