Economic modelling and price cycles are pertinent to any market. But what’s more significant in steering the tumultuous landscape of Critical Raw Materials (CRMs) we are witnessing now is what’s happening in geopolitics.
This was the point I emphasised in a panel discussion at the FT Commodities Global Summit in Switzerland which you can view in its entirety here.
Recording “provided by Financial Times Live”
The world has become so reliant for its CRM supply on countries like Russia and China that it finds itself in a precarious place. Geopolitical instability is leading to supply shortages and price volatility and is distorting global markets.
Major political undercurrents
Russia is no longer a reliable source for CRMs because of sanctions following its invasion of Ukraine in 2022.
Furthermore, there are increasing tensions between China and the West, and political undercurrents surrounding Taiwan where 90% of advanced semiconductors are produced. The impact on the manufacture of green technologies required for the world to transition to clean energy would be immeasurable should these tensions escalate.
In addition to Russia and China, what’s unfolding in the Middle East could jeopardise CRM supply routes that run straight through the region: the Persian Gulf, the Iranian port of Bandar Abbas and the Suez Canal, as well as the Red Sea, which is now under threat from Iran-backed rebels – the Houthis, designated by the US as a terrorist organisation.
Provenance is the key word
These significant shifts are affecting supply chain security. Politics has then become the main factor showing the importance of provenance of raw materials. And in respect to CRMs, provenance is the key word.
The issue of fragmented geopolitics and the effect on demand, supply and pricing of CRMs forms the backdrop to Norge Mineraler’s story.
Our deposits of three Critical Raw Materials – phosphate, vanadium and titanium (with titanium metal having been recognised as a Strategic Raw Material in the latest EU List of Critical Raw Materials) – are in Norway, a country with a democratic and stable political environment. The Norwegian government recognises the benefits resource development will bring to the economy – and that interest extends further afield.
The European Union is also keen to gain access to a secure supply of our three CRMs that are needed for fertiliser, electric vehicle batteries and defence equipment, among other uses. The deposit, currently in the ground at our site in Southwest Norway, will change the European CRM supply chain and bolster provision long into the future.
“Friend-shoring” and new opportunities
It’s not only about upstream processes – like the exploration and excavation of CRMs. The knock-on benefits to downstream areas – like mineral processing and refining – are significant. Practices like “insourcing” and “friend-shoring” involve prioritising partnerships and ecosystems with domestic businesses and suppliers, rather than outsourcing these functions to far flung places.
We have a strong understanding of what’s viable upstream. And we are following the value chain of future downstream products, which are further evolving. By keeping the focus local, we hope to carve out new opportunities that will create products in Europe from raw materials sourced inside Europe for the greater good of western industries.
Conflicting dynamics
There are conflicting dynamics involved in CRM resource development. On the one hand, the need for them has never been greater; yet on the other, we must be mindful of environmental, social and governance (ESG) restraints in place to protect the planet’s natural resources.
The European Carbon Border Adjustment Mechanism – that charges a penalty to countries whose CRM development practices are carbon-intensive – was one such measure discussed by my fellow panellists. ESG and sustainability are crucial aspects that must be considered in any discussion about CRM supply. These matters are, however, often overshadowed by the importance of food security.
A matter of survival
On this matter, access to Critical Raw Materials is more about survival. Phosphate, for example, is a mineral essential to making more environmentally friendly fertilisers, to grow food to feed future populations.
Understandably, food security and its connection to the fertiliser market has been the priority discussion point at several global events I’ve attended recently. These include COP28, the Munich Security Conference and the World Economic Forum (WEF) Annual Meeting held in Davos, where I spoke about creating a sustainable future.
Levelling the CRM field
The FT Commodities Summit also discussed how the West, with its short political cycles and therefore oftentimes shortened vision, can do more to become independent from the East, and unallied countries in general, in its supply of CRMs.
State-back agencies that provide proactive political risk insurance was a subject one panellist had heard mooted as a possible way to help more private capital to flow; an idea based on the premise that the market is not always efficient at pricing this type of risk.
Geopolitical intricacies
As nations continue to vie for access to these indispensable resources, one thing is clear: understanding and navigating geopolitical intricacies will be imperative for securing reliable and steady access to CRMs to ensure a strong, sustainable future.
But in the current global landscape an unprecedented battle with far greater implications unfolds: the struggle between two political systems – democracy vs autocracy; a defining conflict shaping the course of what lies ahead.
