Middle East Wars: After oil and gas, concerns about a mineral crisis are increasing

Until war erupted on February 28 with the Israeli-US bombing of Iran and retaliatory attacks in the Gulf states, a wide range of essential minerals and related products were available, according to the UN Economic Commission for Europe (UNECE).

But as the conflict continues, pressure to obtain these raw materials is increasing, to ensure continued production of everything from semiconductors to solar panels.

The impact is higher prices in commodity markets and a potential shift to new production locations where there is less geopolitical uncertainty, thereby increasing the number of countries that can process minerals such as rare earths.

Sulfur, helium and naphtha shock

“The impact of the Gulf War, not only on the energy market, but also had an impact on several sub-products derived from oil.” such as sulfur, helium and naphtha – said Dario Liguti, Director of UNECE’s Sustainable Energy Division.

They are all by-products of oil refining and are used in a variety of manufacturing applications, from fertilizers to insecticides, plastics and matches, as well as refrigeration and semiconductor production.

Naphtha is another byproduct of oil refining and is an important element in the chemical industry.

“The first reaction – apart from of course increasing prices – is for industry to reduce its use and thereby reduce its production… whether it is solar panels, whether it is magnets, whether it is batteries, and so on, in the future,” stressed Mr. Liguti.

Before the war, 30 percent of the world’s sulfur production – used in metal processing – transited through the Strait of Hormuz.

But that’s when about 140 ships per day transit the important trade route. Currently, shipping is at a standstill, following attacks on ships and an ongoing dispute between Iran and the US over use of the strait.

If the conflict situation persists, shortages of essential minerals “will become apparent”, the UNECE official continued, forcing industry to “reduce its production” of essential minerals used in renewable energy equipment and digital technologies.

“Therefore over time, this will have an impact on increasing prices, firstly…and secondly on the availability of that equipment.”

Currently, the industries that rely on supplies from the Strait of Hormuz “are using existing stocks and using reserves and increasing production elsewhere”, said Mr. Liguti.

Hunt for new suppliers

He highlighted the “push by many Member States around the world to secure these minerals” which will result in countries increasingly building “strategic stockpiles…to avoid similar disruptions in the future.

“So far, this situation is felt in some regional markets, especially in South Asia and Southeast Asia, where there is a lot of refining and processing of these early commodities. But as time goes by, the geographic coverage will become larger.”

In addition to the huge loss of life resulting from the war, UNECE officials noted how the oil and natural gas crisis also threatens a global shift towards environmentally friendly energy sources.

“You can see how a crisis that was essentially focused on the long-standing fossil fuel sector, how it impacts the new fossil fuel sector. renewable energyand the transition that we’ve made and we actually need to accelerate, as you know, because we are still behind the Paris 2030 target”.

UNECE includes 56 Member States in Europe, North America and Asia; they are making efforts to align critical raw materials with the UN Sustainable Development Goals.