Commitments to achieve net zero carbon dioxide emissions by countries that currently account for 70% of global GDP are increasing the demand for clean energy, bringing several minerals into focus (see Figure 1). However, the related supply chain, as a recent report by the International Energy Agency points out, features high-intensity use of certain minerals, such as lithium, nickel, cobalt, manganese and graphite for batteries; rare minerals for electric turbines and motors for electric cars; and copper and silver for solar panels. The European Commission has drawn up a list of “critical raw materials” to identify those requiring a procurement strategy. Similarly, the US adopted a national strategy in 2017 to secure access to 35 strategic minerals.
In several cases, existing mineral reserves have given control over global supplies to certain countries, such as Chile, China, the Democratic Republic of Congo, Guinea, and South Africa. The quest for alternatives could lead consuming countries to evaluate different locations or second-tier producers, with mixed effects on host economies.
On land, the main challenge lies in mitigating the risks posed by having a small number of countries producing strategic minerals for the energy transition. In December 2021, the International Monetary Fund (IMF) posted an analysis on metals linked to energy transition, assessing how prices have headed upwards as economies re-opened in the wake of pandemic closures. Such trends highlight that production constraints, supply chain responses, and frailties in global trade networks may not have been entirely factored into current price models and investment decisions. According to the IMF, insufficient financing is likely across the mining sector, due to growing investor concerns on environmental, social, and governance (ESG) considerations.
One example of supply concentration is vanadium, a metal that can make materials stronger, lighter, and more resistant to corrosion and absorption of other elements (see Figure 2). Vanadium has recently become key to the automotive sector and steelmaking in general, but it also acts as a supercharger for batteries and a main ingredient for decentralized electrical generation.
In 2020, 83% of the global production of vanadium was located in China and Russia. The remaining three main producers — Brazil, South Africa, and US — show an increased likelihood of strikes, riots, and civil commotion events. Since 79% of vanadium was sourced in countries whose legal and regulatory field are riskier than the world average, and have deteriorated during the pandemic, political violence may become a substantial risk should supply from China or Russia be scaled back. Due to vanadium’s limited supply base, business interruption risk is heightened compared to other minerals. Such a development in producing countries could lead to protests and demonstrations given the amplifying effect that such disruptions could have on industries and countries hosting consumers of the mineral.
The extraction of minerals — primarily cobalt, zinc, manganese, titanium, iron, and gold — from the seabed has become both profitable and possible. In many cases, extracting these mineral deposits, which are worth billions of dollars, could be easier, technically, from the seabed compared to from land-based deposits as it would not require building roads, disposal systems, landfills, and related infrastructure.
Unbridled industrial exploitation of these resources could cause irreversible damage to underwater ecosystems, which produce 50% of the planet’s oxygen, regulate the climate, and are essential to the food chain. To deal with this threat, the United Nations Environment Programme Finance Initiative (UNEP-FI) and the OECD developed the first guide to sustainable investment in the ocean economy, including a restriction list that would exclude deep-sea mining investments from sustainable ocean economic activities.
The Clarion-Clipperton area of the Pacific Ocean, between Hawaii and Mexico, would on its own contain more manganese, nickel, cobalt, titanium, and yttrium than all terrestrial reserves. Underwater reserves of cobalt, for example, would be five times greater than all terrestrial reserves, while titanium reserves appear to be 6,000 times greater than all terrestrial reserves combined.
The extraction of minerals from the deep seabed is perhaps the most controversial issue in the race for underwater resources. At present, mining takes place close to the coast, mainly for sand and other materials used in the construction industry. Nevertheless, the growth of high-tech industries and the need for a low-emission future have brought to the fore commercial interest in minerals between 800 and 6,500 meters below sea level. Unregulated sand mining has been documented in 70 countries globally, with associated conflicts related to ecological destruction, livelihood disruption, and labor rights violations. Conflicts over sand have reportedly killed hundreds in recent years, including local citizens, security personnel, and government officials.
The global consumption of sand is ten times higher than cement use. Urbanization still prevails in several countries with positive demographics, and cities are being constructed at a scale and pace never seen before. Singapore provides a glimpse into the future in this regard as the state leverages sand as a strategic resource, stockpiling massive quantities in reserve — akin to the strategic stockpiling of oil and gas. The last three decades have seen a construction boom in Singapore as the population nearly doubled, while reclamation has increased its landmass by 20%. This urban and terrestrial expansion required the entirety of Singapore’s local sand deposits, including from its seafloor. As a result, the state turned to its neighbors for additional supplies to maintain growth.
As Singapore imported sand from its neighbors, some small islands started disappearing. Indonesia, for example, lost 25 islands while exporting sand to Singapore, which resulted in border demarcation talks between Indonesian and Singaporean lawmakers. The situation deteriorated to such an extent that Malaysia stopped selling sand to Singapore. Indonesia and Cambodia followed suit in 2007, while Vietnam imposed a sand ban in 2009.
Another impact of this sand rush can be found in India, where sand mafias rank among the most powerful criminal syndicates. The sand mafia influences the nationwide construction industry and the political apparatus. What is happening in India and Singapore is a manifestation of a slowly building crisis that demonstrates the advent of conflicts over access to sand.
The Indian government introduced a general order at the start of 2022 that set the price of sand sold at quarries. This improved the economic climate of an infrastructure sector impacted heavily by the pandemic and by the increasing costs of raw materials. The new regulations ensure that sand is readily available for approximately one-eighth of what the price was before the changes were implemented. The measures also increased self-sufficiency, as previously the country relied heavily on sand imports from Malaysia.
In the race for underwater resources, the position of small island states is particularly delicate. Too small and remote to be able to develop a domestic market, access foreign markets, and diversify their economies, they are largely dependent on the rest of the world for development aid, remittances, and tourism. These islands are experiencing increasing interest from major powers, and rapidly becoming a bone of contention, fueling a global trend towards regional conflicts that are of little public interest, but of great importance to supply chains and trade. Kiribati, for example, is a state made up of 33 atolls spread over an area of about 3.5 million square kilometers — larger than India. Globally, there is a risk of increasing inequalities between countries and worsening injustices related to climate change.