supply chains

Against the backdrop of the accelerating global push towards net zero carbon emissions, the authors of a May 2021 KPMG study on “geographical and geopolitical constraints to the supply of resources critical to the energy transition” and the associated “call for a circular economy solution” titled the first chapter of their report “From OPEC to ‘OMEC’: the new global energy ecosystem.” In a then little-noticed footnote the authors explained that “OMEC” was a “freshly minted acronym for ‘Organisation of Mineral Exporting Countries’” – a grouping that “may not yet exist, but the point remains: geopolitical power could shift from oil-dominated countries to critical metal-dominated countries.” 

“There is an underappreciated risk to the energy transition: the supply of clean energy depends on mined natural resources, which are steeped in geological, geopolitical, and governance challenges,” wrote the authors at the time.

Fast forward twelve months to our vastly changed geopolitical landscape, and the “freshly minted acronym” may go from footnote to required subject of global public policy considerations.

As  Tsvetana Paraskova writes for OilPrice.com, “Russia’s invasion of Ukraine has exposed, once again, the vulnerability of the global energy markets and economy to the actions of petrostates with the power to weaponize their energy resources for political purposes.” She adds that as the European Union attempts to wean itself off Russian oil and gas and accelerate the shift to renewables, other harsh geopolitical realities come into focus:

“Countries that aren’t Saudi Arabia, Iraq, and Iran hold vast resources of the metals and minerals that will be critical to enabling a faster energy transition. But those resource holders also include Russia, China, and a host of African and South American nations still living ‘the resource curse’, where conflict, forced and child labor, and critically low environmental standards are undermining the ‘green’ credentials of the clean energy transition.”

With a confluence of factors — pandemic-induced supply chain shocks, increasing resource nationalism in various parts of the world, and Russia’s invasion of Ukraine — having completely altered the Post-Cold War geopolitical landscape and mineral resource security calculus, the new global energy ecosystem could indeed see a transformational shift “from OPEC to OMEC.”

We know how decades of petro-dependency warped geopolitics and challenged national security.  The question as we move from “OPEC to OMEC” is whether the U.S. and its allies will trade petro-dependency for tech metal-dependency – or will U.S. policy makers and other stakeholders be able to chart a course that will provide much needed security for 21^st century supply chains?

They say desperate times call for desperate measures, and if you needed any more indications that the state of supply chain security has reached crisis level, consider headlines like this one:

 “Tech firms rip apart NEW washing machines so they can harvest their computer parts in a bid to beat the global microchip shortage”.

The news surfaced during an earnings call with the CEO of a Netherlands-based company, who told shareholders that a “major industrial conglomerate has resorted to buying washing machines and tearing out the semiconductors inside for use in its own chip modules.”

Chip shortages first began making headlines in the wake of the coronavirus pandemic, but shortages are expected to persist for the foreseeable future, as demand for semiconductors continues to increase across industry sectors, particularly in light of the acceleration of the “electrification of everything.”   

The automobile industry is a case in point.  As the EV revolution continues to gain steam, automakers, according to Bloomberg, have “yet to overcome a semiconductor crunch that has challenged their operations for over a year,” prompting some corporations to trim output targets or alert shareholders to expected “negative effects from chip scarcity.”

It is for good reason that the Biden Administration dedicated an entire chapter to “semiconductor manufacturing and advanced packaging” in its 100-Day Supply Chain Review last summer  (- see our coverage of the report here -), in which the Administration underscored that [d]ue to the extremely complex and geographically dispersed nature of the semiconductor supply chain (which results in the typical semiconductor production process spanning multiple countries and products crossing international borders up to 70 times) there are many access points for supply chain vulnerabilities along the way.

Several steps have been and continue to be taken to shore up semiconductor supply chains, and thankfully, the U.S. is not only in the fortunate position to have known resources for both Gallium and Indium (via deposits in Texas and Alaska, respectively).   Both metals can also be “unlocked” in the “co-product” development of their Gateway Metals Aluminum (for Gallium) and Zinc and Tin (Indium) — another reason stakeholders should focus more on the inter-relationship between Gateway Metals and the critical co-products they unlock.

Of course, as followers of ARPN well know, our critical mineral supply chain challenges extend far beyond the materials required for the manufacture of semiconductors, and as such, this complex challenge can only be addressed in the context of a comprehensive “all of-the-above” approach across the entire value chain — from mine to manufacturing. But, as we have frequently pointed out: “the first word in supply chain is ‘supply,’” so any effort must begin at the beginning – with the responsible sourcing of the materials needed to underpin 21st Century technology.

Recycling parts can and must be part of any comprehensive solution. But when industry has to resort to “cannibalizing” new consumer products to manufacture others, the situation is truly dire, and warrants concerted action.

After all, ripping microchips out of brand new washing machines is not exactly what we had in mind by “clean energy.”

Bearing testimony to a growing awareness of our nation’s critical mineral resource challenge, the U.S. Senate Committee on Energy and Natural Resources held a full committee hearing on domestic critical mineral supply chains earlier this week. The witness panel at the hearing, which E&E Daily described as “a largely pro-mining hearing that could serve as a blueprint for a potential deal [...]

With a single electric vehicle battery requiring between 10 and 30 pounds of cobalt content, the lustrous, silvery blue, hard ferromagnetic, brittle nickel and copper co-product has long attained “critical mineral” status. However, with most global supplies of the material coming from the Democratic Republic of the Congo, where mining conditions often involve unethical labor standards and [...]

 While in the early days of Russia’s invasion of Ukraine, concerns over how the war would impact global supply chains were mostly focused on oil and natural gas, it quickly became apparent that the ramifications of drawn-out hostilities would stretch far beyond the global oil and gas sector. With Ukraine considered the “breadbasket of Europe,” Russia’s invasion [...]

Already severely strained by the coronavirus pandemic, global critical mineral resource supply chains have taken another hit with Russia’s full-fledged invasion of Ukraine.  With no de-escalation of hostilities in sight, Western nations, including the United States, are stepping up their efforts to bolster domestic supply chains, not only for oil and gas, but also for non-fuel [...]

Set to deliver his first State of the Union address today (March 1, 2022), U.S. President Joe Biden will likely have to tweak the outline for his speech considering the latest developments in Ukraine, and the resulting implications for the United States, and the world as a whole. Against growing tensions, we recently highlighted mounting [...]

We’ve named it the year of the Supply Chain, noting that others said “2021 is the year ‘supply chain’ went from jargon to meme.” While an increased focus on the supply chain was undoubtedly a critical development in the mineral resource realm, and several steps to increase supply chain security for critical minerals were taken in [...]

 Happy New Year — and “shoutout to everyone who said they would start eating healthy in the new year and already decided to wait until Monday,” (i.e. today) as one Instagram influencer put it this weekend. Here’s the thing with New Year’s resolutions – while the new year seems like the perfect time to proclaim ambitious intentions [...]

At the 2021 United Nations Climate Change conference (COP26) held in Glasgow, Scotland earlier this month, two major U.S. automakers, General Motors and Ford, signed a commitment calling on automakers to sell only zero-emissions vehicles by 2040.  Joined by Volvo, Jaguar Land Rover and Mercedes-Benz, as well as several countries, territories and fleet operators, the manufacturers [...]