Michael Wurmser



The world’s conflict/commodities conundrum



As I write this, Ukraine tensions are escalating by the day – with Russia having placed an estimated 100,000 troops, tanks, artillery and missiles near the country’s frontiers. It’s said to be the biggest mobilisation Europe has seen in decades. With fear of war growing, natural gas prices have, unsurprisingly, been climbing higher and higher and European policymakers are on edge. A full-blown conflict could disrupt the massive volumes of gas Russia sends to Europe; approximately a third comes through Ukraine. But, the situation isn’t just about global gas supply and prices. A conflict could also impact raw materials crucial to the global economy.

Raw material ripple effect

Oil, wheat, aluminium, nickel and palladium – Russia is a heavyweight when it comes to supplying key raw materials. If the severity of the situation intensifies, food commodity costs could soar, leaving buyers vulnerable. Put simply, the price of bread could go up for many. Russia is also one of the biggest exporters of fertilisers; any cuts in supply would further exacerbate food inflation.

Then there are Russia’s rich metal deposits. Manufacturers are already facing critical shortages of metals – from aluminium to zinc.  A palladium squeeze would hit particularly hard. Dubbed as more precious than gold or platinum, it’s a critical element in catalytic converters and hydrogen fuel cells. What’s more, its demand far outstrips supply already; Russia accounts for 40% of global supply.


To Western Sahara now and the desert dispute that’s aggravating the old rivalry between Algeria and Morocco. In November 2020, a decades-old conflict between Morocco and the Polisario Front (a nationalist movement seeking independence in Western Sahara, backed by Algeria) started heating up again. Over the following year, Morocco logged with the UN more than 1,000 “incidents” of Polisario firing on its units. While the Polisario Front says dozens of its soldiers and civilians have been killed. (You can read more about the background in our previous blog, here).

White gold rush

Aside from the humanitarian aspect, why is this regional dispute of global significance? Phosphate, for one. What may look like vast swathes of desert is, in fact, home to lucrative deposits of what’s often dubbed ‘white gold’. Morocco and the Western Sahara region ranked second in terms of annual phosphate output in 2020 – producing 37 million MT. Morocco’s deposits have therefore historically been of huge importance to the world’s food production; as a critical fertiliser ingredient, phosphate underpins global food supply.

On that note, another key player in the global phosphate supply chain is China – who, in November 2021, banned phosphate fertiliser exports until June 2022. So, we have fears over phosphate supply in Western Sahara and an existing Chinese freeze of exports – all with the power to threaten the West’s food security. And, of course, Russian fertiliser exports (that I’ve already mentioned), are also hanging in the balance.


And then there’s the continuing rare earth elements (REE) tug of war between China and the US. China commands roughly 85% of the REE export market, producing 62% of global raw mineral materials. And yet, a recent study showed that 80% of the US rare earth imports in 2019 were from the East Asian superpower. This is not new news. But, this is: in January, US senators proposed a law to increase domestic supplies of rare earth metal which will ease the country’s reliance on China by building a strategic reserve of minerals by 2025.

Strategic advantage

Whether this is realistic or not, given that currently the US only has one rare earth mine and has no capability to process REEs, is another question. China, meanwhile, has yet to seriously flex its strategic advantage. No doubt it doesn’t want to alienate its top trade partners, nor is it likely to want to encourage competitive supply chain development.

However, in my opinion, these commodity conflicts (whether physical or political) are demonstrating that supply chain competition needs to rev up and alternative producers discovered. And those alternatives need to be as close to ‘home’ as possible, as well as stable and consistent –  to satiate the world’s thirst for raw materials. A thirst that is only going to become increasingly insatiable as climate change targets creep closer. Not to mention the increasing emphasis placed on the provenance of raw materials – and that will be the subject of my next blog ‘The politics of provenance’, coming up soon.