Commodities, energy transition in spotlight after DR Congo failed putsch

A botched coup attempt in the Democratic Republic of Congo has laid bare the political instability of one of the world's most resource-rich nations, with implications for global commodity markets and the energy transition.

On May 19, security officials in the Central African nation said they had "nipped in the bud" a putsch by self-exiled politician Christian Malanga and a band of Congolese and foreign rebels. Hours earlier men in fatigues had breached the presidential palace in Kinshasa bearing the flag of Zaire, as the country was known under former dictator Mobutu Sese Seko.

Among the alleged plotters were a US cannabis entrepreneur who established a Mozambican mining company with Malanga, and the dissident politician's son. Malanga was killed by soldiers.

The DRC has a history of coup attempts, including in 2001 and 2013.

"The coup appears to be isolated, however, the choice of targets, namely the National Palace, and the home of recently elected president of the National Assembly, Vital Kamerhe, was unusual. In the past, the airport and communications networks were the major target of insurrectionists," said Cody Pope, a senior adviser at Horizon Engage. "It's possible that the rebels believed they had more support than they did."

Although the coup failed, it comes against a backdrop of December's disputed election -- which saw President Felix Tshisekedi win a second term with 72% of the vote -- rampant corruption and poverty, and a war in the east against M23 rebels allegedly backed by neighboring Rwanda.

It also comes as the DRC is growing in geopolitical importance, with foreign powers including the US and China eyeing its bounty of critical minerals and metals, as well as emerging as an oil producer and climate finance hub.

Transition metals

The DRC boasts tremendous mineral wealth including globally-significant deposits of copper, cobalt, tin, tantalum and lithium -- minerals considered critical for the manufacture of renewable energy technologies such as wind turbines, solar panels, and electric vehicle batteries.

According to the US Agency for International Development, the country's mineral wealth is worth $24 trillion. Yet the country remains among the world's poorest and is plagued by insecurity.

In its troubled east, minerals are even driving conflict with rebel groups and smuggling operations. The eastern provinces, which border Rwanda and Uganda, are rich in gold, tin, tantalum and tungsten. The battle with mostly-Tutsi M23 rebels dates to the aftermath of the Rwandan genocide in 1994, when Hutu genocidaires fled into the DRC.

While tantalum, tin, and tungsten, are mostly mined in relatively small-scale artisanal mines in the east, the DRC's copper and cobalt resources form the copperbelt region spanning the Lualaba and Haut-Katanga provinces to the south.

Accounting for approximately 74% of global cobalt production and around 9% of world copper output, the DRC copperbelt has become the focus of international mining companies attracted by high-grade and low-cost mines. The area boasts some of the highest quality copper reserves globally, with some mining properties estimated to contain grades above 3%, significantly higher than the global average of 0.6-0.8%.

While western mining companies such as Glencore, Eurasian Resources Group, and Ivanhoe Mines operate in the copperbelt, China dominates the country's mining industry, with CMOC Group, Zijin Mining Group and China Minmetals holding significant ownership stakes in most of the DRC's major copper-cobalt mining operations.

Having locked down both the mining and refining of critical minerals, China's imports of cobalt and both raw and refined copper the DRC have risen sharply in recent years.

"Copper and cobalt regions are unlikely to be affected by the attempted coup, in part because they are geographically isolated from Kinshasa, and also due to the quick response from the Tshisekedi government," said Pope.

Having acknowledged that China's virtual monopoly in the DRC's mining industry boosts its comparative advantage with respect to critical mineral and renewable technologies, the US is supporting an ambitious project aimed at upgrading and extending the existing rail corridor linking northern Zambia and the southern DRC to the Port of Lobito in Angola.

With an estimated price tag of $2.3 billion, the Lobito rail corridor represents one of the most ambitious US infrastructure bids in Africa, aimed at strengthening supply chains for critical minerals, and comes with significant risk given the ongoing political instability in the DRC.

"The involvement of Americans in the coup raises issues for the US State Department, however they have recently increased engagement in DRC over mining, and this could prove a critical opportunity for cooperation between the two countries," said Pope.

Oil resources

Beyond metals, the DRC is also an emerging oil and gas producer, with Anglo-French independent Perenco currently producing 19,500 b/d of crude from a smattering of Coastal Basin projects, much of it exported to China, Indonesia and Israel. On May 21, Perenco announced the country's first offshore discovery in three decades through its Moke-East well.

Representatives of Perenco declined to comment on the attempted coup.

In 2023, the country launched a new bid round for 27 blocks to encourage further exploration. According to estimates it holds 5 billion barrels of potential resources. However, potential drilling in the DRC's environmentally sensitive regions has prompted an environmental backlash, which officials say has sapped investment appetite.

The country hopes to piggyback on the as-yet-unfinished East African Crude Oil Pipeline connecting Ugandan oil fields with Tanzania's Tanga port, which could offer an export route for the DRC's eastern crude resources.

Lungs of Africa

Besides its wealth of critical transition minerals, Africa's second-largest country is also viewed as potentially crucial from a carbon market perspective, owing to its large forests.

The Congo Basin, also known as the "lungs of Africa", is one of the largest carbon sinks in the world, absorbing more carbon that the rainforests of the Amazon and Indonesia.

The peat swamp forest, which stretches across six African countries, stores around 29 billion mtCO2 (approximately equivalent to three years' worth of global greenhouse gas emissions), and absorbs nearly 1.5 billion mtCO2 per year, according to the United Nations Environment Programme.

That makes it an appealing prospect for carbon credit projects in the voluntary carbon market, particularly from avoided deforestation, just as many Western countries and companies are investing in forests to shore up climate finance. The DRC has also engaged with Brazil and Indonesia on rainforest conservation through an alliance dubbed the "OPEC for rainforests".

The World Bank estimates the DRC has potential to generate an estimated $223 billion-398 billion per year from stored carbon and associated ecosystems, although prices of nature-based carbon offsets have fallen sharply this year due to a lack of confidence among buyers.

Platts, part of S&P Global Commodity Insights, assessed its nature-based avoidance price at $3.50/mtCO2e on May 21, a slight recovery since it slumped to a record-low of $2.70/mtCO2e this February.