Cobalt Refining — China's Stranglehold on Processing

The Global Cobalt Refining Landscape

Cobalt refining — the process of converting intermediate cobalt products (primarily cobalt hydroxide) into battery-grade cobalt chemicals (primarily cobalt sulphate) — is the most geographically concentrated stage of the cobalt battery supply chain. China processes an estimated 80 to 85 percent of the world's cobalt into refined chemicals, a degree of concentration that exceeds even China's dominance of copper smelting and approaches the country's near-monopoly on rare earth processing.

This concentration has developed over approximately two decades, driven by deliberate Chinese industrial policy, massive capital investment in hydrometallurgical processing capacity, and the co-location of cobalt refining with China's battery manufacturing ecosystem. Chinese cobalt refineries are strategically positioned near the cathode and precursor material plants that consume their output, creating logistical and commercial advantages that reinforce the clustering of the supply chain within China.

Total global cobalt refining capacity exceeds 250,000 tonnes of cobalt content per year, with Chinese facilities accounting for more than 200,000 tonnes. Outside China, significant refining capacity exists in Finland (Umicore's Kokkola plant), Belgium (Umicore's Olen facility), Japan (Sumitomo Metal Mining), Canada (Glencore's Sherbrooke facility and Vale's Long Harbour), and Australia (Cobalt Blue's proposed Broken Hill facility and BHP's Nickel West). However, the non-Chinese capacity is dwarfed by Chinese facilities and in several cases operates at sub-optimal utilisation rates due to feedstock availability, cost competitiveness, or commercial challenges.

Global Cobalt Refining Capacity

Key Chinese Refiners

China's cobalt refining industry is dominated by a small number of large companies that have built vertically integrated supply chains linking DRC mining operations to Chinese processing facilities and downstream battery manufacturing customers.

Huayou Cobalt

Zhejiang Huayou Cobalt, headquartered in Tongxiang, Zhejiang Province, is the world's largest cobalt chemical producer and the most vertically integrated company in the cobalt supply chain. Huayou's operations span the entire value chain: its subsidiary Congo Dongfang Mining (CDM) operates in the DRC, purchasing and processing cobalt ore; its Quzhou refinery in Zhejiang processes cobalt hydroxide into battery-grade cobalt sulphate and cobalt oxide; and its downstream subsidiaries produce precursor cathode active material (pCAM) for sale to major battery manufacturers including CATL and BYD.

Huayou's cobalt refining capacity exceeds 50,000 tonnes of cobalt content per year, making it the single largest cobalt refining operation globally. The company has invested heavily in expanding and modernising its facilities, and its product quality is considered among the best in the industry. Huayou has also been at the centre of responsible sourcing controversies, with its DRC operations facing scrutiny over child labour in artisanal supply chains. The company has responded by investing in traceability, formalisation, and industrial mining operations to reduce reliance on ASM feedstock.

GEM Co. Ltd

GEM (Green Eco-Manufacture), based in Shenzhen, is one of China's largest cobalt refiners and a leading battery materials recycler. GEM processes both primary cobalt hydroxide from the DRC and recycled cobalt from end-of-life batteries and manufacturing scrap. The company's dual-feedstock model gives it flexibility and cost advantages. GEM supplies cobalt chemicals to major Chinese battery manufacturers and has expanded into precursor and cathode material production.

Jinchuan Group

Jinchuan Group, headquartered in Gansu Province, is one of China's oldest and largest integrated nickel-cobalt producers. Jinchuan produces cobalt as a by-product of its nickel operations in China and refines cobalt hydroxide imported from its Metorex subsidiary's operations in the DRC (acquired through the 2012 purchase of Metorex). Jinchuan's cobalt refining operations are integrated with its broader metals processing complex, which includes nickel, copper, and PGM production.

CNGR Advanced Material

CNGR, based in Hunan Province, is a major producer of precursor cathode active material (pCAM) that also operates significant cobalt refining capacity. CNGR's business model integrates cobalt refining with pCAM production, allowing it to control the quality and composition of inputs at each stage. The company is a key supplier to CATL and has been expanding internationally, with a planned pCAM facility in Indonesia.

How Chinese Dominance Self-Reinforces

Chinese cobalt refiners benefit from a virtuous cycle of scale, cost, and market access. Their proximity to the world's largest battery manufacturing cluster (in Guangdong, Fujian, and Jiangxi provinces) provides a captive market. Their scale enables lower unit costs. Their long-standing relationships with DRC producers ensure reliable feedstock supply. And state support — through subsidised energy, land, and financing — reduces the capital and operating costs that would otherwise constrain expansion. For non-Chinese companies contemplating entry into cobalt refining, competing against this entrenched ecosystem is an enormous challenge.

DRC's In-Country Refining Ambitions

The Democratic Republic of the Congo has articulated a clear policy ambition to process more of its cobalt domestically, capturing a larger share of the value chain that currently flows to China. This ambition is driven by the recognition that the DRC — despite producing 70 to 78 percent of the world's mined cobalt — captures only a small fraction of the total value generated by the cobalt battery supply chain.

Policy Instruments

The DRC government has employed several policy instruments to encourage in-country processing. The 2018 Mining Code classified cobalt as a strategic substance, subjecting it to a higher 10 percent royalty rate (compared to 3.5 percent for copper). A 2021 decree required cobalt exports to be in at least hydroxide form, restricting the export of unprocessed ore. The government has periodically discussed further restrictions that would require higher levels of processing before export, potentially mandating the production of cobalt sulphate or even precursor materials within the DRC.

Existing Processing Capacity

The DRC already has substantial capacity to produce cobalt hydroxide, with multiple hydrometallurgical plants operating across the Copperbelt. The major industrial mines — Tenke-Fungurume, KCC, Mutanda — all include on-site processing facilities that produce cobalt hydroxide. Chinese-owned processing plants, including those operated by Huayou and CDM, also produce hydroxide from purchased ore. However, the DRC has minimal capacity to produce battery-grade cobalt sulphate or higher-value cobalt chemicals, which is where the bulk of processing value is created.

Challenges to In-Country Refining

Building battery-grade cobalt sulphate production capacity in the DRC faces significant challenges. These include unreliable power supply (cobalt refining is electricity-intensive), limited availability of the industrial chemicals (reagents, acids, solvents) required for refining, absence of a local market for refined cobalt chemicals (necessitating export of the final product), shortage of trained metallurgical engineers and process operators, and the regulatory and business environment challenges that affect all industrial investment in the DRC. Chinese companies operating in the DRC have the technical capability to build refining capacity but have limited incentive to do so, given that their existing Chinese facilities are already operational, depreciated, and integrated with downstream customers.

Western Alternatives

Building non-Chinese cobalt refining capacity is a priority for Western governments pursuing critical mineral supply chain diversification. Several existing and planned facilities represent the foundation of an alternative refining network.

Finland — Umicore and Freeport Cobalt

Finland hosts the most significant Western cobalt refining capacity. Umicore's Kokkola facility, located on Finland's western coast, is a major cobalt refinery that produces battery-grade cobalt chemicals for European cathode and battery manufacturers. The Kokkola facility has been operating for decades and has undergone multiple expansions. Its location provides access to Arctic shipping routes and proximity to Scandinavian renewable energy sources. Freeport Cobalt (now BASF subsidiary) also operated a cobalt refinery in Kokkola, adding to Finland's position as the Western world's most important cobalt processing hub.

Canada

Canada has modest cobalt refining capacity through Glencore's Canadian operations and Vale's Long Harbour nickel-cobalt processing facility in Newfoundland. Several new cobalt processing projects have been proposed, leveraging Canada's mineral resource base, established mining industry, and free-trade agreements that qualify Canadian-processed materials for US IRA tax credits. Canada's proximity to the US market and its alignment with Western supply chain diversification objectives make it a natural location for expanded cobalt refining.

Australia

Australia has emerged as a potential source of non-Chinese cobalt refining capacity. Cobalt Blue's proposed Broken Hill cobalt project includes plans for integrated mining and refining, producing cobalt sulphate from domestic feedstock. BHP's Nickel West operations in Western Australia produce cobalt as a by-product of nickel refining. The Australian government has identified critical mineral processing as a strategic priority and has established financing mechanisms (including the Critical Minerals Facility) to support investment in domestic processing capacity.

United States

The United States currently has no significant cobalt refining capacity, a gap that the IRA is designed to address through incentive structures that reward domestic processing. Several companies have announced plans for US-based cobalt and nickel processing facilities, though none has yet reached the commercial production stage. The economic challenge is significant: building a new cobalt refinery in the US costs substantially more than in China, and securing reliable feedstock supply from DRC mines requires navigating complex commercial and logistical arrangements.

Japan and South Korea

Japan and South Korea, as major battery manufacturing nations, maintain modest cobalt refining capacity that supports their domestic cathode and cell production industries. Sumitomo Metal Mining in Japan operates cobalt refining as part of its integrated nickel-cobalt processing chain. South Korean companies including EcoPro BM and L&F process cobalt chemicals as inputs to their cathode manufacturing operations. Both countries have pursued supply diversification strategies through their respective government agencies — JOGMEC (Japan) and KORES (Korea) — which invest in overseas mining and processing projects to secure non-Chinese supply. These efforts are increasingly coordinated with broader Western supply chain initiatives, including partnerships linked to the Lobito Corridor.

The Economics of Non-Chinese Refining

A persistent challenge for non-Chinese cobalt refiners is cost competitiveness. Chinese refineries benefit from lower labour costs, state-subsidised energy in some provinces, proximity to downstream customers, and economies of scale that reduce per-unit processing costs. Western refineries face higher labour and energy costs, more stringent environmental compliance requirements, and smaller scale. The cost premium for Western-refined cobalt chemicals is estimated at 10 to 25 percent relative to Chinese equivalents. This premium must be absorbed by the supply chain — either through higher prices for end consumers, lower margins for refiners, or government subsidies and incentives. The IRA's tax credit structure effectively creates a subsidy that offsets the cost premium for IRA-compliant cobalt, making Western refining economically viable for supply chains serving the US EV market.

Implications for Corridor Strategy

The concentration of cobalt refining in China is not merely an industrial observation. It is a strategic reality that shapes the design, purpose, and potential of the Lobito Corridor. The corridor's role in the cobalt supply chain is twofold: as a logistics route for cobalt hydroxide destined for non-Chinese refineries, and as a potential location for cobalt refining facilities that would capture processing value within Africa.

Logistics for Western Refineries

The most immediate opportunity is connecting DRC cobalt to Western refining capacity. Currently, DRC cobalt hydroxide destined for European refineries (principally in Finland) must travel south through Zambia and Zimbabwe to Durban, then by sea around the Cape of Good Hope to Northern Europe — a journey of approximately 12,000 nautical miles and 35-45 days. The Lobito Corridor offers a dramatically shorter route: westward to the Atlantic port of Lobito and then by direct sea route to European ports, cutting transit time substantially and reducing logistics costs.

This routing advantage is particularly significant in the context of IRA compliance. Cobalt processed in Finland, Canada, or other IRA-qualifying countries is eligible for the EV tax credit, while cobalt processed in China is not (under the FEOC provisions). The Lobito Corridor thus becomes an enabler of IRA-compliant cobalt supply chains, providing the physical logistics link between DRC mines and Western refineries that allows the supply chain to bypass China entirely.

Corridor-Based Refining

The more transformative possibility is building cobalt refining capacity along the corridor itself — in the DRC, Zambia, or Angola. A cobalt refinery in a corridor-adjacent special economic zone could process DRC cobalt hydroxide into battery-grade cobalt sulphate for export to European or American cathode manufacturers. This would create an alternative to Chinese refining that captures processing value in Africa and aligns with DRC value addition policy objectives.

The challenges are substantial: power supply, reagent logistics, skilled workforce, capital cost, and commercial agreements with downstream buyers. But the strategic alignment is powerful. Western governments seeking to de-risk cobalt supply chains, the DRC government seeking value addition, and mining companies seeking IRA-compliant offtake routes all have converging interests in corridor-based cobalt refining. The question is whether these converging interests can be translated into bankable projects with committed offtake agreements, secured financing, and realistic timelines.

The cobalt refining challenge crystallises the broader strategic logic of the Lobito Corridor. The corridor is not just about moving minerals. It is about restructuring supply chains — creating alternatives to Chinese processing dominance that serve Western strategic interests, African development objectives, and the global energy transition simultaneously. Cobalt refining is where the corridor's logistics capability, the DRC's geological endowment, and Western supply chain policy converge. If the corridor can enable a functioning, commercially viable, non-Chinese cobalt processing pathway, it will have justified its investment many times over.