Tianfeng: Congo (Kinshasa) quota has been released, focusing on strengthening the logic of cobalt in the short and medium term

Tianfeng released a research report stating that the Democratic Republic of Congo (DRC) has implemented a new quota policy, leading to a short-term continuous destocking and inventories lower than expected. Various links in the industry chain are reluctant to sell, and the short-term price space is expected to rise; the long-term logic of 96,600 quotas throughout the year - direct balance of supply and demand or even shortage, optimistic about the central increase in cobalt prices in the medium and long term. Under the solid long logic, assets with long-term equity may face reassessment. The impact of lithium battery exports control is limited, and the direct impact on ternary precursors is gradually reflected in overseas supplies, overall, the impact on cobalt demand is relatively small. Tianfeng's main points are as follows: The DRC has implemented a new quota policy, with a total quota of 96,600 tons, and the basic quota of 87,000 tons remains unchanged. Specific allocation: the Lomu Group's mining company is allocated a proportion of 36%, with an annualized production of 31,200 tons; the second largest quota enterprise, Glencore, is allocated a proportion of 22%, with an annualized production of 18,800 tons; the third largest quota enterprise, Eurasian Resources, is allocated a proportion of 12%, with an annualized production of 10,000 tons. In addition, the DRC's national company EGC is allocated a proportion of 6.5%, with an annualized production of 5,640 tons, ranking fourth. Other Chinese companies that are of interest, such as NORTH MINING, have a quota proportion of 5.5%, with an annualized production of 4,800 tons; Chengtun Mining Group has a quota proportion of 2%, with an annualized production of 1,680 tons; Zhejiang Huayou Cobalt has a quota proportion of 1.24%, with an annualized production of 1,080 tons. The quotas for October/November/December of this year are 3,625/7,250/7,250 tons, and will be implemented starting from October 16, 2025. Looking at the quota distribution, the preliminary policy indicates that the baseline quota is allocated based on the historical export volume between January 1, 2022, and December 31, 2024. The current implementation of quotas basically meets expectations, except for the DRC's local company EGC, which has almost no exports in the past but has a quota of 6.5%. However, considering the local policy support, this is understandable. After the introduction of the total quota indicator on September 22, the prices have shown significant performance, with a 10% increase in the royalty fee to significantly increase local income. According to the regulations of the DRC's strategic mineral market regulatory agency (ARECOMS), enterprises that obtain cobalt export quotas must pay a royalty fee to the country before shipping the cobalt, calculated at 10% of the sales value. This has been the ongoing demand for price increases in the DRC, which directly and meets local interests. How to look at the future market? From February to the present, a series of policy uncertainties regarding cobalt in the DRC have ended in the short term. In the future, one should pay attention to the overall direction under the current policy framework: 1) The quota amount is only 96,600 tons (last year's exports were close to 220,000 tons, a 56% decrease compared to the export volume last year), subtracting the "strategic quota" of 9,600 tons, the actual basic quota available for normal exports is only 87,000 tons, the current quota volume tightens the medium to long-term supply and demand balance back to a tight balance or even a shortage. 2) Inventory has become the most important issue at present: shipping scheduling issues still test current inventory levels, and the current industry chain inventory is approximately 4 months. This means that the delay (until October 15) + shipping of 2-3 months will consume the inventory during this time, and importantly, the 4-month inventory is the inventory of the entire industry chain. If any link stores more inventory, it will exacerbate the overall supply tightness in the industry chain. As of October 13, cobalt sulfate/lithium cobalt/ cobalt hydroxide prices were 82,500/336,000/356,000 per ton, with a year-on-year increase of +40%/+38%/+29% from September 22 to October 13. Demand from the downstream side is expected to further drive cobalt prices. Stock recommendations: It is recommended to pay attention to stocks that are not affected by the DRC, such as Zhejiang Huayou Cobalt (603799.SH), LYGENDE RESOURCE (02245), and low-cost stocks such as CMOC Group Limited (603993.SH, 03993) after the release of quotas (uncertainty is relieved, still the largest cobalt supplier). Risk warning: Risks of policy uncertainties, geopolitical and trade risks, and risks of lower-than-expected demand.