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Roula Khalaf, Editor of the FT, selects her favorite tales on this weekly e-newsletter.
The author is head of thematic fastened revenue analysis at Barclays
The US-Ukraine minerals deal was a symbolic win for each side. Kyiv secures long-term US funding in a free and sovereign future. Washington features preferential entry to Ukraine’s mineral wealth and an opportunity to cut back its dependence on China in a strategic space.
But, the prospect of a surge in Ukrainian essential minerals stays a distant one. Whereas consideration typically centres on extraction — the untapped deposits of uncommon earths, lithium and titanium beneath Ukraine’s soil — the true constraint lies additional alongside the worth chain. The bottleneck isn’t in getting minerals out of the bottom, however in what occurs subsequent: refining. And that is the place China’s dominance is unmatched.
Ukraine is estimated to carry about 5 per cent of the world’s uncommon earths and sits atop a few of largest reserves of lithium and titanium in Europe — strategic minerals the US can’t do with out. Synthetic intelligence could run on code, nevertheless it depends on uncommon earths for the magnets, sensors and cooling methods that energy superior chips and servers. Lithium, the important thing mineral for lithium-ion batteries, drives most electrical automobiles, from compact metropolis automobiles to long-range vans. American defence depends on titanium for its distinctive mix of energy and lightness, making it supreme for fighter jets and missiles.
For the minerals-hungry US financial system, the stakes might hardly be larger. World provide chains are strikingly concentrated, leaving patrons with few actual selections — depending on a small handful of gamers who management both the uncooked supplies or the means to course of them. The Democratic Republic of Congo accounts for greater than 70 per cent of the world’s cobalt output, whereas Guinea is a big producer of aluminium.
Securing future provide from various sources equivalent to Ukraine is prudent and strategic. Ukraine could possibly be the following frontier of reserves — the one drawback is that its potential is uncooked. Minerals manufacturing requires greater than geological luck; it calls for infrastructure, vitality, environmental safeguards, and above all, scale.
Over the previous 20 years, Beijing has quietly however systematically constructed the services, experience and industrial ecosystems required to show uncooked supplies into usable inputs for batteries, electronics and inexperienced know-how. Right this moment, China is the world’s largest exporter of processed minerals. It controls 65 per cent of refined lithium and 80 per cent of refined cobalt.
In uncommon earths, nevertheless, China has a close to monopoly, accounting for near 90 per cent share of world refining capability. A few of the uncooked supplies are mined domestically, others imported from rising economies, and even from developed markets. Take MP Supplies, America’s solely uncommon earth mine. It extracts mild uncommon earths in Mountain Go, California, but 80 per cent of its output was sold to China for processing earlier than it suspended its shipments final month amid China-US tariff tensions. Japan’s magnet trade tells an analogous story. Japan imports a good portion from its uncommon earth oxides for magnets from non-Chinese language suppliers. However the dependency continues to be there — it’s merely shifted downstream. Japanese corporations typically ship their supplies and parts to China’s industrial heartland for ending.
Even with contemporary funding, shifting processing capability from China to Ukraine is not any fast repair. A lot of what China refines is tailor-made to US industries, precision-built to fit straight into American provide chains. The provision chain, in different phrases, nonetheless bends — instantly or not directly — in the direction of Beijing. Rerouting that pipeline will take years and will imply a full-scale overhaul of world provide chains.
Because the world pivots from oil to metals, essential minerals are the brand new entrance line of geopolitics. However not like oil, which might be purchased from many international locations, essential minerals come from a choose few, typically only one.
China leads. The west is struggling to catch up. The minerals cope with Ukraine was Washington’s first transfer — extra will comply with. What’s the following minerals deal? Possible the Democratic Republic of Congo, for cobalt. Or Guinea, for aluminium. However China bought there first, pouring 20 years of funding into mines and infrastructure throughout the so-called world south. Right this moment, based on IEA estimates, Chinese language corporations management 40 per cent of the world’s nickel and cobalt mines, tightening their grip on the minerals that energy every part from electrical automobiles to missiles.
For the US and its allies, the lesson is stark: securing provide chains goes far past tapping new mines. It requires funding in refining — an important step which stays firmly in China’s palms. With out this, the US received’t simply shut the hole.
