Kazakhstan and the Democratic Republic of Congo (DRC) have taken significant steps to restrict the export of two key commodities—oil and cobalt—highlighting the challenges faced by governments as they navigate international trade and local market dynamics.
Beginning with Kazakhstan, the Central Asian nation has imposed restrictions on the export of naphtha, heating oil, and marine fuel, effective from January 29, 2023. These measures aim to control the domestic supply of petroleum products; they, unfortunately, come with repercussions for mini-oil refineries, which depend heavily on exporting these by-products.
Muratbek Makhanov, Managing Director of the Oil and Gas Sector and Ecology at the National Chamber of Entrepreneurs (Atameken), cautioned against this ban. “Restrictions on the export of refined oil by-products, such as naphtha, heating oil, and marine fuel, harm not only the financial stability of mini-refineries but also Kazakhstan’s broader economy,” he said, urging the government to reconsider the imposed export ban.
The ban covers not only gasoline and diesel but also by-products like naphtha, which is used as fuel for tractors and as a solvent, and heating oil, both of which have minimal domestic demand. Approximately 30 smaller facilities focus on producing diesel, leading to inevitable by-products, which many refiners can only sell outside Kazakhstan.
Abdymanap Isabayev, representing one mini-refinery, expressed concern over the impending closure of smaller processing plants. “Selling them domestically is not viable, which means we may have to suspend production entirely, leading to a diesel fuel shortage,” Isabayev stated. He proposed lifting restrictions on by-products like naphtha and marine fuel, supporting continued production of diesel.
These mini-refineries primarily process crude oil extracted from marginal fields, and their shutdown would carry significant economic consequences. “This would be a significant loss to the national budget, which is already suffering from lower revenues due to the ban,” warned Amanbai Sembekuly, another representative from the industry. The consequences of halting production could ripple throughout the economy, exacerbated by higher customs duties imposed on high-sulphur oil products.
Kazakhstani naphtha is mostly exported to countries like Turkey, Uzbekistan, Italy, and Greece, where it is refined for diesel fuel. Despite the capacity of Kazakhstan's major refineries to process these by-products internally, doing so would require substantial investment to set up additional processing lines. Incidentally, the authorities had also announced the liberalization of domestic oil product prices aimed at addressing fuel shortages driven by price disparities.
On the other side of the globe, the DRC faced its own challenges, as it announced on February 22, 2023, the suspension of cobalt exports for four months. This drastic measure aims to curb oversupply of the battery metal, mainly driven by production scaling at mines owned by the CMOC Group Ltd., which has led to suboptimal prices and potential market destabilization.
“Exports must be aligned with world demand,” commented Patrick Luabeya, president of the Authority for the Regulation and Control of Strategic Mineral Substances’ Markets, known as ARECOMS. Prior to the suspension, cobalt prices had fallen dramatically, with benchmarks dropping below $10 per pound—the lowest point since late 2015.
Despite continuous rising demand for cobalt, which is central to electric vehicle batteries, the pace of supply has far outstripped it, contributing to market volatility. Luabeya pointed to excessive supply fueled by illegal mining and uncontrolled exports, identifying it as posing severe risks to economic stability for both domestic and international investors.
While the ban applies to all cobalt producers equally, it does not affect copper exports, allowing companies like CMOC—also the largest copper producer in the DRC—to continue their operations unaffected. The DRC plans to reassess its cobalt export restrictions after three months, indicating the government’s approach to balancing market dynamics efficiently.
“The situation required immediate action,” asserted Luabeya, implying actionable steps are necessary to rectify years of regulatory lapses. The DRC's policy shifts come after President Felix Tshisekedi had previously directed his government to formulate strategies to uplift cobalt prices, hinting available measures such as export quotas might be considered, albeit no decisions have been finalized.
Both Kazakhstan and the DRC's cases reflect the tense balance governments face between domestic market demands and the pressures of global commodity markets. For Kazakhstan, the repercussions of the export ban may lead to operational shutdowns at mini-refineries, risking shortages of diesel fuel, whereas the DRC’s cobalt export ban highlights the need for strategic oversight to maintain healthy market conditions for one of the world’s most sought-after minerals.
These developments serve as stark reminders of the complex interplay between local economies and international trade dynamics—a balancing act governments worldwide must navigate carefully to promote sustainable growth and stability.