From American Affairs Journal, Fall 2022:
As nations around the world struggle to deal with the humanitarian crisis created by the Russian invasion of Ukraine, they also face difficult choices in balancing near- and long-term economic and environmental challenges. Europe, in particular, is stuck in a bind between multiple conflicting goals. In the immediate term, the continent must access fossil fuels from other sources in order to offset Russian oil and gas imports and avoid massive disruptions for consumers and industry. On the other hand, Vladimir Putin’s war has served as a clarion call to accelerate plans for decarbonization in order to starve the Russian war machine of revenues and build a more sustainable energy future.1 Yet this latter goal will also require securing the materials that will enable the construction of new energy sources.
Herein lies the challenge in the climate, energy, and critical materials nexus: countries around the world, already beset by problems from the recent pandemic, with sluggish supply chains, stifled growth, and profound socioeconomic shocks, are engaged (with varying degrees of fervor) in the complete transformation of whole industry sectors and their attendant infrastructures. And it turns out that Russia and Ukraine, in addition to food and hydrocarbons, produce many of the key materials that the world needs to decarbonize.
Thus far, media attention has understandably focused on soaring food prices, gas pipeline disruptions, oil import bans, and so forth. But critical mineral supply chains running through Russia and Ukraine have also been affected. Russia holds enormous mineral reserves, which are also a source of significant revenues for the Kremlin. Nonferrous metals represent $20 billion of annual income for Russia; mixed ores and metal scrap, $5.3 billion; nonmetallic minerals, $6 billion; and inorganic chemicals comprise $4.7 billion of Russia’s export income.
We are already witnessing large-scale disruption to many of these supply chains. In March, the EU introduced sanctions on the import of certain iron and steel products originating from Russia, which represent an estimated $3.3 billion of export revenue.2 Feeling the bite and trying to stave off the economic impact, Putin has announced plans to try and increase domestic consumption of metals by expanding their use in Russian factories, infrastructure construction, and home building.3 The UK has announced sanctions and an asset freeze on Evraz, a steel manufacturing company that makes railway wheels and tracks, which are key to the Russian military’s ability to move heavy equipment.4 The EU subsequently introduced a prohibition on the import of unwrought lead, leading to the London Metals Exchange (LME) suspending deliveries of all Russian lead into LME warehouses.5 The UK announced 35 percent additional duties on imports of copper, lead, primary aluminum, and aluminum alloy from Russia.6 In the United States, a bill to repeal permanent normal trade relations status for Russia and Belarus passed Congress and was signed into law in April.7
This article will attempt to analyze the implications of these disruptions to key mineral supply chains and the underlying climate, energy, and critical materials nexus. The impacts, already significant, will continue to resonate around the world.
Nickel
Nickel is critical to our energy future. In addition to prosaic uses in stainless steel and other alloys, nickel finds a home in more exotic applications and serves as a key critical material in electric battery cathode formulations.
There are two different types of nickel. Type 1 nickel is of a higher quality and is suited to specialized applications in which a very high purity is required, while Type 2 nickel is lower quality and suitable for more general alloying applications. Nickel prices play a big part in determining the prices of alloy surcharges at stainless steel mills, which pass the raw material costs on to their customers.8 Of course, when prices are high, demand is dampened down, as customers delay less critical projects and manage demand to suit new market realities.9 But stainless steel is a material so key to many manufacturing applications that price rises in stainless steel will affect many components of new energy technologies....
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