The Supply Chain Begins - And Ends - In The Earth

Supply chains have suffered severe disruption during the pandemic, and are now being severely tested by the robust recovery in demand and economic activity. Stories of supply shortages and delivery delays abound, causing havoc in distribution and pushing up prices. The US Federal Reserve (Fed) and other central banks sound confident that these problems will work themselves out within the next few months; corporates on the ground tend to be less optimistic, and warn that dislocations will likely stretch well into next year.

There is indeed a lot more at play than the disruptions of Covid-19. Some key innovation trends, like the push for Electric Vehicles (EVs) and broader advances in energy, or the steady rise of 3D printing, have shifted the demand for components and raw materials. At the same time, several countries have adopted an increasingly active strategic posture in securing supplies of rare earths and other crucial minerals – China stands out in this regard.

Corporates across the world have now prioritized the need to bolster flexibility and resilience of their supply chains – including by making them less exposed to new bouts of protectionism. Governments have also become painfully aware of the importance of resilient supply chains.

But not all of them realize that supply chain resilience begins in the earth – literally right in the ground. As some raw materials acquire an irreplaceable role for industries of key strategic importance, companies and countries need to have reliable access to those materials in the first place, or none of the safeguards in the supply chain will help. And in a number of key mineral resources, the US finds itself in a very weak position.

Lithium is perhaps the best known example: it’s a key component of EVs batteries, and therefore crucial to the electrification of the transport sector – a goal increasingly embraced by both governments and automakers. Australia is by far the largest producer of lithium, followed by Chile (which holds over half of global lithium reserves, however) and then China; the US ranks seventh. For rare earths, heavily used in electronics, clean energy and defense, China is the undisputed global leader in both reserves and production. Titanium plays a fundamental role in aviation, space technology, defense, health care and other industries, including through its use in 3D printing; and here again China stands out as the main world producer, followed by Japan and Russia.

Two considerations jump out:

1. First: these raw materials are essential components in industries that hold a major strategic role for national security, economic growth and sustainability. These industries drive a country’s efforts to improve sustainability through the energy transition, to boost productivity and create better paying jobs through the digital-industrial revolution, and to bolster national security including in space and cyberspace.
2. Second: the supplies of many of these materials are subject to significant geopolitical risk. The pandemic has demonstrated that in times of scarcity and emergency even your closest allies can curtail supplies. In more normal times, the US could feel more at ease when it relies on allies like Australia; much less so when supply is dominated by geo-strategic competitors like China and Russia, with which relations are often adversarial. 

This vulnerability must and can be addressed – through the combined efforts of private companies and policy makers. 

Hyperion Metals has made its mission to develop the US-based supply of minerals critical to high-tech strategic industries. It has launched a major venture to mine titanium ore and produce titanium metal in Tennessee: the Titan Project, aptly named not just for the metal involved, but also because in Greek mythology Hyperion was one of the Titans, children of Gaia (the Earth) and Ouranos (the Sky).

Hyperion’s Managing Director Anastasios Arima, noted in a recent article that there are currently no US operations that convert titanium ore into metal, and stressed that developing US titanium reserves would not only bolster the strategic security of supplies, but also create high-quality high-paying jobs.

Hyperion’s ancestry also points to another key priority for the company: to develop mineral resources in way that is environmentally sustainable. Hyperion aims to produce low- to zero-carbon titanium with minerals from its Tennessee project in conjunction with commercializing titanium metal technology that was developed with funding from Boeing, Arconic and the US Government’s Advanced Research Projects Agency-Energy (ARPA-E). Hyperion have also launched life-cycle sustainability studies with the help of a specialized outside consultancy to underpin its sustainability efforts.

Because just as the supply chain begins in the earth with the extraction of raw materials, it ends in the earth with the disposal of emissions and used products; looking at the entire life cycle of the material is the most appropriate way to account for the full impact of production and use, and therefore to make sure the overall environmental impact remains sustainable.

The sustainability imperative is an integrant part of Hyperion’s vision and mission – but also a crucial component of the broader picture. The drive for energy sustainability drives part of the increased demand for minerals, so it would be paradoxical if developing the necessary inputs were to set sustainability back. Progress towards sustainability can also help alleviate geopolitical tensions, making it easier for emerging markets populations to move rapidly to higher living standards with less environmental impact.

Supply chains begin and end in the earth. Mining companies have a crucial role to play in powering global prosperity and technological progress while safeguarding the planet. Hyperion is showing the way. The strategic security and sustainability of supply chains will be one of the key themes of the coming decade.