Cobalt economy in numbers

In 2022, 190,000 metric tons of cobalt were produced globally. Approximately 68% of the production volume and ~1% of the refined volume came from the DRC. The demand for refined cobalt was 169,643.6 metric tons. At the peak market value of ~US$82,000 per metric ton of refined cobalt in 2022, the global cobalt economy was worth ~US$13.9 billion. Going by national production proportions, ~US$9.5 billion originated from the DRC mines. Just slightly lower than the DRC’s 2022 national budget which totalled US$10.95 billion.

Supply chain participants¹

The cobalt value chain consists of upstream, midstream and downstream actors spread across the globe. The upstream actors, Congolese nationals working as artisanal and industrial miners, form the bottom rung of the value ladder. Artisanal miners are locally known as Creusers - from the verb ‘creuser’ meaning ‘to dig’.

The wide middle rung belongs to 3 main midstream groups: smelting, refining and trading. The top spot in the pyramid is reserved for downstream actors - battery and consumer electronics manufacturers.

Compensation - risk pyramid¹

Creusers produce 1 to 2 sacks of cobalt ore (heterogenite), each weighing 30 to 40 kg, per day using crude tools. For the back-breaking work and the worst working conditions, they are the lowest earners in the supply chain with a measly annual earning of ~US$780 which translates to about ~US$2 per day. Women and child laborers are generally paid less and some child laborers are forced to work for free. For reference, the lowest salary for miners in the US is ~US$37,506. Same job, different countries, vastly different incomes.

Creusers generally sell their output through intermediaries called Negociants. Negociants move the output along to depots and cooperatives which serve as the gateway to the formal world renowned cobalt supply chain. This is the part of the supply chain where operations are clean, organized and pay very well. Negociants are paid in US$ per kg of heterogenite and the rate depends on the grade of the ore. The depots and cooperatives obtain a rate of 15% to 20% of the cobalt price listed on the London Metal Exchange (LME) - a much better deal compared to the earnings of the artisanal miners. As a result, the annual incomes of depot managers and depot owners are US$15,600 and US$36,000 - 60,000, respectively. Depot managers and owners tend to be foreign nationals, largely from China. 

Onwards to the mid-scale earners. The CEO of Glencore, the cobalt mining and refining giant based in Switzerland and with huge operations in the DRC, earned US$6.07M in 2022. 69% of the compensation was a performance based bonus. The full compensation translates to around US$16,712 per day - 8,356 times the daily wages of the artisanal miners at the bottom of the chain.

Our last stop is the top of the food chain - where the big bucks are made. Consumer electronics CEOs are the ultimate beneficiaries of the value chain. The CEO of LG earned ~US$7.2M in 2022. The compensation package of the Apple CEO totalled an astronomical ~US$99M equivalent to ~ $US 271,232 per day. This is about 135,616 times the daily wages of the child, woman and man working with crude tools in deadly cobalt tunnels.

Polar opposites

Creusers are men, women, children and infants (on their mothers’ backs) who spend up to 12 hours of their day in tunnels, pits or still water. The ones without whom we would have no phones. On the other hand, the executives of cobalt refining, battery manufacturing and consumer electronics producing companies sit in well-lit, air-conditioned offices and board rooms formulating mission statements and business strategies. The worst case scenario for the middle and the top levels of the pyramid is losing one’s job. For Creusers, it is literally a matter of life and death - when they leave for work in the morning, they do not know if they will return alive. In return for the high risk and hard work, they barely receive any compensation.

The major impact of the wage inequality in the cobalt value chain is extreme poverty and low standards of living. Despite 12-hour long workdays, Creusers cannot afford basic necessities such as food, health and education. In a vicious cycle, those starving and those unable to access education end up in mines, being exploited - even more than the land they exploit. Those who are ill and cannot work, simply die. 

Proposed mitigation practices

Recent years have seen growing awareness of the poor labor practices in the cobalt industry in the DRC. The issues range from sexual harassment, meagre wages, indentured labor, child labor, unsafe working conditions, lack of protective clothing and use of antiquated tools. As such, various organizations have been formed by the industry actors to address the challenges. Some of the key organizations include the Organisation for Economic Co-operation and Development (OECD), Global Battery Alliance (GBA) and Responsible Minerals Initiative (RMI). These organizations aim to eliminate the negative practices by creating standards which when implemented, will bring accountability to cobalt sourcing.

And therein lies the challenge, despite the creation of comprehensive and sound standards, implementation and monitoring have been lacking. As you can imagine, the standards remain on websites and barely trickle to the ground. Thankfully, with the growing interest in ESG in mineral supply chains, third-party supply chain due diligence is moving from good-to-have to must-have.

Conclusion

The implementation of standards and third-party due diligence is our way out of the prevailing dark and hopeless situation of extreme poverty at the bottom of the pyramid and extreme opulence at the top of it.

Reference

1. Siddarth, K. (2023). Cobalt Red, How the Blood of the Congo Powers Our Lives. St. Martin’s Press.