Russia, Ukraine, and the Critical Materials–Energy Nexus

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.

Then there are the more exotic uses of nickel. As noted in this author’s previous article on cobalt,¹⁰ EV manufacturers have sought to improve battery chemistries by replacing their cobalt content (which is problematic for many reasons) with nickel. While nickel was not on the last EU critical materials list, released prior to the invasion of Ukraine, the European Commission has indicated that it is an element of interest and that it will “also monitor nickel, in view of developments relating to growth in demand for battery storage.”¹¹ It would seem likely that the EU might revise this position in future critical materials lists given the new global context.

The war in Ukraine has created significant new problems for nickel supply. It has been said that Putin has the power to “hold nickel hostage,” a move that could potentially disrupt the nascent EV industry.¹² In Russia, Norilsk Nickel, or Nornickel, is a massive producer of nickel as well as other critical materials like palladium (a by-product, but more on that later). In recent weeks, the UK has imposed sanctions against its owner, Vladimir Potanin, known as the “nickel king,” and Russia’s second-richest person.¹³ The result was an increase in nickel prices of 6 percent,¹⁴ though prices have stabilized more recently. In order to bolster its position and to weather the storm of Western sanctions, Norilsk Nickel has been in merger talks with Rusal to make a $60 billion Russian industrial metals champion.¹⁵

Nornickel was already controversial before the invasion of Ukraine. It was responsible for one of Russia’s largest natural disasters, in which 17,500 tons of diesel spilled into the Arctic, resulting in a $2 billion fine,¹⁶ a record-breaking penalty issued by a Russian court and one which the company chose not to appeal. Ironically, climate change played a hand in the enormous environmental disaster, with the melting permafrost unable to support the weight of the enormous rusting oil storage facility which cracked and broke.¹⁷

The Norilsk plant is particularly dirty: while many other plants around the world have installed equipment to abate sulfur emissions, Norilsk currently does not have the same equipment (although there are plans to improve its environmental performance).¹⁸ The impacts are so significant that Norilsk Nickel’s contribution to global emissions aver­ages skews the data used by scientists for life-cycle analysis of the environmental impacts of nickel in lithium-ion batteries. Thus weaning the West off of Russian nickel, while painful, may lead to a concomitant improvement in the impact of Western-made batteries. Yet regardless of concerns in the West, China will likely remain an end user of Russian nickel.

The complexities of geopolitics in the battle for critical materials are considerable, particularly in the battery manufacturing industry. In February 2019, there were 70 gigafactories in China and 5 in the United States; by 2020, there were 136 in China and 8 in the United States. In Benchmark Mineral Intelligence’s latest assessment, of the 304 gigafactories in the pipeline for the next ten years, 226 are in China and 23 are in the United States.¹⁹ China, moreover, has notably refused to impose sanctions on Russia. Thus not only is the American battery industry far smaller, but new manufacturers face more daunting challenges in trying to establish new supply (established manufacturers are generally the ones with long-term price agreements and hedges²⁰). Yet this isn’t a uniquely American problem: Europe and the West also confront the challenge of trying to build out this new industry in the face of a commanding Asian lead.

In the UK, the start-up battery manufacturer Britishvolt has sought to ensure a stable nickel supply by moving away from Russian nickel and signing a deal with the Indonesian firm VKTR,²¹ noting that the war in Ukraine is forcing companies and countries to rethink supply chains. The UK’s Faraday Institution has stressed the importance of gigafactories to the prospect of future automotive jobs—they previously forecast demand for eight gigafactories in the UK by 2040. In a recent update to that study, they have increased the number to ten. If these gigafactories get built, they predict a boost of 270,000 jobs for the UK; if they do not, they anticipate a corresponding loss of 114,000 jobs. The stakes are high,²² and in America, where 7.25 million jobs are supported through the automotive industry,²³ similar scales of losses or gains can be anticipated in the future.

In this context, it is unsurprising that the Biden administration is investing $3 billion in the U.S. supply chain for advanced batteries,²⁴ yet the challenges are immense. Simon Moores of Benchmark Minerals Intelligence implores America to consider the last time the United States built a heavy industry from scratch—noting that it was likely before its present leaders were born.

Nickel’s recent, unprecedented price volatility only exacerbates these difficulties, though long-term supply agreements can take away some of the sting for established battery manufacturers. Moores observes that “Volatility is the norm right now. . . . Unless EV and battery makers have rock-solid, long-term supply agreements or own their own mines, they will have no choice but to eat these sky-high and rising prices.”²⁵ Nickel price volatility affects the entire cost structure of EV battery production. If the price of nickel moves from $20,000 to $50,000 per ton, the cost of a 60 kilowatt-hour battery pack increases by around $1,580,²⁶ and this does not include the cost of other materials in the pack rising as a result of constrained supply. (At the peak, nickel prices briefly touched over $100,000 on the LME.)

Recent events have sent shock waves through the London Metals Exchange, causing it to suspend trading in nickel—the first time this has happened since the tin crisis of 1985. The LME also canceled nickel trades to the benefit of a Chinese trader, which has raised questions about LME’s Hong Kong ownership²⁷ and their intervention, along with more general concerns about governance and failure to manage market volatility.²⁸ LME’s controversies may in part explain why trading activity on that exchange has begun to slide, with activity in the second quarter down 13 percent relative to the prior-year period and 21 percent during the first three months of this year.²⁹

Other players in the market have been looking to increase their capacity to capitalize upon this opportunity, with Indonesia ramping up its nickel production by 52 percent on the year.³⁰ Many Western firms have been looking to Indonesia for their nickel supply, with Volkswagen planning to build a processing plant for nickel ore.³¹ Others are also making upstream investments to secure access to nickel with a stable supply route that isn’t subject to fluctuations on the spot market.³²

In the United States, domestic production at Michigan’s Eagle Mine is increasingly under the spotlight.³³ Although the mine is currently nearer its sunset years than its genesis, unless more ore is found, it is likely to be important in the short term. For Tesla, which has trialed LFP batteries in vehicles sold in the Chinese market, the move to roll out these batteries more widely seems like a smart one.³⁴ While there are some tradeoffs and compromises, the relative abundance of the materials used in their production may mean that they are a more resilient choice in a world of unstable nickel prices.

Cobalt

The challenges around cobalt were covered extensively in this author’s previous article for American Affairs, and so there will be no detailed exposition of global market dynamics here. Suffice it to say that Russia, while the second-largest cobalt producer in the world, is a very distant second to the Democratic Republic of Congo. Russia currently produc­es 4 percent of the world’s cobalt,³⁵ but it has plans to double this to 8 percent.³⁶

In addition to the further development of the Norilsk-1 Talnakhskoye and Oktyabrskoye deposits, which are all located in the Norilsk ore district, there are plans to develop similar ores in the Zhdanovsky and Zapolyarnoye fields located in the Kola Peninsula. Beyond the development of conventional deposits, Russia also plans to develop undersea deposits in the Magellan Mountains, located deep in the western Pacific Ocean. While the value of these deposits is not yet currently being realized to their fullest extent, they are unlikely to benefit Western producers in the near term given the current situation.

Russia’s invasion of Ukraine and the ensuing sanctions has put a squeeze on cobalt.³⁷ In a bullish market where supply is constrained and demand is inexorable, small changes can still have large impacts. Furthermore, Western lenders, concerned about future reprisals that may follow as yet unspecified sanctions, have told clients that they will not be extending credit to underwrite new purchases from Russia.³⁸

Aluminum

Although not a technology-critical metal, aluminum is a key commodity metal for Western industry and plays an important role in the transition to clean technologies. For EV makers seeking to improve the efficiency of their vehicles, reducing weight by replacing steel with aluminum helps to achieve improved range on premium models. Aluminum is also key to a whole host of different renewable energy technologies: for instance, aluminum extrusion frames solar panels, and the metal is used for both onshore and offshore wind energy, as well as for hydroelectric power generation. Aluminum also finds a home in lithium-ion batteries, where it is used in electrode foils that support the cathode materials.³⁹ According to World Bank estimates, if the global economy mounts a concerted effort to combat climate change, it would more than double demand for aluminum.⁴⁰

Russia produced 3.76 million tons of aluminum last year, equivalent to 6 percent of global supply.⁴¹ In 2018, the U.S. sanctioned Russia-based producer Rusal, pushing aluminum prices to a seven-year high. After the invasion of Ukraine, aluminum prices passed $4,000 per ton for the first time.⁴² Australia has announced a ban on alumina exports to Russia—Russia depends on antipodean alumina for 20 percent of its aluminum industry’s raw materials inputs.⁴³ Rusal has shut down Ukrainian refineries that take aluminum and turn it into intermediate products for its smelters.⁴⁴ It was also one of the first Russian companies to call for an investigation of war crimes in the Ukrainian town of Bucha.

The United States, following the passage of bill HR 7108 in April, imposed a range of duties on the import of Russian aluminum, with tariffs rising from 0 to 25 percent on primary aluminum, 3 to 30 percent on sheet and plate products, and from 0 to 40 percent on certain kinds of foil products.⁴⁵ If we rewind to 2017, the United States was importing 1.7 billion pounds of aluminum. By 2021, this had dropped to 535 million pounds.⁴⁶ As the tariffs bite, this is likely to decrease further.

What are the impacts on U.S. domestic industry? The picture is complex given the challenging dynamics of the global economy and soaring energy prices.

Understandably, the news was welcomed by the American Primary Aluminum Association.⁴⁷ Some have been quick to see the tariffs as a catalyst for domestic industry, with Steel Dynamics Inc. moving into aluminum, building North America’s first new aluminum rolling mill in forty years.⁴⁸ They note that, in the long run, aluminum supply needs to rise to meet anticipated future demand, with the pivot towards EVs leading to increased demand for aluminum in automotive applications.⁴⁹

That said, the news is not entirely rosy. Aluminum is energy-intensive to produce from virgin material, and so the spike in energy prices will affect the costs of production and put further pressure on aluminum prices. Century Aluminum shares crashed following news that it planned to mothball capacity, citing a tripling of the historical average in energy costs in a very short period. This shutdown is expected to last from nine months to a year, with the hope that energy prices will normalize in that time.⁵⁰ This is a pattern that looks set to repeat around the world, with Alcoa curtailing operations in Spain, Hydro in Slovakia, and Alro in Romania, citing exorbitant energy prices.⁵¹ Furthermore, the Fed’s plan to raise borrowing costs has raised concerns of recession in the United States. This has translated to metal prices, with aluminum prices falling in the wake of the news and touching yearlong lows.⁵² Given Western supply tensions, China, tra­ditionally a supplier of last resort,⁵³ has been exporting aluminum despite high tariffs on outbound shipments.⁵⁴

Impacts on Microchip Production

The United States has cut off Russia’s supply of microchips. Russia, however, is responsible for many of the key materials that are used in the production of microchips. We typically think of semiconductors as being essential for computers, processors, and memory in high-tech­nology products, yet they are also essential in many renewable energy technologies, performing not only control and monitoring functions but also key operations in power conversion. Photovoltaic plants need to convert the direct current produced by photovoltaic devices into the alternating current used by the grid. Many renewable energy generators provide electricity in forms that cannot be immediately utilized and so power conversion and rectification is essential. These systems will un­doubtedly be affected by the ongoing squeeze in semiconductor manu­facturing capacity.

This is to say nothing of the automotive industry, which is already struggling with supply chain shortages around semiconductor manufacturing. With the electrification and digitalization of vehicles, semiconductors will be increasingly important in cleaner, greener vehicles, not only for smart functions but also in power electronics.

Two firms in Ukraine are responsible for the production of a range of noble gases from air liquefaction, and Ukraine is one of the major global producers of neon gas,⁵⁵ which is essential for the manufacture of semiconductors. Between 45 percent and 54 percent⁵⁶ of the world’s neon (at the correct purity for semiconductor manufacturing) comes from Ukraine. Neon is used in lithography, the process by which the intricate designs of semiconductor chips are transferred onto the wafers from which they are made.

The semiconductor industry is already reeling from the pandemic⁵⁷ and struggling to recover production volumes. The shutdown of neon production from Ukraine will be another stumbling block for recovery. Building replacement plants requires time and capital investment. Furthermore, such plants produce noble gases as a by-product of producing oxygen. The economics of the plant are dictated by the principal product, not the side product, and so in order to justify the investment and expense, a market needs to be secured for the primary product prior to the financing of any new plant.

Another key material is hexafluorobutadiene, an etchant used in microelectronics. It is a relatively new etchant combining high performance with relative improvements in environmental impact. A significant producer of the gas in Ukraine is Perm Chemical Company (PCC), a Russian concern with a plant in Yodobrom. Its main customers are Samsung and Toshiba.⁵⁸ There is no demand for hexafluorobutadiene in Russia; its entire output is exported in order to meet the needs of foreign companies. At the time of the plant’s development, there was only one other manufacturer in the world in Italy.

Many chip manufacturers have claimed that, in the short term, they will not face immediate challenges, beyond those that they are presently facing, because of diversity in supply chains. The White House has already cautioned the chip industry to ensure resilience in the face of potential ramifications from the Russian war in Ukraine.⁵⁹ But in addition to potential future raw materials shortages and disruptions, there is the potential for demand-led disruption that comes from component buyers panic-buying inventories of materials and intermediate products, introducing further market instability, shortages, and price escalation.⁶⁰ This could have knock-on effects for a range of industries, including automotive, communications, and energy technologies reliant on power management integrated circuits.⁶¹

Titanium

Titanium is prized for its incredible strength-to-weight ratio; it imparts unique qualities to the alloys which contain it, enabling the production of very strong lightweight parts that are resistant to corrosion and high temperatures.⁶² As a result, it finds wide application in the aerospace industry, as well as in all manner of industrial components. As the aviation industry seeks to reduce its carbon emissions, the drive has been toward ever lighter, more efficient aircraft. Carbon fiber has been one of the tools employed to make lightweight aircraft, replacing heavier materials in aircraft construction.⁶³ Carbon fiber, however, is electrically conductive, and so problems can potentially arise with galvanic corro­sion, whereby dissimilar metals with an electrically conductive path produce unwanted corrosion. As titanium resists this, it is prized in lightweight aircraft construction. Titanium alloys account for 15 percent of Boeing’s 787 airframe by weight and 14 percent of the Airbus A350 XWB.⁶⁴

Only a few countries commercially produce titanium, and Russia is one of them.⁶⁵ “Titanium Valley” is a Special Economic Zone⁶⁶ that has been created in the Sverdlovsk Region, near Yekaterinburg, where the world’s largest titanium manufacturer, vsmpo-avisma, is located.⁶⁷ The region accounts for 98 percent of the total Russian production output of titanium, one of thirty-five critical materials of interest to the U.S. government.⁶⁸ America imports 95 percent of the titanium it consumes.⁶⁹

Before the war, Boeing had warned that tensions in Ukraine were creating unfavorable conditions for its business and supply chains.⁷⁰ While Boeing has taken a principled stand and suspended the purchase of titanium from Russia,⁷¹ it has yet to shake its relationship with a supplier run by a former KGB employee who worked under Putin.⁷² By contrast, Airbus has urged Europe not to block imports of titanium from Russia, saying that sanctions would be deeply harmful to Euro­pean aviation, while barely causing any impact on Russia’s economy.⁷³ Regardless of the commercial calculations and lobbying stances that companies may adopt, they still remain vulnerable to potential supply disruption if the Kremlin calculates that the damage to Western industries would exceed the pain of lost revenues from its sales of critical materials.⁷⁴

Previously, titanium was produced in the United States. Iluka Re­sources had a mine at Old Hickory,⁷⁵ in Virginia, closed in 2016. A titanium sponge facility in Utah, owned by Allegheny Technologies,⁷⁶ was also closed in 2016 and another owned by timet in Henderson, Nevada, reduced operations in 2020.⁷⁷ These domestic facilities were casualties of foreign competition and cost pressure,⁷⁸ but the new geopolitical context may provide motivation for resuming operations.

There are already moves to reshore the titanium supply chain with plans to extract titanium from sand deposits in McNairy Sand, Tennessee,⁷⁹ using environmentally friendly processes. A new process for tita­nium production, hydrogen assisted metallothermic reduction (HAMR), is currently being scaled by IperionX.⁸⁰ This process promises to be a more environmentally friendly and lower-cost production method for titanium, in what has been described as a “Bessemer” moment for the metal. The new process uses half the energy of existing methods and could cut emissions by more than 30 percent (or more if the hydrogen is green hydrogen produced electrolytically from renewables). This pro­cess can also make use of scrap for feedstock, processing secondary recycled material. When aviation components are machined from large “single crystal” forged ingots, there is a lot of scrap generated in the form of swarf. Currently, the entrained oxygen makes it difficult to produce fresh titanium from scrap, but the HAMR process can reduce the oxygen content in processing.

Platinum Group Metals

Platinum group metals (PGMs) are key to a range of clean energy technologies. Platinum group metals are currently used in the catalytic converters that reduce tailpipe emissions in conventional internal com­bustion engine vehicles. The value of platinum group metals is such that surging prices have been a catalyst for crime,⁸¹ with catalytic converters being a prime target for thieves who then sell them to recyclers. In the future, with the production of internal combustion engines set to decline as vehicles pivot to cleaner drivetrains, the growth market for platinum group metals may be found in the technologies needed for the hydrogen economy, one of the proposed decarbonization pathways that could help wean the world off Russian gas.⁸²

Russia produces 37.5 percent of the global supply of palladium, and it also produces around 10.6 percent of the world’s supply of platinum. It is forecast to be the largest producer of PGMs by 2050.⁸³ At present, analysts anticipate declines in the production of platinum, with many of the current PGM mines being exhausted by 2050,⁸⁴ raising the specter of a future deficit. Since the invasion of Ukraine, the London platinum and palladium market has removed the JSC Gulidov Krasnoyarsk Non-Ferrous Metals Plant and the JSC Prioksky Plant from the list of refiners that can be traded in London and Zurich.⁸⁵ In the short term, it is likely that Russian commodities the West is reluctant to purchase may simply flow to China, whose appetite for such metals is voracious.⁸⁶ The longer‑term question is whether, once such trade flows are established, they become deeply entrenched.⁸⁷

In a future hydrogen economy, hydrogen gas could be used to power devices by producing electricity in fuel cells—a bit like a battery, but one in which the chemicals, rather than being finite, are constantly replenished. The advantage is that when hydrogen is burned or con­sumed in a fuel cell, its product in reacting with the oxygen in the air is a benign one, namely pure water. Of course, while there are no emissions at the point where the hydrogen is consumed, many are acutely con­cerned about where the hydrogen comes from in the first place.

A plethora of color prefixes has been unofficially assigned as a shorthand for indicating where hydrogen has been generated.⁸⁸ There are process routes that produce hydrogen from energy sources that result in either atmospheric or nuclear waste. But from an environmental perspective, “green hydrogen,” whereby hydrogen is produced from the electrolysis of water using electricity from renewables, is preferred. At present, this represents less than 1 percent of the hydrogen produced in the world.⁸⁹ As the use of fossil fuels tapers down and the competitiveness of electrolyzer technologies improves, however, we can expect to see more refueling hubs deriving their fuel from green hydrogen from electrolysis.⁹⁰

Even Russia itself sees the opportunity in a hydrogen future.⁹¹ Observing the writing on the wall for fossil fuels, it has spied hydrogen as a potential export opportunity. Moscow launched an ambitious hydrogen strategy, aiming to be a world leader in the export of the gas, targeting 20 percent of the world market by the year 2030 with an end goal of fifty million megatons per year by 2050. While Russia identifies its vast fossil fuel endowment as one of its potential advantages in producing hydrogen⁹² (albeit dirty hydrogen), it can also look to its platinum group metal production as a key to enabling future hydrogen technologies. The extraordinary properties of platinum group metals enable them to be used as critical components in many of the systems that will underpin a future green hydrogen economy. Platinum is used as a catalyst in proton exchange membrane or polymer electrolyte membrane (PEM) fuel cells⁹³ (sometimes in conjunction with iridium or other PGMs); these operate at low temperatures and are commonly used in automotive applications and fuel cell vehicles.

There are, however, remaining challenges to the hydrogen economy: reducing the equipment costs of the technology used, as well as the infrastructure challenges to promote user acceptance of hydrogen. To some degree, we have seen the impacts of the “learning curve” on electric vehicle cost reduction as technology improves and costs fall; the technology can in turn reach a larger pool of users, thus driving unit cost reduction.⁹⁴ The expense of the materials used in these applications remains a barrier, and the problem has only been exacerbated by the war in Ukraine.

Then there is the challenge of producing clean, green hydrogen. At present, less-than-renewable energy is typically used to split water into its constituent parts, hydrogen and oxygen, in an electrolyzer. The hydrogen can then be used as a fuel for fuel cells. Here, platinum provides an incredible efficiency boost to the performance of electrolyzer technologies.⁹⁵ It is used in PEM electrolyzers (which work like a PEM fuel cell but in reverse), one of two technologies that lead the market. One of the advantages of PEM electrolyzers is that they are tolerant of the fluctuating energy that can be produced from renewable energy sources as the weather changes,⁹⁶ which makes them particularly important in the green transition. They are also compact and durable, which makes them a strong commercial contender.

A further challenge is the sourcing of iridium. As with other PGMs, the biggest deposits are in Russia and South Africa.⁹⁷ Iridium is pro­duced in very small quantities globally, yet its performance in some applications makes it very hard to replace.

Of course, as with all critical materials challenges, there are potential solutions to be found if we invest in them. Scientists have considered how to make electrolyzers with more earth-abundant materials,⁹⁸ e.g., cobalt and manganese,⁹⁹ but there are often trade-offs. While improvements have been made, the currently available substitutes do not last as long. The new technology lasts a couple of months before corrosion is a problem, while PGM-based catalysts can last for a decade or more.¹⁰⁰ As such, although the cost increases in critical materials may be painful in the short term, the unique material properties that PGMs impart mean that they will remain favorable contenders unless there are significant advances in materials science to enable viable alternatives.

A few PGM mines are located on U.S. territory, though they are South African-owned.¹⁰¹ Furthermore, the minerals harvested must be exported to separation plants overseas,¹⁰² so America does not have control over the supply chain. The United States is therefore dependent on imports or the recovery of PGMs from recycled waste (namely, the aforementioned catalytic converters, obtained by fair means or foul). A familiar leitmotif across critical materials, previously explored in my article on cobalt,¹⁰³ is the high degree of vertical integration in the firms producing these materials, alongside the fact that PGM production occurs as a by-product of mining other things.

The Clean Energy–Materials Nexus

The current geopolitical situation has highlighted more than ever the vulnerability of the West to critical materials disruptions and the need to improve our economic security through prudent industrial strategy. The position of countries that have long adopted a laissez-faire policy, leaving the globalized market to deliver critical resources, looks increas­ingly tenuous in the face of fierce competition from state-managed economies. We need the courage to invest in resilience and security directly,¹⁰⁴ but the transition to cleaner, more secure energy systems is also going to require investment in the supply chains and the circular economy of materials needed to realize that vision.

While learning-curve cost reductions continue apace with many cleaner energy technologies,¹⁰⁵ raw material prices will be an uncontrollable factor that may halt or reverse cost reduction gains in clean technologies. The Russian invasion of Ukraine has roiled markets for these materials, though rising interest rates, an economic slowdown, and lower Chinese growth amid recurring Covid lockdowns may dampen these effects. At the same time, economies dependent on large quantities of fossil fuels are vulnerable to the whims of those who produce them. Germany’s situation in the face of Russian aggression is a case in point.¹⁰⁶

As key industries seek to diversify their sourcing strategies for a range of mined and processed materials, new investment will flow to many new projects around the world, even though this will undoubtedly introduce other environmental and social concerns.¹⁰⁷ For critical materials, the problem is especially challenging, as the supply chains for these materials are often tighter and less diversified.

While no one country has all the answers, the West should leverage its collective resources and technological capabilities to address these challenges. In the immediate aftermath of Russia’s invasion of Ukraine, the needs of alleviating the humanitarian crisis can conflict with the broader transition to clean energy. But in the longer term, security, economic, and climate goals can all align, provided that stable supplies of critical materials are secured. To quote the first human in space, Yuri Gagarin, “Earth is too small for conflict and just big enough for cooperation.”

This article originally appeared in American Affairs Volume VI, Number 3 (Fall 2022): 88–101.

Notes