SHABA S COBALT: WESTERN DEPENDENCE AND OPTIONS

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• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP83B00851R000100040001-1
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• Original Classification: S
• Document Page Count: 16
• Document Creation Date: December 20, 2016
• Document Release Date: January 29, 2007
• Sequence Number: 1
• Publication Date: July 1, 1982
• Content Type: REPORT

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Intelligence
Shaba's Cobalt:
Western Dependenc
and Options
Secret
GI 82-10144
July 1982
Copy 4 0 4
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Directorate of
Intelligence
Shaba's Cobalt:
Western Dependence
and Options
This a er has been prepared b
Office of Global Issues.
Comments and queries are welcome and may be
addressed to the Chief Minerals and Resources
Branch, OGI,
Secret
GI 82-10144
July 1982
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Shaba's Cobalt:
Western Dependence
and Options (u)
Key Judgments Western concern about raw material supply disruption was heightened in
the late 1970s by two rebel invasions of Zaire's mineral-rich Shaba
region-the world's largest producer of cobalt and a significant producer of
copper. The first incursion in 1977 had no effect on mineral markets, but
the second invasion, a year later, prompted substantially higher cobalt
prices amidst panic over the continued availability of "risk-free" cobalt
In spite of recent rebel activity along Zaire's Angolan and Zambian
borders, there is little prospect of a major rebel invasion of Shaba soon.
Smaller scale attacks, involving sabotage and hit-and-run operations, are
somewhat more likely and could disrupt mining and processing. The risk of
another invasion, however, could well increase over time
From the standpoint of strategic mineral supplies, the West's main concern
with a Shaba disruption would be the loss of access to Zaire's cobalt. 25X1
Because of large inventories outside Zaire and sagging demand, however,
industrial countries could absorb as much as a yearlong supply disruption
with little or no trouble. Although this supply cushion will narrow as 25X1
Western economic recovery boosts demand, inventory overhang and un-
used capacity outside Zaire will remain adequate to absorb the shock of a
one-year Shaba shutdown until well into the last half of the decade
The industrial countries as a whole could get by without cobalt from Shaba
indefinitely by developing other sources and by exploiting conservation,
substitution, and recycling measures. Because Shaba's cobalt production is
relatively inexpensive and the alternatives would require considerably
higher investment and operating costs, however, the long-run price of
cobalt would have to rise above $25 a pound to stimulate these changes.
While such an increase would be substantial, the impact on cobalt
consumers would be minor because cobalt represents only a small fraction
of the total cost of its end products
Information available as of 1 July 1982 has been used in
the preparation of this report.
Secret
GI 82-10144
July 1982
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The United States has several large deposits of low-grade ore that could re-
place most of the cobalt now imported from Zaire. By exploiting these
deposits and adopting conservation, substitution, and recycling measures,
US demands for cobalt could be satisfied without imports from Shaba.
France, Japan, and the United Kingdom do not rely heavily on cobalt from
Zaire and could weather any disruption by increasing imports from their
major suppliers. West Germany, Sweden, Belgium, and Italy, however, are
greatly dependent on Shaba's cobalt and would likel try to develop new
foreign sources, including the Soviet Bloc.
Although currently an importer of cobalt, the Soviet Union is expanding its
cobalt-producing facility at Noril'sk, and Cuba plans to expand its
domestic industry. As their export capacities grow, these two countries
would benefit from price increases resulting from a cutoff in Shaba
supplies. Indeed, to the extent that Soviet Bloc cobalt appears on the
market, Western producers may be reluctant to expand their own capaci-
ties, open new deposits, or pursue substitution, recycling, and conservation
plans. Some Western countries could come to rely on the East for yet
another important mineral
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Shaba's Cobalt:
Western Dependence
and Option
Introduction
Western industrial countries have been concerned for
several years about the continued availability of co-
balt from Zaire's Shaba region. Shaba accounts for
over 55 percent of the non-Communist world's output
of cobalt. Few producers of the metal exist in the
industrialized West. Last year Australia, Canada,
and Finland together mined 4,900 tons of cobalt, only
a sixth of the non-Communist world's output and less
than one-third of the developed West's needs.' Al-
though recycling supplies 5 to 10 percent of those
needs, most cobalt consumption requirements in the
developed West are met by imports. The United
States, for example, imports over 90 percent of the
cobalt it uses. Nearly 60 percent of US imports come
from Zaire; 14 percent come from Zambia.1I
While Shaba produces other metals (see map), that
activity is far less important to the world economy.
The region accounts for 8 percent of the copper mined
in the non-Communist world; copper, however, is
widely available outside Zaire, and the developed
countries produce almost as much as they consume.
Moreover, copper is not as highly valued as cobalt in
strategic uses, and, while few substitutes have been
developed for cobalt, adequate substitutes are avail-
able for many of copper's applications. Shaba also
produces small amounts of cadmium, zinc, tin, silver,
and manganese (table 1) and has the world's largest
reserves of germanium. The developed West, however,
meets most of its germanium needs from large depos-
its in the United States and Western Europe
The Shaba Incursions
Shaba I. Rebels of the Front for the National Libera-
tion of the Congo (FLNC) invaded Shaba in March
1977. Meeting little resistance from security forces,
the FLNC quickly captured several towns in the
southwestern part of the region and at one point
'Weights are given in metric tons unless otherwise noted.
3 Belgium-Luxembourg actually account for 15 percent of US
cobalt imports. Since all of Belgium-Luxembourg's cobalt is of
Zairian origin, however, it is included in the total for Zaire.I
Shaba Mineral Production as a Share
of Non-Communist Output, 1981
advanced to within 50 kilometers of the key copper
and cobalt mining town of Kolwezi. The area affected
was limited because a grass-roots uprising expected
by the rebels in other parts of the country never
materialized. In mid-April at the invitation of Kinsha-
sa, Moroccan troops joined with Zairian Government
forces and, in a matter of a few weeks routed the
rebels. 25X1
The invasion did not seriously affect Zaire's cobalt
output nor the market for the metal. Cobalt produc-
tion fell by 7 percent, but that was mainly attribut-
able to a decline in the cobalt content of the ore mined
that year and was not related to the invasion. Growing
demand-not associated with FLNC activities- 25X1
caused cobalt prices to rise.
Shaba H. FLNC rebels again invaded southwestern
Shaba in May 1978. This time they occupied Kolwezi
for six days before French Legionnaires, in conjunc-
tion with the Zairian Army, retook the mining center.
The insurgents destroyed rail stock but did not dam-
age the mines. As many as 130 foreigners and
25X1
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Political Status
The Democratic Republic of the Congo, which won its
independence from Belgium in June 1960, was re-
named Zaire in October 1971. In February 1978, the
present one party constitution was declared.
President and Head of Government
Lt. Gen. Joseph Mobutu became Head of State by
military coup in 1965; named President of the Popu-
lar Movement of the Revolution in 1967; elected
President of the Republic by popular vote in 1970
(albeit as sole candidate); reelected on 23 October
1977, and inaugurated for a second seven-year term
on 5 December.
Geography
Zaire, located in west-central Africa, is 2,343,950
square kilometers in area (roughly equal to the
United States east of the Mississippi River). However,
the coastline, which is entirely on the Atlantic Ocean,
is only 37 kilometers long. This equatorial country
borders Angola and Zambia to the south; Tanzania,
Burundi, Rwanda, and Uganda to the east; Sudan
and the Central African Republic to the north; and
the Congo to the west (see map).
Resources
Zaire is well endowed with minerals, including co-
balt, copper, industrial diamonds, tin, manganese,
zinc, silver, cadmium, gold, tungsten, columbium,
germanium, and tantalum. Most of Zaire's mineral
thousands of Zairians were killed during the fighting.
The ensuing flight of foreign managerial and techni-
cal personnel made resumption of mineral production
difficult and curbed expansion plans. Eventually most
of the Europeans returned. By resorting to richer
grade ores, Zaire increased cobalt production signifi-
cantly for the year as a whole
wealth and production-including all of its cobalt,
copper, zinc, germanium, manganese, and cadmium,
is located in the southernmost region of Shaba. In
1975 Zaire began oil production from two offshore
fields.
Export Earnings
In 1981 Zaire is estimated to have received more
than $1.5 billion in export earnings. Nearly seven-
eighths of this came from the sale of mineral prod-
ucts, including copper (49 percent of export earnings)
and cobalt (11 percent).
Population
Estimated 29.4 million in .1981
Capital
Kinshasha (formerly Leopoldville)
GDP
Estimated $4.5 billion in 1981
Per Capita GDP
Approximately $150
Foreign Debts
Estimated $4.5 billion in 1981
The incident aggravated an already tight cobalt mar-
ket, setting off a round of panic buying and hoarding
in the developed West. The producer price reached
$25 per pound by early 1979, up from $6.85 per
pound a year earlier. Prices on the spot market hit $50
per pound. Even so, the West was not badly hurt by
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Zaire: Minerals
Congo
Central African Republic
Equ-ateur
Lac
Mai-Ndombe
ins asa
NSKAS
Kikwit
Blas- aired Bandundu
Ag Silver Ge Germanium
AU Gold Mn Manganese
Cb Columbium Sn Tin
Cd Cadmium Te Tantalum
Co Cobalt vd Tungsten
Cu Copper do Zinc
D Diamond
asese
Uganda
24 not W) LUSA
necessarily authoritative.
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this incident. Since cobalt accounts for a small share
of the total cost of most finished products in which it
is used, the impact on the prices of cobalt-bearing
final products was fairly small. Furthermore, the price
increases spurred substitution and conservation meas-
ures, which served to reduce Western reliance on
cobalt imports, both then and later:
? Steps were taken, almost at the onset of the sharp
price increase, to replace alnico (aluminum-nickel-
cobalt) magnets with ferrite-ceramic magnets con-
taining no cobalt or with cobalt-samarium magnets,
which have a greatly reduced cobalt content. The
use of cobalt in magnets fell 50 percent in two years.
The magnet market accounted for 21 percent of US
uses of cobalt in 1977. By 1980 its share had fallen
to 15 percent.
? In some of cobalt's critical uses, substitution and
conservation activities also made headway. In high-
speed tool steels, for instance, cobalt-free alloys are
now commercially available. In jet engines, alloys of
nickel, molybdenum, and aluminum have been de-
veloped to replace cobalt in some components. Pratt
and Whitney, the world's largest user of cobalt,
plans to reduce cobalt consumption by 50 percent
during the next few years.
? The developed West's dependency was further re-
duced through intensified recycling. In the United
States, for example, secondary cobalt now accounts
for about a tenth of domestic needs. By contrast,
consumption of recycled cobalt in 1977 amounted to
just 3 percent of total US consumption
Shaba III: Impact on the West
Should a "Shaba III" occur, a shutoff of mineral
supplies of any duration would not affect critical
Western needs. The impact on prices and supplies in
the developed West would largely depend on market
conditions at the time of the incursion and the length
of the supply disruption. The latter would be in large
part determined by the extent of damage to mining,
processing, or shipping facilities.
A Yearlong Supply Disruption. A yearlong disruption
of cobalt output in Shaba is possible if any future
invasion results in significant damage to mines, proc-
essing facilities, or the transportation network. A
guerrilla campaign-involving recurring sabotage and
hit-and-run operations-aimed at those facilities
could bring about the same result. If such a cutoff in
cobalt supplies from Zaire were to occur soon-that
is, under current market conditions-the developed
West would not feel much of a pinch for some time,
perhaps a year or so. Cobalt is currently in excess
supply and is expected to remain abundant at least
until the mid-1980s. Even if world demand for cobalt
returns to the 25,000-ton-per-year level of the mid-
1970s, the West could manage without serious diffi-
culty because of the production capacity and large
inventories available elsewhere
? Non-Communist cobalt capacity outside Zaire is
now almost 14,000 tons per year.
? Private commercial inventories in the United States
amount to ab ut 2.700 tons of cobalt.
? We calculate,
that other Western countries
probably have at least 1,800 tons of cobalt in
In order to sustain its badly needed foreign exchange
earnings while dealing with a crisis in Shaba, the
Zairian Government could be ex ected to continue to
sell cobalt Although
actual supply shortages cou east y be avoided, prices
would almost certainly increase as the disruption wore
on. Given the huge inventory overhang, we believe
that traders and commercial dealers would be willing
to sell off stocks without much resistance. Moreover,
under these conditions other cobalt producers would
be induced to use their slack mining and processing
capacity.
Even if the price of cobalt increased sharply, the
impact on industrial users would not be particularly
serious. In most applications cobalt accounts for only
a small portion of final product costs. For example,
the 900 pounds of cobalt used in the $2 million F- 100
jet engine now costs around $9,000. Thus, even if the
price of cobalt were to increase to four times the
current price, the cost of the engine would rise by less
than 2 percent. Similarly, the cost of a gallon of paint
using 4 to 5 milligrams of cobalt would rise by no
more than one cent.
25X1
25X1
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Cobalt: Applications and Market Structure
Cobalt-virtually irreplaceable in some of its appli-
cations-is one of the most critical industrial metals.
Because of unique hardening qualities and resistance
to corrosion, abrasion, and heat buildup, it is re-
quired in such strategic end items as jet engines,
machine tools, drill bits, wellhead valves, and as a
catalyst for petroleum hydrogenation. The quantity
needed in each application is relatively small, and
with a few sign cant exceptions, forms only a frac-
tion of final product costs. Consequently, rising co-
balt prices do not represent a significant inflationary
threat for consuming countries.
Cobalt mine production is dominated by Zaire, which
accounted for over 55 percent of the non-Communist
world's output and almost 45 percent of total world
production in 1981. With the exception of the USSR,
which accounts for a sixth of world output, the few
other. cobalt producers are much smaller. The United
States currently has no cobalt mineral production,
but it obtains about 10 percent of its current needs by
recycling scrap. In 1981 the USSR overtook the
United States as the world's largest cobalt user,
6,100 tons versus 5,600 tons. Together these two
account for about half of the world's cobalt use. For
the second year in a row, consumption in the non-
Communist world fell about 20 percent in 1981
because of the Western economic slowdown and
continued progress in developing substitutes.
An Extended Shutdown. The possibility of an inter-
ruption in supplies from Zaire lasting several years
cannot be ruled out. That might be the case if a civil
or military disturbance dragged on beyond a year and
were accompanied by destruction of mining and proc-
essing facilities. We believe that Zairian security
forces would be unable to cope with a reasonably well
organized military invasion and even less able to deal
Growth of cobalt demand during the remainder of the
1980s will depend heavily on the recovery and subse-
quent growth of the economies of the principal indus-
trial countries and the price of cobalt. Barring a new
energy crisis or some other major dislocation, eco-
nomic growth should rebound from the current deep
slump within the next year or so, causing increased
investment in products that require cobalt. Without a
disruption of cobalt supplies from Zaire we expect
that annual Free World demand for cobalt will be
about 25,000 tons in 1985 and will grow to between
27,000 and 31,000 tons by the end of the decade.
with a campaign of sabotage and terrorism. More-
over, Kinshasa's prospects for receiving the foreign
assistance it would need to quash the rebels quickly
are significantly less now than they were several years
ago. Nevertheless, the FLNC itself is undermanned,
ill equipped, disorganized, and demoralized. It proba-
bly does not now have the ability to carry out a
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successful military invasion of Shaba but does appear
to be able to mount a guerrilla campaign of sabotage
and hit-and-run operations
Western mining experience suggests that if Zaire's
cobalt mining and processing facilities were de-
stroyed-whether by a well-organized incursion or
appropriately directed hit-and-run activity-up to two
years would be required to replace them on normal
installation schedules: a year to pump out under-
ground mines and restore water-damaged interiors;
12 to 18 months to rebuild concentrating plants; and
one to two years to completely rebuild smelters and
refineries. Less time would be required, of course, if
production facilities were only partially damaged.
Refineries and concentrators could be reconstructed
in eight months to a year on a "cra?h" basis with
substantial amounts of external aid
Cobalt: Potential Expansion of Capacity Outside
Zaire, 1984-90
North America
Canada
United States
South America
Estimated Potential Total
Present Capacity Potential
Capacity Additions Capacity
1982 1984-90 1990
Peru
0
Europe
1,400
Finland
1,400
Africa
6,910
Botswana
300
1,800
230
Given these factors, a supply disruption lasting three
years or more is a distinct possibility. While slack
cobalt capacity and inventory drawdowns could satis-
fy normal consumption patterns during a disruption
lasting up to a year and perhaps 18 months, more
basic adjustments would be required to absorb the loss
of Shaba cobalt for a longer period. The adjustments
woul have to come on both the supply and demand
sides 25X1
Our analysis of supply alternatives indicates that
enough cobalt mine capacity could be developed
elsewhere during a three- to four-year period to
replace one-third to one-half of Shaba's current mine
capacity of 16,000 tons. By the end of the decade,
capacity additions elsewhere could completely replace
Shaba's capacity. The price increase needed to bring
these additional supplies on stream would also provide
a strong incentive to develop cobalt substitutes, recy-
cling, and conservation-measures that would reduce
demand. Industry statements indicate that a long-run
price of between $25 and $50 per pound (1981 dollars)
would be enough to generate the supply-demand
adjustments that would eliminate the need for
Shaba's cobalt.
Supply Alternatives
The annual cobalt mine capacity of non-Communist
countries outside Zaire currently totals almost 14,000
tons. Drawing from a variety of government and
Uganda
Zambia
Zimbabwe
Oceania
Australia
Indonesia
Cuba
USSR
1,270
9,500
2,500
7,000
5,500
1,500
4,000
1,100
1,100
500
500
7,100
7,770
3,770
4,000
1,100
1,100
1,900
1,900
14,010
300
1,800
800 1,030
1,300 1,300
5,000 9,500
80
1,400
1,800
1,600
1,400
2,050
1,270
8,500 18,000
2,500 5,000
6,000 13,000
1 25X1
industry studies, we estimate that this capacity could
be increased by more than 17,000 tons by the end of
the 1980s (table 3). The United States could become a
major cobalt producer from several low-grade depos-
its: cobaltiferous laterites in Oregon and California, 25X1
the Blackbird mine in Idaho, the Duluth complex in
Minnesota, and lead-zinc deposits in Missouri.I
these deposits
could produce 4,000 tons annually. Zambia could 25X1
expand its cobalt output considerably by exploiting
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Estimated
Reserves
Total
Resources
Percent
Reserves
Produced
Annually
World
1,483+
4,278+
2.4
Non-Communist countries
1,165+
2,998+
2.4
North America
30
1,010
Canada
30
250
7.6
United States
760
Western Europe
18
25
Finland
18
25
5.7
Greece
Latin America
Brazil
Colombia
Oceania-Asia
511
890
Australia
49
300
3.3
India
Indonesia
New Caledonia
272
390
0.1
Papua New Guinea
Africa
606+
1,073+
Botswana
26
30
1.0
Morocco
13
13
5.8
South Africa
NA
NA
Zaire
454
680
3.4
Zambia
113
350
4.0
Zimbabwe
Proven and
Probable
Reserves
Total
Resources
Percent
Reserves
Produced
Annually
3,665+
8,120+
0.9
2,665+
6,645+
0.9
220
650
220
250
1.0
400
20
320
20
25
5.2
200
45+
255+
30
100
0
30
1,555
4,295
135
300
1.2
45
45
0
565
865
0
385
835
0
40
825+
1,125+
25
30
1.0
10
15
7.5
NA
NA
450
680
3.4
300
350
1.5
30
30
0.3
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Table 4 (continued)
Estimated Total
Reserves Resources
Cuba
USSR
Other
a US Bureau of Mines, Cobalt, Mineral Commodity Profiles,
October 1979, p. 8.
b Kruszona, Manfred et al., Cobalt, San Francisco: Miller Freeman
Publications, 1979, p. 67.
new high-grade deposits and improving existing proc-
essing facilities. Uganda is anxious to process cobalt-
rich tailings from past copper production. Additional
major non-Communist expansion of cobalt output
could occur in Canada, Indonesia, New Caledonia,
and other countries with large cobalt resources (table 4).
Investments could be delayed if equipment were
difficult to obtain and install, which might well be the
case with numerous expansion and development proj-
ects under way simultaneously, or if economic growth
remained or again became sluggish.
Compared to the relative low cost of cobalt available
from Zaire, however, development of new cobalt
deposits and expansion of existing production else-
where would be expensive. Investment decisions,
therefore, would be heavily influenced by expectations
of long-run price trends. The prospect of renewed
large-scale cobalt production in Shaba, causing the
world price to fall again, would greatly discourage
investment elsewhere. Thus, such investment would
probably not be made unless a disruption of Shaba
output were expected to last at least five years or
unless governments or consuming industries were
willing to underwrite alternative cobalt production y
price guarantees or subsidies.
Percent Proven and Total Percent
Reserves Probable Resources Reserves
Produced Reserves Produced
Annually Annually
1.8 800 1,100 0.3
3.0 200 350 3.2
5
Technological Change
In addition to development of alternative sources,
there is considerable room for reducing demand and
limiting its growth through technological adjust-
ments. Indeed, technological alternatives to Shaba's
cobalt have already made inroads into demand for the
metal. The expectation of even a short disruption has
caused some buyers to reduce their dependence on
cobalt, regardless of cost, rather than face periodic
supply problems. Government encouragement of recy-
cling, conservation, and substitution would greatly
speed the development of these measures: 25X1
? Recycling. The possibilities for increased recycling
of cobalt are limited because in most applications
the metal is dispersed in a host material. However,
recently announced US projects alone would pro-
duce over 700 tons of cobalt per year from recycled
catalysts and cobalt-bearing machinery scrap by
1985. More recycling possibilities would be explored
as the price of cobalt increased.
? Conservation. The use of powder metallurgy is
already reducing cobalt waste in the manufacture of
superalloy components of jet engines. This and other
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techniques for conserving cobalt would be aggres-
sively pursued if the price of cobalt were to rise
beyond the peak reached in 1979.
? Substitution. Nickel-based alloys and ceramics can
be substituted for cobalt in some superalloy and
magnet uses. Should cobalt prices increase, the
development of rapid solidification and superplastic
metals technology, metal glasses, metal-matrix and
carbon-carbon composites, and reinforced plastics
would provide still other materials that could be
substituted for cobalt in a number of applications.
West Germany, Italy, Belgium, and Sweden have
fewer options. Only Sweden has a small strategic
stockpile. These countries, then, would need to devel-
o new foreign sources much sooner than the others.
25X1
East-West Issue
The Soviet Bloc would be in a position to take
advantage of any high prices resulting from a disrup-
tion of the cobalt market. Cuba already exports cobalt
to Japan and nickel to West Germany, France, Bel-
gium, the Netherlands, Italy, and Japan. Moreover, it
has major expansion plans; enlargement of two pro- 25X1
As new sources of cobalt, substitutes, and recycling
and conservation techniques are being developed,
governments could institute priority allocation
schemes to assure that timely and adequate supplies
of the metal reach defense and critical civilian users.
This option might be needed during a transition
period if commercial inventories decline too rapidly or
if commercial traders withhold stocks from the mar-
ket. In addition, a few countries maintain strategic
stockpiles of cobalt. The US strategic stockpile of
somewhat more than 21,000 tons is available for use
in a national emergency.
Individual Country Responses
well weather any disruption in cobalt supplies from
Shaba, the situation in various countries could differ
greatly. The United States, with its large domestic
resources and technological lead in recycling, substi-
tution, and conservation, could get by without cobalt
from Shaba. France, Japan, and the United Kingdom,
which now rely less than others on Zaire, would press
current suppliers to replace at least part of the lost
Shaba cobalt and would expand their use of alterna-
tive sources:
? France imports heavily from Morocco and French-
controlled New Caledonia.
? Japan produces most of its own cobalt from copper-
nickel ores imported from the Philippines, Austra-
lia, and New Caledonia.
? The United Kingdom produces a large amount of
cobalt in refining Canadian nickel and imports a
good deal more from Zambia and South Africa.
lthougl- the Soviet Union is now
a small importer of cobalt, it is a major producer of 25X1
the metal and is expanding mining and processing
capacity at its Noril'sk facility. 7
As export capacities in the Soviet Union and Cuba
grow, these two countries would welcome a disruption
of Shaba cobalt production: 25X1
? Cobalt exports could substantially increase Cuba's
hard currency earnings.
? Soviet cobalt exports would neither flood Western
markets nor earn significant amounts of hard cur-
rency compared to total Soviet trade and hard
currency needs, but such exports extend the USSR's
presence in Western Europe.
Moreover, to the extent that Soviet Bloc cobalt ap-
pears on the market, some Western producers might
be reluctant to expand their own capacities; open new
deposits; or pursue substitution, recycling, and conser-
vation plans. Some West European countries-West
Germany, Italy, Belgium, and Sweden-could be-
come dependent on the East for yet another important
mineral.
 Secret
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