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Export bans and investment

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A number of countries have implemented export bans or restrictions on raw materials over the last few years. Image credit: Leon Louw for WhyAfrica.
A number of countries have implemented export bans or restrictions on raw materials over the last few years. Image credit: Leon Louw for WhyAfrica.

Export bans and investment

A number of countries have implemented export bans or restrictions on raw materials.

By Nicolaas C. Steenkamp

Several countries, particularly those rich in minerals crucial for clean energy technologies and strategic industries, have implemented export bans or restrictions on raw materials.

Over the last decade, developing countries have started to pursue domestic beneficiation of ore, instead of the export of raw ore, where it is processed and then bought back by the source country at escalated prices.

The most notable countries in the past two years to introduce a ban on the export of certain unprocessed minerals are considered.

Ban on nickel, cobalt and lithium

In 2023, Indonesia enacted a ban on the export of nickel ore, aiming to capture greater value by developing a domestic nickel processing industry for electric vehicle batteries.

The ban led to the sharp increase in the number of processing facilities constructed in the country. The sharp drop in nickel prices, have also actually strengthened Indonesia’s position in the global nickel market. There has been a concern about the environmental impact of the mining activities.

The Democratic Republic of Congo (DRC), home to over half the world’s cobalt reserves, announced plans to restrict cobalt exports in 2022, seeking to boost domestic refining capacity and secure fairer pricing for the mineral.

The sharp downturn in cobalt prices in 2023 had a massive negative impact on this sector. The DRC also currently lack any notable capacity to process cobalt domestically.

Bolivia, boasting the world’s largest lithium deposit, nationalised its lithium industry in 2007, gaining control over the entire value chain, from extraction to battery production. The sharp downturn in lithium prices have however also negatively impacted the value of this sector to the Bolivian economy.

Namibia banned the export of unprocessed lithium, cobalt, and other critical minerals in 2023, similar to Indonesia’s strategy of fostering domestic value addition. The country however also currently lacks notable capacity to process these minerals.

Benefits of Export Bans

Proponents of export bans argue that they offer several advantages. This relates to increased economic value by restricting raw material exports, countries can capture the economic benefits associated with processing and manufacturing finished goods, creating jobs and boosting industrial development.

Export bans can incentivise investments in domestic technology and infrastructure, enabling countries to move up the value chain and gain expertise in refining and manufacturing.

It also considered as a means of sustainable resource management where controlled exports can be used to ensure responsible resource utilisation, preventing environmental degradation and promoting sustainable mining practices.

It also provides developing countries with a degree of geopolitical leverage. In a world increasingly dependent on critical minerals, export bans can be used as leverage to secure favourable trade deals or exert influence on the global stage.

Challenges and the downside

However, export bans also come with potential drawbacks. It is indicated to have a high probability of disruption of global supply chains. Sudden restrictions on raw material exports can disrupt established global supply chains, leading to price hikes and shortages for downstream industries in importing countries.

Export bans can create uncertainty for foreign investors in the mining and processing sectors, potentially hindering investment and slowing down technological progress.

Further there is increased potential for trade disputes and legal challenges where export bans can trigger trade disputes with importing countries, potentially leading to legal challenges and retaliatory measures.

The effectiveness of export bans can be limited, as alternative sources for the targeted minerals may be available in other countries.

The decision to impose an export ban on raw minerals is a complex one, requiring careful consideration of the potential benefits and drawbacks.

While such measures can offer opportunities for economic development and resource management, their success hinges on effective implementation, supportive policies, and a nuanced understanding of the global market dynamics.

As the demand for critical minerals escalates, driven by the green energy transition and technological advancements, the use of export bans as a policy tool will undoubtedly be subject to further scrutiny and debate.

Finding a balance between national interests and global economic stability will be crucial in navigating this complex landscape and ensuring the responsible and sustainable utilisation of mineral resources.

Export bans and investment

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Export bans and investment

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