Market Power in Critical Minerals: Dynamic Pricing and Nationalization in the Cobalt Market

Demand for minerals critical to global electrification is projected to skyrocket over the next several decades, driven by the green energy transition and rapid technological development. Given the high geographic concentration of these resources, this paper investigates the economic incentives for nationalization as a means to exert market power. Focusing on the Democratic Republic of the Congo’s cobalt market, a dynamic non-linear programming model is developed to identify optimal price trajectories under both perfect competition and dominant pricing scenarios. The simulation reveals behavior consistent with a predatory pricing strategy: after a period of growth, the DRCbrings prices below marginal costs to marginalize the competitive fringe, evidenced by a -0. 184 lagged correlation between dominant pricing and fringe supply contraction. Following this phase, the model demonstrates a significant price escalation, resulting in a recoupment ratio of 86. 96 and an additional 10 billion of profit.