The Russia-Ukraine war and the imposed sanctions continue to increase the volatility in commodity prices.
It is noteworthy that the prices of nickel, which is important for the production of batteries used in electric cars, increased sharply with the war.
While the supply problems of automobile manufacturers increase with the war, there is also a supply problem in neon gas, which is indispensable for the chip industry, after the rise in nickel prices. This situation puts the future of the industry, which is currently struggling with supply problems, into uncertainty.
While Russian President Vladimir Putin's plan to pay for gas in rubles shocked Europe, this makes it impossible for most Europeans to procure Russian gas given the sanctions.
It is stated that there will be problems in heating in Western Europe without Russian gas. It is pointed out that energy-intensive companies may also be in a difficult situation.
While it is stated that these developments are only the beginning of a global struggle, it is emphasized that the world is heading towards a crisis in which there is a power struggle over raw materials.
There is a risk of problems in the production of critical raw materials
It is worth noting that while the energy transition requires enormous quantities of specialized industrial metals to be successful, most of them are still a niche market today.
The International Energy Agency's (IEA) report titled "The Role of Critical Minerals in the Clean Energy Transition" states that the rapid introduction of clean energy technologies may lead to shortages in the supply of certain non-ferrous, rare earth and precious metals, driving up their prices and, as a result, the reduction in renewable energy generation. growth is expected to slow.
While copper, cobalt, nickel, lithium, graphite, rare earth metals and aluminum are listed as critical raw materials by the IEA, there is a risk of shortages in supply and, as a result, production.
The USA, EU, Canada, Australia and Japan have created and updated their own critical raw material lists with different definitions and justifications. For example, there are 30 critical raw materials on the list that the EU updated in 2020.
If the transformation of electric mobility progresses as fast as planned, it is estimated that the demand for lithium, which stands out especially with its use in battery technologies, will increase to 6 times the global production volume in 2021 by 2040.
It is stated that there is an urgent need for cobalt and graphite for electric car batteries and energy storage. About 70 percent of the known cobalt deposits are located in the Congo, while 74 percent of the graphite is mined in China.
While nickel has been required as an alloy for many types of steel for decades, the demand for nickel is gaining in importance in battery manufacturing.
Similar to nickel, it is pointed out that there may be a significant change in demand for copper as well. The metal in question is required for electrical wires and coils of all shapes. From electric cars to power lines and wind turbines, they all need copper. Chile stands out as the largest copper producer.
The industry is in need of rare earth elements such as high performance magnets more and more. It is noteworthy that China has secured access to these raw materials.
Many industries suffer
While some raw materials are more difficult to obtain than others, this often appears to result in greater production risks and greater price fluctuations.
This is also reflected in the current crisis of the Russia-Ukraine war. The auto industry is currently struggling to find nickel due to the exclusion of Russian suppliers as a result of Western sanctions. Nickel is used to manufacture battery cells for electric cars. The aircraft industry is also struggling to find affordable aluminum for use in airframes.
Chip manufacturers, who are already grappling with capacity issues, are also feeling the effects of the shortage. Manufacturers cannot find the neon gas used to manufacture semiconductor products.
Ukraine war is cause for concern for battery supply chain
Nickel price doubled in a few days with the start of Russia's attack on Ukraine.
Nickel, which is needed as an alloying material in many industries for certain types of steel, such as stainless steel, is supplied mainly from Russian suppliers. After Indonesia and the Philippines, Russia is the world's third largest producer, followed by Australia, Canada and China.
Experts state that the Ukraine war is the biggest concern for the battery supply chain. It is stated that the war in Ukraine broke out at a time when lithium prices reached record levels and the price of cobalt rose.
While geopolitical tensions have a temporary effect on the commodity market, it is stated that the impact of Russia, an important raw material supplier, may cause the situation to last for a long time.
Higher prices are not yet noticeable, as automakers often have longer-term contracts with battery suppliers. It is noted that the increasing costs over time will affect the price of electric cars, as the calculations of the manufacturers show.
Neon shortage slows chip industry
Two years ago, with the COVID-19 pandemic shaking up global supply chains, the shortage of semiconductors had become a part of daily life for the global industry. Since then, a one-year delivery time for a car has been commonplace. While many companies hoped to alleviate the supply shortage, the next worst-case scenario came with the Russia-Ukraine war.
While Ukraine stands out as one of the most important producers of neon gas, which is mainly needed in the chip industry, it is stated that it is not easy to find a new supplier of neon gas.
Neon gas, which is a by-product of steel production, can only be produced in some old and large iron and steel factories, since it can be obtained in small quantities.
While Ukraine's neon gas supply is entering a troubled period with the ongoing war, the possibility of global sanctions against Russia causing a supply deficit in palladium is increasing.
Both substances come into play at important points in industrial production. It is known that the most important usage area is the production of semiconductor chips. While neon gas is used to feed laser lights projected onto the silicon layer in chip manufacturing, palladium comes into play in the final stages of chip manufacturing.
Experts point out that some large companies producing neon gas in Ukraine had to stop production due to the war, and point out that the start date of the re-production is unknown.
Noting that rising prices negatively affect the global economy and increase inflationary pressure, the experts emphasize that there is not enough time for new suppliers to emerge.
According to consulting firm Alix Partners, if the conflict between Ukraine and Russia lasts longer, there is a risk of significant supply bottlenecks for neon gas and thus a new crisis in global chip production.
The world is threatened by famine
Russia and Ukraine are the most important exporters of basic agricultural products. One third of the wheat needed in the world is met from these countries. Both countries are considered to be the "granaries" of the world.
The war greatly interrupted deliveries of agricultural products from Ukraine.
The war is expected to exacerbate food and production shortages in many parts of the world as Russia halts wheat and nitrogen fertilizer exports, of which it is one of the world's largest producers.
According to the United Nations (UN), 45 African countries and most of the world's poorest countries import a significant portion of their grain from Russia and Ukraine.
The UN Food and Agriculture Organization warns that international food and feed prices may increase by 8 to 20 percent due to the supply gap that will arise due to the war in Ukraine.
Most powerful commodity companies public company
It is noteworthy that the majority of the most powerful commodity companies in the world are public companies. This is especially common in the oil and gas industries. Sinopec in China, Petro China, Aramco in Saudi Arabia, Gazprom in Russia and Petrobras in Brazil stand out as public companies.
The majority of the largest mining groups by market capitalization are publicly traded. The market is dominated by BHP and Rio Tinto from Australia, Vale from Brazil, Zijin, China Molybdenum and Gangfeng Lithium from China, Nornickel from Russia and Glencore from Switzerland.
About 20 to 25 percent of commodity trade is carried out through Switzerland. It is noteworthy that 5 companies, Trafigura, Glencore, Vitol, Mercuria and Gunvor, dominate the trade.
On the other hand, in the international media reports, it was claimed that China is planning to buy shares or increase its existing shares in Russian energy and commodity companies, including Gazprom and Rusal, through public companies.
- Independence from Russian gas is possible but expensive
It is recorded that Russia supplied 155 billion cubic meters of natural gas to Europe last year.
S&P Global Platts warns that it will be difficult for the EU to end its dependence on Russian gas, especially in the short term.
As hopes become dependent on liquefied natural gas (LNG), it is known that the EU wants to significantly increase its imports of energy sources that can be transported by private tankers. The Union's imports are expected to increase by 50 billion cubic meters per year to 125 billion cubic meters.
While it is noted that Europe has so far signed only a few long-term supply contracts with LNG exporters, it is stated that this will be costly, putting Europe in competition with Asian LNG buyers at "high prices".
While pointing out that the "days of cheap gas" are over, analysts warn that if high energy prices continue for longer, it will contribute to the economic slowdown in Europe and globally.
States use raw materials as power tools
Nord Stream 2, which will transport Russian gas to Europe; While it was initially seen as a purely private sector project, today it is stated that states like Russia want and can use their rich raw materials for political power games.
It is noted that Western and Asian countries look at China with concern for this reason, and that China, the world's most important rare metal supplier, dominates the supply even if it loses its market share.
Knowing the power of rare earth elements, the Chinese government is controlling the raw material companies in a targeted way. Concerns are growing in the US and Europe that China may one day use this power.
It is known that China has also invested heavily in the extraction of raw materials in Africa. While this was initially interpreted as a "step taken to secure the supply of raw materials" by the Beijing administration, it has long been stated that China pursues greater interests in East Africa and wants to expand its sphere of influence.
Waste will be the raw material of the future
While more than 100 billion tons of raw materials are extracted from resources such as oil, gas and metals in the world every year, only 8.6 percent of this is reused, the rest is incinerated or turned into waste.
It is emphasized that these wastes may one day become the most important source of raw materials. It is stated that raw materials can be found in large quantities in the world for a long time.
The circular economy market, which is based on the recycling of production and consumption processes, is expected to create new opportunities of $ 4.5 trillion by 2030 by reducing waste and creating jobs. The circular economy market is projected to reach 800 billion euros in Europe by 2030.
It is noted that the circular economy has not been sustained intensively for many years, and companies prefer to use cheap new fossil raw materials.
With the world population projected to approach 9 billion by 2030, this increase is projected to place unprecedented pressure on natural resources to meet consumer demand.
Experts point out that if original materials are recovered from waste, this pressure can be reduced, problems such as environmental pollution or supply bottlenecks can be eliminated, and climate change can be combated.
Experts estimate that more than 95 percent of key raw materials can be recovered from already manufactured battery cells. It is stated that recycling may one day replace mining as a source of raw materials.
Raw materials become "weapons" in the struggle for the new world order
While the total GDP of the USA and the EU is 40 trillion dollars, China's GDP is at the level of 17 trillion dollars. Russia, on the other hand, lags behind these countries with a GDP of 1.7 trillion dollars.
In terms of natural resources, the situation is quite different. Russia is at the top of this list with 75 trillion dollars, followed by the USA with 45 trillion dollars and China with 23 trillion dollars.
Raw materials become "weapons" in the struggle for a new world order.
Economist Sophia Kalantzakos from New York University states that the interaction of the geographical concentration of critical resources and increasing global competition will shape and destabilize geopolitics in the 21st century.
Drawing attention to China's dominance in rare earth elements, Kalantzakos states that sovereignty for raw materials is Beijing's clear goal.
While China sees the dominance of raw materials as "a giant step towards absolute economic power", it is warned that production and supply disruptions in the intertwined global economy can have serious consequences for value chains at any time in the face of such monopolies.
It is seen that industrialized countries are trying to take measures against China's monopoly on the raw material problem. It is stated that the US Department of Defense has also built warehouses for critical raw materials.
Comments
No comment yet.