Electric car makers face higher costs as Congo eyes higher cobalt tax

The Democratic Republic of Congo has taken the first steps towards hiking taxes on cobalt exports by more than double, a move that could potentially increase the cost of a key material used in electric car batteries.

The DRC, responsible for two-thirds of the world's cobalt supply, is proposing a potential increase in the royalty percentage miners of the substance had been required to pay from 2% to 5% if it chose to categorise cobalt as a "strategic substance".

Mines minister Martin Kabwelulu told the African nation's Senate last week that the new classification was part of an overhaul of legislation, strongly opposed by the mining industry, that could deter future investors from the region.

The tax on base metals like copper and gold would also increase from 2% to 3.5% under the revised laws, Bloomberg reported.

A byproduct of copper and nickel mining, cobalt prices surged throughout 2017 after companies like Tesla and Volkswagen had utilised its efficiency in conducting electricity, a process essential for the rechargeable batteries used by the companies in their electric cars.

Plans made by the world's leading carmakers to increase production of electric cars led to cobalt's price tripling over the past two years, a boom not ignored by Congolese authorities.

The new legislation guaranteed the DRC would have "the flexibility to face unforeseen developments in the international market if the international economic situation demands it" by allowing the government the authority to declare certain minerals "strategic substances," Kabwelulu told senators.

The minister highlighted cobalt's "not only strategic but also critical character" to the global market.

Kabwelulu also singled out tantalum, a scarce mineral extracted from coltan ore that was used in the development of smartphones, as another mineral that could be taxed at the higher 5% rate.

Evariste Madi Mulumba, president of the Senate's economy and finance commission, said the new category remained a proposal "because we have not yet passed the law."

If approved by the Upper House, it would be forwarded to President Joseph Kabila to sign into law.