The West is sleepwalking on critical minerals
A book came out last year called The Sleepwalkers: How Europe Went to War in 1914. In it, author Christopher Clark argues that the great powers of Europe just allowed matters to drift and then, before they realised it, they had unleashed the bloodiest war ever known. It didn’t help that the nincompoops were in charge: the dim-witted Tsar in Russia, the slightly unhinged Kaiser in Berlin and, in Vienna, the doddering Emperor of the unsustainable Austro-Hungarian Empire. And, to top it off, in London there was a government that tried to close its eyes and cover its ears about what was going to happen in Europe until it, too, got pulled in (and almost totally unprepared at that).
Well, 100 years later, we’re at it again, only this time we’re sleepwalking in terms of critical minerals. If you doubt that, just re-read the posts on Investor Intel today from Jack Lifton and Daniel McGroarty. The argument by Jack Lifton suggesting, in effect, that rare earths will continue to be a Chinese sphere of influence and the one by Daniel regarding the defence implications are both, in their own ways, chilling.
But that’s only the start of the sleepwalking story as it applies to the West. We are beholden in so many minerals and metals. We have seen how a spat between Russia and Belarus can torpedo potash prices, something that the rest of the world could do nothing about. Roger Bade, of London brokers Whitman Howard argues this week that the Uralkali story has spilled over into phosphate, telling clients that “the Belarus situation has also impacted on end-user phosphate fertilizer demand and, in turn, this has pressurised phosphate rock prices which now trade at around $115/tonne”.
But, if there is concern about China and REE, then the fertilizer world has much bigger worries than Belarus, especially in terms of phosphate. Morocco/Western Sahara produce 14.8% of world supply (and are the largest exporters), while North African and Middle East countries accounted — before the disruption of Syrian supplies — for a further 13.2% (Tunisia 3.4%, Jordan 3.4%, Egypt 2.8%, Israel 1.7%, Syria 1.6% and Algeria 1.1%).
A Sydney newspaper Monday published a long argument that the Arab Spring has turned into what the writer called the Muslim Winter. Rebels have taken Fallujah in Iraq, car bombs are going off in Beirut, Afghanistan has released a draft penal code calling for lashing or stoning to death for adultery, Libya is divided between two warring factions, civil war has broken out in the Central African Republic and a million people displaced, bombs are going off in the Somali capital, while Egypt and Syria are dreadful messes.
That leaves Jordan and Morocco, both important suppliers of fertilizer material (and Israel of course: it is not comforting to read reports that Hezbollah has smuggled advanced guided-missile systems into Lebanon to use against Israel).
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Jordan could be a problem, too. It is just over a year since some 200 unemployed men in the southern city of Ma’an marched into one of the city’s main intersections chanting “Martyrdom is better than a bitter living” in their protest against the treatment they received from the Jordan Phosphate Company. They wrapped themselves in burial shrouds and prevented company trucks loaded with phosphate from reaching the port of Aqaba. Police dispersed them with tear gas. Ma’an is the second poorest city in Jordan, with a quarter of the population living below the poverty line. What heightened the sense of grievance is that Jordan’s deposits of potash and phosphate are located in the south, yet jobs, especially at the Jordan Phosphate Company, remain scarce and the local economy continues to worsen.
There were reports at the time that Jordan’s monarchy might be about to fall, with several political parties calling on King Abdullah II to give up power. The threat was averted that time, but who knows when it might re-emerge? In this new era of chaos in the Arab world, who could save Abdullah if his enemies seek to remove him? The same powers that could do nothing to stop the fighting in Syria?
And then there’s Morocco. It was cordoned off from the Arab Spring that convulsed so many of the other countries of North Africa, but what if, some time in the near future, the convulsions affecting much of the Muslim world spread to the globe’s single largest supplier of phosphate?
And then there are all the other critical materials over which the West has little say in terms of their supply. For all the drawing up of critical metals lists in Washington and Brussels, little has actually been done. Just look at the following list.
Minerals on which the United States is 100% reliant upon imports:
* Bauxite and Alumina
* Quartz crystals
* Rare earths
Percentage of critical metal needs which need to be imported:
99 per cent Gallium
90 per cent Germanium
87 per cent Antimony
76 per cent Tin
SOURCE: U.S. Geological Survey
We may no longer have to put ourselves in the hands of a tsar, kaiser and Austrian emperor, but where are the firm, reassuring hands on the tillers in the West? So who’s sleepwalking now?
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