As followers of ARPN well know, pressures on global supply chains in the wake of a global pandemic, trade tensions and the rise of resource nationalism in Central and South America were at an all-time high even before Russian President Vladimir Putin’s decision to launch a full-scale invasion of Ukraine on February 24, 2022. The move, and subsequent global policy responses have raised the stakes. As we pointed out in our latest post, because Russia is a global supplier of rare earth minerals and other critical minerals and metals the current eruption of war in Ukraine spells trouble for resource security beyond oil and gas.
Amidst the barrage of news coming out of Ukraine, here’s a blast from the past that may give us insight into what is in store on the mineral resource front.
In 2014, the last time Russia bit off a piece of Ukraine, in a piece for RealClearWorld, ARPN’s Daniel McGroarty pointed to U.S. over-reliance on Russian-sourced titanium, a key material used in aerospace technology. At the time, U.S. manufacturers Boeing and United Technologies were making headlines with their build up of aerospace-grade titanium stockpiles. Pointing to the significant usage of the material not only for civilian aircraft but also national defense, with titanium being a must-have metal for advanced fighters such as Boeing’s F/A018 Super Hornet, McGroarty wrote:
“But the statistic that says most about Boeing and United Technology’s Russian titanium stockpiling is this one: The U.S. is import-dependent for 79 percent of the titanium it consumes each year.
Are there other sources for titanium if Putin decides to “counter-sanction” the U.S. and cut off exports?
China is a major global source of titanium, but it tends to consume what it produces. Then there’s Ukraine, which produces titanium in Zaporizhzhya — located between Russian-controlled Donetsk and Russian-reclaimed Crimea. U.S. and EU titanium users may want to cross Ukraine off their long-term supply list. U.S. titanium suppliers like RTI, Allegheny Technologies Inc. and TIMET may push to surge their production lines, but how quickly — and how much — is uncertain.
But doesn’t the U.S. Defense Department maintain a metals stockpile? It does. And between 1998 and 2005, the National Defense Stockpile sold off its titanium reserve — from 34,800 metric tons down to zero. (Where did the proceeds go? By order of the U.S. Congress, the Pentagon was instructed to implement the “sale of titanium from the National Defense Stockpile and allocate funds to the establishment of the World War II Memorial.”)
With the Pentagon’s cupboard bare, Boeing and United Technologies have little choice but to bulk-buy titanium parts — as long as their Russian supplier is willing to sell.
But what happens if Vladimir Putin decides it’s time to escalate the sanctions war as he refuses to deescalate in Ukraine?
The result could be a resource war we’re likely to lose.”
Fast-forward to 2022, and it looks like we haven’t learned our lesson from 2014. U.S. import-dependence for titanium has risen to 90%, while Russian troops mass just south of Zaporizhzhya, eliminating Ukraine as an alternative to relying on Russia for titanium supply.
“The cold war is long over today. But a lot of the world’s titanium ore still comes from the same places. And both Boeing and Airbus get a significant proportion of their titanium supply from Russia.”
He points to a memorandum of understanding signed between Boeing and VSMPO-AVISMA, a titanium producer in Russia, suggesting that it is Boeing’s biggest supplier. He adds:
“Like Boeing, Airbus gets a lot (most?) of its titanium from the same company. And the recent tensions from developments in Ukraine have raised the possibility of sanctions to Russia. In such an eventuality, the two aircraft manufacturers worry that they could lose access to a key link in their supply chain.
Of course, this development isn’t really new. Boeing’s MoU is from back in November. But both Airbus and Boeing have been warning governments and officials about the importance of titanium in their manufacturing. Boeing last made such a warning publicly at the end of January. However, industry sources say that both manufacturers have been stockpiling titanium for some time. This should give Boeing and Airbus some valuable time if further developments starve them of Russian titanium.”
While this may be true, Georgilidakis adds that “after the pandemic, the generational changes in aircraft models and the ramp-up of production, both manufacturers have worries about their suppliers, in general.”
What’s more, the current war in Ukraine has already, within only a few short days, completely altered the global post-cold war security calculus, prompting Germany to not only reverse its longstanding policy of not sending arms to conflict zones, but also significantly raise its defense spending above 2 percent of GDP.
With every day the war drags on and threatens to escalate, other nations will likely rethink their defense budgets and prop up their arsenals, including advanced military aircraft, thus increasing the demand for titanium – and a wide range of other metals and minerals critical to defense technology.
The fact that U.S. Department of Commerce (DOC)-led investigations under section 232 of the Trade Expansion Act of 1962 determined last year that titanium sponge imports into the United States threatened to impair national security and concluded “that the United States was at risk of losing the remaining industrial capacity and technical knowledge related to titanium sponge production that is essential to meet national defense and critical infrastructure requirements” does not bode well here.
The Biden Administration in February announced several “major investments in domestic production of key critical minerals and materials, ensuring these resources benefit the community, and creating good-paying, union jobs in sustainable production” to shore up domestic supply chains, the highlights of which we outlined here.
Nonetheless, President Biden’s recent State of the Union Address, while stressing his Administration’s commitment to revitalizing American manufacturing. contained only a single sentence asserting the importance of addressing America’s supply chain challenge. While the events in Ukraine required the President to significantly retool his address to the nation, the speech represents a missed opportunity to convey to the American people that “the pride that comes from stamping products ‘Made In America,’” starts with materials that are ‘Mined in America.’
With the yellow warning light in 2014 flashing red in 2022, Russia’s attack on Ukraine is only the beginning of a reshaping of the post-Cold War global order. For the sake of our nation’s economic and national security wellbeing, a focus on strengthening domestic critical mineral supply chains – across the entire value chain – will be paramount.