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Mining Goes Critical: Russia, Ukraine and US Mineral Supply Chains
The Russian invasion of Ukraine is the most dangerous realignment of global supply chains in a generation, one the United States may not be ready for.
As America and NATO allied nations impose further economic sanctions against Russia, established supply chains are being disrupted. It is more than just Russian oil and gas or oligarch's bank accounts at risk. America’s blind spot and its reliance on mineral imports is being revealed.
Russia has strategically embraced global trade while also preparing for political and economic isolation. As part of this preparation, Russia developed domestic natural resources and invested in mineral assets around the world.
While the United States has had the luxury of wide global trade to source its basic materials over the last several decades, the trade-off has been neglect of our own natural resource wealth.
Russia is vast with abundant natural resources. While oil takes the headlines, Russia’s mining industry quietly provides many of the critical metals the world is dependent on for products ranging from air planes to fertilizer to electrical vehicles and more.
Russia provides 37% of the world’s palladium, around 18% of the potash, 14% for coal, platinum around 10%, plus many other essential metals. Russia also controls about 10% of global copper reserves and is a major producer of nickel and platinum.
Geology and mineral deposits do not stop at political borders. Across the border from Russia in Ukraine lay several strategic mineral deposits that may not be the cause of Russia’s aggression but certainly have played a part in Putin’s calculations.
Ukraine is one of Europe’s largest commodity producers and is host to 5% of the world’s natural resources. Around 7% of the world's iron ore reserves are in the Kryvyi Rih basin, Dnipropetrovsk, Kremenchuk, Poltava regions - all regions that lie along or very close to its Russian border. The country also has the largest uranium deposit in Europe - 1.8% of the world’s known uranium deposits - and more than 1 billion tons or 20% of the world’s graphite.
The realignment of the global supply chain with Russia in control of a greater share of the world’s critical minerals has direct impact on strategic US industries including the US aerospace sector and transition to clean energy.
As recently as January 31, Boeing disclosed that tensions over Ukraine may create an “adverse climate” for their business because 20% of the proven world reserves of titanium ore are located in Ukraine. Economic sanctions will impact the supply chain for titanium and therefore the US ability to manufacture aircraft.
There are few alternatives for the US for titanium outside of Ukraine other than China or Russia. Ukraine is one of the few countries with a complete titanium industry, from mining and processing of ores to the manufacturing of finished products such as specialty metals for the aerospace industry. As of last year, China was the largest importer of Ukrainian titanium iron ores taking 24.4% of supply, with Russia ranking second with 15.3%, and Turkey ranked third with 14.5%.
Prospector tracks global mineral projects, of which there are only five titanium exploration/development projects listed on the TSX and the TSX venture outside of Russia, with even fewer in production.
Ukraine was aware of the potential wealth in the border areas and its strategic importance to the energy transition and started promoting its own critical minerals last year, when it received 50 proposals for development through an electronic auction.
In the first three months of 2021, the number of proposals jumped to 100, according to S&P Global Platts. Sergiy Tsivach, a director of UkraineInvest, a government investment promotion office, said that the mineral investment program was expected to attract $10 billion in development for 24 major mineral projects.
The Donetsk and Dobra lithium mines were up for sale and there was competition between Australia-listed European Lithium and Chinese Chengxin Lithium who wanted a position in Europe's lithium industry. With China’s tacit support of Russia’s actions in Ukraine, it is not hard to predict who will end up developing those mines.
All this mineral potential now lies behind a new iron curtain.
We cannot help our allies if our supplies are under threat or out of our control. The US needs to develop its domestic mining industry.
The US is heavily dependent on imports of the most basic but valuable minerals for renewable technology, defense and hi-tech. According to the USGS, in 2021, imports made up more than half of US consumption for 47 nonfuel minerals, and the US was 100% net import reliant for 17 of those.
Of the 35 minerals or mineral material groups identified as “critical minerals”, the US was 100% net import reliant for 14, and an additional 15 critical mineral commodities had a net import reliance greater than 50%.
The US mining supply chain needs attention and investment before we are cut off or left scrambling when we could develop supplies in our own backyard.
The US has access to all the resources it could need at home and among its allies but it does not have the production and refinement capacity to meet its needs. These supplies take time to bring online - politicians can't just flip them on like a light switch or the push of a button in a new electric vehicle.
Disruptions happen overnight, but mineral supply and production take time. Russia and China understand this which has led to their dominance of commodity supply chains.
The US and our allies need to prepare for supply chain disruptions with strategic long-term investments in domestic and allied mineral supply chains.
With the tools that Prospector provides we have the data, we know where we are vulnerable, we just need investment and the willingness to build the next generation of mines to address America’s mining blind spot before it is too late.
- Emily King