Resources Policy 62 (2019) 317–323

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Resources Policy
journal homepage: www.elsevier.com/locate/resourpol

China's domestic and foreign influence in the global cobalt supply chain T
Andrew L. Gulley , Erin A. McCullough, Kim B. Shedd
∗

National Minerals Information Center, U.S. Geological Survey, USA

ARTICLE INFO ABSTRACT

Keywords: In addition to increasing interest in the supply risk of minerals produced in China, there is also concern that
Cobalt China's efforts to mitigate its own mineral supply risk—through overseas foreign direct investment—may limit
China mineral availability for other countries in the short-term (due to production capacity constraints). However,
Critical mineral little is publicly known about the quantity of global mineral production that is subject to Chinese ownership
Supply risk
influence or how this influence may mitigate China's exposure to mineral commodity supply risk. In this analysis,
Import reliance
Foreign direct investment
we estimate China's ownership-share of foreign production for cobalt mine and intermediate materials (in the
year 2016), as well as the net import reliance of China's cobalt refinery industry—which is then adjusted to
reflect China's ownership share of foreign production. First, we find that China's foreign cobalt ownership is
predominantly in the Democratic Republic of the Congo, the largest source of cobalt mine and intermediate
imports for China's growing cobalt refinery industry. Second, overseas foreign direct investment provided China
with ownership influence over roughly 29% of its cobalt mine and intermediate imports in 2016—which may
have reduced the supply risk exposure of China's refinery industry from a net import reliance of 97% (on cobalt
mine and intermediate materials) to an adjusted net import reliance of 68%. Third, China's global production
share jumps from 2% to 14% (for cobalt mine material) and from 11% to 33% (for cobalt intermediate material)
when China's ownership-share of foreign production is added to China's domestic production share. Fourth, over
time China's foreign direct investment appears to have targeted facilities with progressively larger cobalt pro-
duction capacities. Finally, China's global production share increases as cobalt material moves downstream (i.e.
mine, 14%; intermediate, 33%; refined, 50% in 2016). If a primary motivation of China's Going Out Strategy is to
secure natural resources, then China's global production share may be reserved for Chinese manufacturers. As a
result, this analysis indicates that—for countries outside China—concerns related to critical mineral availability
and supply risk may not be confined to minerals produced in China.

1. Introduction cobalt-containing products and the competition to secure raw cobalt

Global demand growth for cobalt-containing products, such as li-
thium-ion batteries and superalloy turbine blades, continues to accel-
erate as the expanding global population increasingly adopts emerging
and advanced technologies including electric vehicles and jet aircraft
(Andersson and Råde, 2001; BBC, 2007; Cheng and Tong, 2017; Darton
Commodities Ltd, 2018). Concurrently, some countries (or at least their
manufacturers) are competing for global market share in the manu-
facture of such technologies (Kennedy and Johnson, 2016; Sanderson
et al., 2017; Patterson and Gold, 2018; The Economist, 2018). The
confluence of these issues, as well as the potential for disruptions in
international trade (Krugman, 2010; Sugden, 2019), could lead to
competition for the raw materials that enable the manufacture of these
technologies (Gulley et al., 2018). Many cite China as a prominent
player in the competition to supply increasing global demand for
materials required for the manufacture of such products (Moss, 2017;
Goodman et al., 2018; Patterson and Gold, 2018). For example, to
supply the growing demand for electric vehicles—both in China and the
world—the Chinese government has listed electric vehicle manu-
facturing as a strategic emerging industry (Goodman et al., 2018;
Patterson and Gold, 2018), funded domestic manufacturers (Moss,
2017), subsidized domestic demand (Moss, 2017), included charging-
stations in infrastructure development plans (Moss, 2017) and made
arrangements to acquire foreign raw cobalt materials (BBC, 2007;
OECD, 2008; Davies, 2013).
Largely driven by the increasing demand for refined cobalt inputs in
the manufacture of lithium-ion batteries, China's production of refined
cobalt in 2016 was thirty-four times that of 2000 levels (Shedd et al.,
2017) and China's share of global refinery capacity rose from 3% to
50%. However, China's domestic cobalt mine production was unable to

∗
Corresponding author. MS 988, 12201 Sunrise Valley Drive, Reston, VA, 20192, USA.
E-mail address: agulley@usgs.gov (A.L. Gulley).

https://doi.org/10.1016/j.resourpol.2019.03.015
Received 26 June 2018; Received in revised form 23 March 2019; Accepted 25 March 2019
Available online 28 April 2019
0301-4207/ Published by Elsevier Ltd. This is an open access article under the CC BY license (http://creativecommons.org/licenses/BY/4.0/).
A.L. Gulley, et al.
supply sufficient raw materials for this increase in refinery pro-
duction—primarily because cobalt-bearing ores were not available in
China at geological concentrations that could support profitable cobalt
extraction, at existing prices, given existing technologies. This exposed
China's cobalt refinery industry to significant supply risk for cobalt
mine and intermediate materials.
Possibly in anticipation of the disparity between the raw material
demands of domestic manufacturing targets and domestic (economically
feasible) resource availability, the Chinese government officially initiated
the Going Out Strategy around the year 2000. This policy encouraged
Chinese companies to expand overseas foreign direct investment
(OFDI)—especially for mineral resources and infrastructure in developing
countries in Africa and Asia (OECD, 2008; Gu, 2009; Kaplinsky and
Morris, 2009; Jansson, 2011; Davies, 2013). The academic literature often
describes the Going Out Strategy as ‘resource-seeking’ by citing that Chi-
nese firms have progressively expanded OFDI in companies, assets and
infrastructure that produce and transport minerals critical to China's
strategic development plans—especially when domestic production cannot
economically provide sufficient raw material inputs for Chinese manu-
facturers (Foster et al., 2008; Kaplinsky and Morris, 2009; Ericsson and
Löf, 2011; Davies, 2013; Humphries, 2015; Roskill Information Services,
2017). For example, the ‘minerals for infrastructure’ deal between China
and the Democratic Republic of the Congo (DRC) is an often-cited example
of China's resource-seeking behavior via the Going Out Strategy (BBC,
2007; Kaplinsky and Morris, 2009; Jansson, 2011). In this deal, Chinese
state-owned banks provided favorable loans to the DRC government for
infrastructure, purportedly in exchange for access to copper and cobalt
mineral development rights (BBC, 2007; Kaplinsky and Morris, 2009;
Jansson, 2011).
Control of the mineral sector in China—as well as foreign mining
operations owned by Chinese companies—is often portrayed in the lit-
erature as being highly centralized (Jefferson and Rawski, 1994; Ericsson
and Löf, 2011; Humphries, 2015; Riddle et al., 2015; Brown and Eggert,
2017; Giblin, 2017), which may lend itself to greater policy control or
influence. This portrayal may be bolstered by the fact that China's mineral
OFDI has been dominated by state-owned enterprises whose projects often
receive direct and indirect support from the Chinese government (OECD,
2008). While many analyses have described China's Going Out Strategy as
an effort to mitigate its exposure to raw material supply risk (Foster et al.,
2008; Kaplinsky and Morris, 2009; Ericsson and Löf, 2011; Davies, 2013;
Humphries, 2015; Roskill Information Services, 2017; Gulley et al., 2018),
some argue that China's mineral OFDI may also be intended to limit the
mineral supply of future competitors—which is capacity constrained in the
short-term1 (Sanderson et al., 2017; Patterson and Gold, 2018). This si-
tuation indicates that assessments of mineral availability and supply risk
(i.e. criticality), which focus on countries other than China, may need to
assume that China's mineral OFDI is ‘earmarked’ for consumption by
Chinese industries.
Since 2000, many studies have been conducted to assess mineral
availability for the manufacture of a variety of emerging and advanced
technologies, including defense applications (National Research
Council, 2008a), solar power (Andersson, 2000; Nassar et al., 2016),
wind power (Alonso et al., 2012; Nassar et al., 2016) and electric ve-
hicles (EV) (Andersson and Råde, 2001; Kushnir and Sandén, 2012;
Nansai et al., 2014). Similarly, there has been a proliferation of as-
sessments on supply risk related to minerals critical for national and
economic security, generally characterized as 'criticality' assessments
(National Research Council, 2008b; European Commission, 2010, 2014,
2017; U.S. Department of Energy, 2010; Bauer et al., 2011; Graedel
et al., 2015; National Science and Technology Council, 2016). Most of
these mineral availability studies (Alonso et al., 2012; Andersson, 2000;
Andersson and Råde, 2001; Kushnir and Sandén, 2012)—and some of
1
See Supplementary Material Section S1 for a discussion of cobalt production
capacity constraints.
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Resources Policy 62 (2019) 317–323
these mineral criticality assessments (National Science and Technology
Council, 2016)—evaluate mineral supply on a global basis. However,
global analyses may fail to incorporate threats that the resurgence of
economic (Fassihi and Stokols, 2017; Gross, 2016) and resource
(Krugman, 2010; Lederer, 2016; Bariyo and McNish, 2017; Busch,
2017) nationalism may pose to international trade flows required for
stable mineral supplies to a particular country.
To incorporate such threats, mineral availability studies may need to
evaluate the mineral supply that is available for a particular country and
allocate ownership shares gained by the mineral OFDI of more centrally-
planned economies (such as China) as unavailable. Similarly, in evaluating
mineral supply risk for criticality assessments, foreign ownership shares of
more centrally-planned economies may need to be attributed to the
country providing OFDI. For example, European Commission (2017) in-
cluded an adjustment for trade restrictions, which appears to be a first
attempt at modeling such threats. To address the gap of incorporating
earmarked foreign ownership shares into mineral availability and criti-
cality assessments, here we provide a framework to identify foreign
ownership share, which may be reserved for the country providing mi-
neral OFDI—and which may prove to be unavailable for other countries.
2. Methods and data
In this analysis, the term 'mineral' refers to a mineral-based com-
modity. In the case of cobalt, it refers to raw cobalt materials including
ores and concentrates, intermediate materials and refined cobalt. Mine
production represents recoverable cobalt, mainly from the mining of
cobalt-containing copper and nickel ores. Intermediate production is
the pyrometallurgical or hydrometallurgical processing of concentrates
to produce mattes, crude metal compounds and cobalt-copper-iron al-
loys. Refining separates the cobalt from other metals present to produce
cobalt metal, metal powders, oxides and other simple chemical com-
pounds. In this analysis, all cobalt mineral commodity production and
capacity data are converted to cobalt content for common comparison
across the cobalt supply chain.
Here, we focus on these first three stages of the cobalt supply chain
(production of mine, intermediate and refined material) during the
most recent year with sufficient data (2016). We focus on these three
stages because previous analysis (Gulley et al., 2018) suggests that it is
the input of mine and intermediate material (for refinery production)
that represents the greatest mineral supply risk to China. We examine
these stages separately because they often take place in different loca-
tions and because some cobalt mine materials can be direct inputs to
cobalt refinery production (even though cobalt intermediate materials
are the dominant input).
2.1. China's net imports of mine and intermediate cobalt materials
Net imports of mine and intermediate cobalt materials (for China's
cobalt refinery industry) are estimated for the years 2000 through 2016
via annual gross weights of imports and exports for China obtained
from IHS Global Trade Atlas (IHS Markit, 2018), as well as assumed
cobalt contents for each material. For cobalt mine material, import and
export data are calculated from the harmonized system (HS) trade code
26050000 (cobalt ores and concentrates) assuming 7% cobalt content
(Antaike Information Development, 2008). For cobalt intermediate
material, import and export data are calculated from HS codes
81052010 (cobalt hydrometallurgy intermediate) and 81052090 (co-
balt mattes and other intermediate products of cobalt metallurgy) as-
suming 27% and 22% cobalt content, respectively.2 Recycled and
2
The assumed contents were acquired from personal communication with Xu
Aidong of Antaike Information Development/China Nonferrous Metal Industry
Association Cobalt Branch (Xu, 2018) and were corroborated with other sources
(EITI, 2017; Harper et al., 2012).
A.L. Gulley, et al.
refined cobalt materials are not included in the scope of the trade
analysis to focus upon China's consumption of upstream mine and in-
termediate cobalt materials derived from mining and mineral proces-
sing operations.
2.2. Global cobalt production and Chinese ownership production shares
The global mine production estimate is obtained from the U.S.
Geological Survey National Minerals Information Center (USGS, 2018).
Site-level mine production estimates are based on data from various
sources (Highlands Pacific Limited, 2017; Jinchuan International
Resources, 2017; Lundin Mining Corp., 2017; Province du Katanga
Division Provinciale de Mines, 2017; S&P Global Market Intelligence,
2017). The intermediate and refinery production capacity estimates are
reported cobalt capacity or estimated capacity (based on reported or
estimated cobalt production). Cobalt intermediate and refinery pro-
duction and capacity data are from producing company, industry ana-
lyst and government sources—which are provided at relevant locations
below and in the Supplementary Material. Intermediate and refinery
capacities are used as proxies for production and exclude plants not
operating during most of 2016. Confirming whether each refinery in
China was operating or on standby status was not feasible. Notably,
even operating plants were unlikely to have been producing at 100%
capacity. While this may imply that this analysis overstates production,
it is better to cite the data available (and note its potential defects) than
to adjust it in a subjective manner.
Influence (or control) over production is typically equated with
ownership share (Ericsson and Löf, 2011; Giblin, 2017; Hatayama and
Tahara, 2015), so we assume that China's production offtake share is
proportional to ownership share. The offtake share of Chinese pro-
duction may actually be greater than the ownership share (Hatayama
and Tahara, 2015), given that securing access to mineral resources is
assumed to be the goal of China's mineral OFDI. If this is the case, then
these results may reflect conservative estimates of Chinese influence
over global cobalt production. The sum of China's domestic and over-
seas production (in some cases using production capacity as a proxy for
production) is divided by global total production to estimate China's
influence at each stage.
2.3. Net import reliance of China's cobalt refinery industry and adjustments
to reflect China's foreign ownership
To assess the foreign dependence of China's cobalt refinery industry
in 2016, net import reliance (NIR) is calculated using Equation (1),
where the subscript m represents cobalt mine materials, the subscript i
represents cobalt intermediate materials, I represents China's imports, E
represents exports, PD represents China's production of domestic cobalt
mine material (i.e. cobalt mined in China) and ΔS represents changes in
its industry and government stocks. All measurements are in metric tons
of cobalt content and the result is presented as a percentage.
Im Em + Ii Ei + Sm + Si
NIR =
PD + Im Em + Ii Ei + Sm + Si (1)
The denominator in Equation (1) represents an estimate for the
consumption of China's cobalt refinery industry, which is referred to as
apparent consumption (AC) (Gulley et al., 2018). As a result, NIR
simplifies to Equation (2) where AC, in this case, represents China's
consumption of cobalt mine and intermediate materials for refinery
production.
AC PD
NIR =
AC (2)
Net import reliance therefore ranges from 100%, when apparent
consumption is entirely comprised of net imports, to 0% when apparent
consumption is entirely comprised of domestic production. A negative
NIR would result if domestic production was greater than apparent
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Resources Policy 62 (2019) 317–323
consumption, indicating the country is a net exporter of said com-
modity. The data required to compute Equation (2) were compiled as
noted in Sections 2.1 and 2.2 above. In contrast to the periodic avail-
ability of data on Chinese industry and government stocks of refined
cobalt, information on China's stocks of cobalt mine and intermediate
materials is rarely available (Antaike Information Development, 2017;
Darton Commodities Ltd, 2017; Shedd, 2017). In any given year, stocks
of mine and intermediate materials may increase or decrease sig-
nificantly, which would impact the estimate of apparent consumption.
However, due to insufficient data, cobalt mine and intermediate ma-
terial stock levels were assumed to remain constant for this analysis.
Cobalt contained within domestically mined materials is assumed to
pass through intermediate cobalt production in China. In other words,
cobalt mined in China is assumed to be processed to intermediate
material in China. It is therefore only represented in PD to avoid double-
counting this material. To evaluate the potential reduction in China's
exposure to supply risk from foreign sources due to its OFDI (with all
other things being equal), adjusted net import reliance (NIRA) is cal-
culated by not only subtracting China's domestic production from its AC
but also subtracting China's estimated ownership share of foreign pro-
duction of cobalt materials (PF), as illustrated in Equation (3):
AC PD PF
NIRA =
AC (3)
As previously discussed, much of the material represented by PF in
Equation (3) is assumed to be imported by China from a foreign country
and as such is subject to some of the same supply risks as any other
import. However, because of China's foreign investment in PF, the dif-
ference between NIR and NIRA demonstrates a potential reduction in
China's total supply risk exposure.
3. Results and discussion
The results indicate that China's net imports of cobalt mine and
intermediate materials expand significantly between 2000 and 2016,
that China's net imports shift from predominantly cobalt mine materials
to predominantly cobalt intermediate materials, that Chinese foreign
ownership share provides influence over roughly 29% of China's net
imports of cobalt mine and intermediate materials and that China's
influence over global cobalt mine and intermediate materials increases
from 2% and 11% to 14% and 33%, respectively, when Chinese foreign
ownership share is added to domestic share.
3.1. China's net imports of cobalt mine and intermediate materials
Given insufficient domestic cobalt reserves, China has increased its
imports of cobalt mine and intermediate materials to satisfy the con-
sumption requirements of refinery capacity expansions between 2000
and 2016. Fig. 1 displays China's net imports of cobalt mine and in-
termediate materials, as estimated by the methods described in Section
2.1.
Fig. 1 illustrates three major trends. First, China's net imports of
mine and intermediate materials have increased significantly between
2000 and 2016, as indicated by the quantities of cobalt content dis-
played in the stacked bar chart. Second, China's net imports have
shifted in type from predominantly mine materials (from 2000 to 2011)
to mainly hydrometallurgy intermediates (HMI) (from 2012 to 2016).
Third, China has come to depend almost exclusively on the DRC for its
net imports of raw cobalt materials, shown by the line graphs in blue for
mine material and orange for intermediate materials, which correspond
to the percentages on the right vertical axis. The vertical, dotted grey
line indicates the timing of the ‘minerals for infrastructure’ deal be-
tween China and the DRC, which was a component of China's Going Out
Strategy (BBC, 2007). Although specific mining operations central to
the 2007 deal did not begin production immediately, cobalt mine and
intermediate exports (from the DRC to China) increased substantially
A.L. Gulley, et al. Resources Policy 62 (2019) 317–323

Fig. 1. China's net imports of cobalt mine and intermediate materials in thousand metric tons of cobalt content (left vertical axis) for years 2000–2016 (horizontal
axis) with the percentage of China's cobalt material imports from the DRC (right vertical axis). HMI refers to hydrometallurgy intermediate.

after the 2007 deal—which may corroborate the assumption that Chi- Table 1
na's mineral OFDI is geared towards solidifying foreign relationships to Estimated 2016 cobalt production (or capacity) in China and Chinese owner-
secure mineral resources and export them back to China. ship share of foreign cobalt production (or capacity) in metric tons of cobalt
content.
3.2. Global cobalt production and Chinese ownership production shares Cobalt mine production
(ores and concentrates)
Table 1 summarizes the 2016 results related to China's domestic and
China’s domestic cobalt mine production 1,920a
foreign ownership shares, relative to total world production or pro- China’s foreign cobalt mine production ownership share 14,010b
duction capacity. Project-level owners, locations, names, production Global cobalt mine production 111,000
levels (or production capacities) and ownership shares are presented in China’s domestic cobalt mine production relative to world total 2%
detail (for the year 2016) in Section S2 of the Supplementary Material China’s domestic and foreign ownership share relative to world 14%
total
(Tables S1, S2 and S3).
The results indicate that, as a percentage of global totals, China's Cobalt intermediate production capacity
influence increases from 2% to 14% for cobalt mine production and (hydrometallurgy intermediates, mattes and other intermediates)
from 11% to 33% for intermediate production capacity when China's
foreign ownership share is added to China's domestic share. It is worth China’s domestic cobalt intermediate production capacity 13,300
China’s foreign cobalt intermediate production capacity ownership 25,640
noting that, over time, China's foreign cobalt investments appear to share
have targeted facilities with progressively larger cobalt production ca- Global cobalt intermediate production capacity 118,000
pacities—see Section S3 in the Supplementary Material for a detailed China’s domestic cobalt intermediate production capacity relative 11%
discussion of this trend. to world total
China’s domestic and foreign ownership share relative to world 33%
To illustrate the numbers in Table 1, Fig. 2 presents each cobalt
total
supply stage in terms of production or capacity acquired (or estab-
lished) overseas, production (or capacity) in China and production (or Cobalt refinery production capacity
capacity) in the rest of the world. (metal, metal powders, oxides and other simple chemical compounds)
Fig. 2 indicates that much of China's 14% influence over global mine
China’s domestic cobalt refinery production capacity 65,000c
production and 33% influence over global intermediate production is a China’s foreign cobalt refinery production capacity ownership 0
result of Chinese acquisitions or operations established in the DRC. The share
security of China's foreign mine and intermediate cobalt supplies, Global cobalt refinery production capacity 129,000d
therefore, is heavily dependent on stable production in the DRC and China’s domestic cobalt refinery production capacity relative to 50%
world total
continuous access to maritime supply routes between Africa and China.
To measure the impact of this ownership, we compare an original and a
Based on estimated mine production reported by S&P Global Market
adjusted calculation for import reliance. Intelligence.
b
Does not include the Baluba Mine in Zambia (80% China Nonferrous
3.3. Net import reliance (NIR) of China's cobalt refinery industry and Mining Corp. Ltd.), which was on care-and-maintenance status.
adjustments to reflect China's foreign ownership c
Total estimated production capacity in China, regardless of ownership.
d
Refineries operating in 2016; excludes standby capacity.
Fig. 3 provides context for the NIR and NIRA calculations by de-
fining the system boundary and indicating which material flows are imports) and providing outputs (intermediate losses [d], refinery losses
known and unknown. In Fig. 3, the boxes represent production pro- [f] and refinery production). The oval represents the stockpile main-
cesses (the mine, intermediate, refinery stages discussed previously), tained by the China State Reserve Bureau. Where quantities can be
the circles represent markets where cobalt materials are imported and estimated for specific flows, they are noted by the metric tons of cobalt
exported, the horizontal arrows represent production inputs and out- contained. Flows with unknown quantities are labeled with letters a
puts, the vertical arrows represent imports and exports and the angled through f.
downward arrows emanating from the intermediate and refinery pro- Fig. 3 shows three flows into the system boundary; 1,920 metric
duction boxes represent production losses. The dashed box defines the tons of cobalt contained in domestic Chinese mine production (PD) (the
system of focus, which is receiving inputs (mine production and net same quantity noted in Table 1), 10,470 metric tons of cobalt contained

320
A.L. Gulley, et al.
Fig. 2. 2016 cobalt mine, intermediate and refinery production or capacity in China, acquired or established overseas by Chinese firms and in the rest of the world.
Fig. 3. 2016 simplified flow of cobalt mine, intermediate and refinery materials related to China's cobalt refinery industry.
in mine material net imports (Im-Em) and 46,370 metric tons of cobalt
contained in intermediate material net imports (Ii-Ei). The sum of these
flows into system (58,760) represents the apparent consumption (AC)
of the system. Fig. 3 also shows two production flows out of the system
boundary; 47,000 metric tons of cobalt contained in refinery produc-
tion (that presumably went into the market for export or domestic
fabrication and manufacturing) and 2,800 metric tons of cobalt con-
tained in refinery production that was purchased by the China State
Reserve Bureau. The sum of these production flows out of the system
boundary is 49,800. Given the apparent consumption of the system
(58,760) and its production flows (49,800), the total losses for the
system (i.e. the sum of flows d and f) equal 8,960 metric tons of con-
tained cobalt (or 15%).3
Even though some quantities are unknown, the NIR within the
system boundary can be calculated by Equation (2) above as:
AC PD 58,760 1,920
NIR = = = 97%
AC 58,760
To calculate adjusted net import reliance (NIRA), which may reflect
the impact of Chinese foreign ownership on China's exposure to supply
risk, China's foreign production of cobalt materials (PF) is estimated. As
discussed in Supplementary Material Section S2, China's foreign pro-
duction of mine material is not exported to China in the form of ores
3
See Supplementary Material Section S4 for a more detailed discussion of
cobalt intermediate and refinery production losses in China.
Resources Policy 62 (2019) 317–323
and concentrates. Instead, it is processed into intermediate materials at
facilities near the mines. Further, China's ownership share of some co-
balt intermediate production is not currently exported to China (see the
discussion of Tenke Fungurume in Supplementary Material Section S2)
because it is subject to existing supply agreements (Darton
Commodities Ltd, 2018). China's ownership share of foreign production
(PF) is thus estimated as the sum of China's foreign intermediate pro-
duction capacity in Table 1 minus the Chinese production share for
Tenke Fungurume. In this case, NIRA is calculated by Equation (3)
above as:
AC PD PF 58,760 1,920 (25,640 9,020)
NIRA1 = = = 68%
AC 58,760
(5)
The comparison between adjusted and original net import reliance
provides insight into the magnitude of China's foreign mineral invest-
ments, in relation to China's consumption of raw cobalt materials.
(4) While the difference between the original NIR of 97% and the adjusted
NIRA1 of 68% does not reflect a reduction of China's exposure to supply
risk from extreme events (such as civil disorder in DRC or a naval
closure of the Strait of Malacca), it likely indicates a decrease in China's
exposure to supply risk under existing conditions as a result of foreign
mineral investment. Chinese ownership influence over 16,620 metric
tons of contained cobalt (25,640 minus 9,020) represents 29% of
China's cobalt mine and intermediate material net imports. Further, if
the preexisting Tenke Fungurume supply agreement were to change
and China’s 2018 ownership share (80%, as opposed to 56% in 2016)
321
A.L. Gulley, et al.
were to be incorporated, NIRA would be calculated by Equation (3)
above as:
AC PD PF 58,760 1,920 29,500
NIRA2 = = = 47%
AC 58,760
The difference between NIRA1 and NIRA2 reveals that Tenke
Fungurume's Chinese ownership share and its preexisting supply
agreement have a measurable impact on China's exposure to supply risk
for cobalt intermediate materials. As such, the future of the supply
agreement may provide a valuable data point on the underlying mo-
tives of mineral OFDI by Chinese firms—such as the largest shareholder
of Tenke Fungurume China Molybdenum. Adherence to the supply
agreement, which Darton (2018) believes to be for the life of the mine,
may indicate a profit (or other) motive. Renegotiation, purchase, or
negation of the agreement may indicate a resource-seeking motive.
Either way, the incorporation of China's ownership share of foreign
production into an adjusted net import reliance provides a quantitative
method to estimate the impact of foreign investment mitigation stra-
tegies in an environment of increased global competition for cobalt and
other mineral resources.
4. Conclusion
The results indicate that in 2016 when China's ownership share of
foreign production is added to China's domestic production, the per-
centage of total global production that China's mineral policies may
impact jumps from 2% to 14% for cobalt mine production and from
11% to 33% for cobalt intermediate production. This indicates that
China's influence over the global cobalt supply chain was substantially
increased as a result of overseas investment. Future mineral availability
and criticality studies, conducted on a country (rather than global)
level, may consider these production shares to be under the influence of
centralized Chinese mineral policies—or even unavailable to countries
other than China. As China's foreign investment becomes more pre-
valent in global mineral supply chains, evaluations of influence will
likely become a more important component of mineral market analysis.
While ownership may not ensure continuous mineral supplies during
extreme events in the countries where the mineral commodities are
mined and initially processed, it likely provides influence over im-
portant decisions such as supply agreements. Future criticality assess-
ments may consider incorporating ownership share of foreign produc-
tion into adjusted net import reliance calculations to evaluate the
impact of foreign investment mitigation strategies on supply risk and
criticality.
The results also indicate that China's mineral OFDI may reduce its
exposure to foreign supply risk for its cobalt refinery industry by pro-
viding China with ownership of 29% of its imports of raw cobalt ma-
terials. Although China's exposure to supply risk from extreme
events—such as civil disorder in DRC—may not be reduced as a result
of China's mineral OFDI, it likely decreases China's exposure under
existing circumstances. When incorporating China's foreign production
ownership share, China's net import reliance for cobalt mine and in-
termediate material moves from 97% to an adjusted estimate of 68%,
excluding material committed elsewhere by existing supply contracts
[i.e. one or more supply contracts for Tenke Fungurume]. If this supply
contract is altered to allow China's foreign production ownership share
to be exported back to China, the adjusted estimate falls to 47%. These
results demonstrate how crucial foreign mineral investment is to
China's cobalt supply security. If cobalt refined in China is exported
around the world, Chinese foreign mineral investment may reduce
global mineral supply risks related to cobalt. On the other hand, if
China were to use critical mineral supplies as leverage in a diplomatic
dispute, Chinese mineral OFDI may reduce the short-term availability
of cobalt mine and intermediate production for other countries.
Notably, Chinese mineral OFDI is not limited to cobalt and may apply to
other critical minerals (Gulley et al., 2018).
Resources Policy 62 (2019) 317–323
Declarations of interest
None.
(6)
Acknowledgements
The authors are grateful to Sean Xun and Tom Yager at the National
Minerals Information Center, U.S. Geological Survey in Reston, VA for
their input regarding the mineral industries of China and the
Democratic Republic of the Congo, respectively.
Appendix A. Supplementary data
Supplementary data to this article can be found online at https://
doi.org/10.1016/j.resourpol.2019.03.015.
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