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Ukraine’s strategic importance in global critical raw material supply chains amid geopolitical dynamics

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Ukraine‘s role in global supply chains for critical raw materials is increasingly pivotal amidst ongoing geopolitical challenges. These include the Russian invasion of Ukraine, China-US competition, elections, and conflicts in regions like Israel, which collectively impact supply chains crucial for traditional industries, defense, high-tech sectors, aerospace and green energy.

Democratic nations heavily rely on essential minerals like nickel, lithium and aluminum. The market for critical minerals has seen a significant rise, doubling to over $320 billion in the past five years and projected to double again in the next five.

Despite current challenges, Ukraine holds immense potential as a major global supplier of critical raw materials essential for these industries. With vast mineral reserves, Ukraine stands poised to significantly contribute to the global supply chain.

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The disruption caused by the Russian invasion and competition from other suppliers, notably China, underscores the urgent need for resilient and diversified supply chains. In response, the European Union (EU) and the United States are strategizing to reduce dependency on non-democratic regimes. Leveraging Ukraine’s resources could fortify these efforts, driving Europe’s green transition and supporting Ukraine’s recovery post-war.

Ukraine’s abundant mineral resources

Ukraine’s diverse geological zones position it as a top 10 global supplier of mineral resources, hosting around 5% of the world’s total reserves. The country boasts approximately 20,000 mineral deposits encompassing 116 types. Prior to the invasion, 15% of these deposits were active, including significant metallic and non-metallic mineral sources.

The nation holds substantial reserves of rare earth metals crucial for various industries. It leads in titanium reserves in Europe, pivotal for aerospace, medical, automotive, and marine sectors. Ukraine also holds one of Europe’s largest lithium reserves, essential for batteries and ceramics. It ranks among the top producers of gallium, vital for semiconductors, and has been a key global supplier of high-purity neon gas for the semiconductor industry.

Moreover, Ukraine’s resources include beryllium for nuclear, aerospace, and electronic industries, uranium for nuclear applications, and zirconium and apatite for nuclear and medical sectors. The country also boasts significant iron ore and manganese reserves crucial for green steel production. In 2021, Ukraine supplied 43% of the EU’s steel plate imports.

Additionally, Ukraine is prominent in non-ferrous metals production, including copper, lead, zinc, and silver. It also holds substantial reserves of nickel, cobalt, and graphite, supporting various industrial needs.

Challenges in global supply chains

China currently dominates global critical minerals through strategic investments and policies, controlling a significant share of rare earth elements from mining to manufacturing. This dominance extends to key elements crucial for renewable energy and electric vehicle sectors.

Before the invasion, Ukraine was a significant supplier of titanium, lithium, gallium, iron ore and manganese to Europe. However, disruptions caused by the conflict necessitated alternative, albeit more expensive and slower, supply routes.

Russia, another major supplier of critical minerals, has also faced challenges due to sanctions, exacerbating global shortages of essential materials such as titanium, vital for aerospace and electronics industries.

Geopolitical dynamics and shifts

China’s dominance in critical minerals grants it substantial geopolitical influence, enabling economic leverage over global decisions. Rising protectionism further complicates supply chains for these materials, with some countries imposing restrictions on exports of minerals like lithium and nickel.

The geopolitical landscape post-Ukraine invasion has seen significant price hikes in minerals like nickel and lithium, crucial for electric vehicles and renewable energy solutions. Platinum group metals, essential for hydrogen production and fuel cells, are also gaining prominence.

Toward a resilient supply chain

The world is increasingly transitioning toward sustainability-driven industries. Projections indicate a surge in electric vehicle sales by 2030, significantly boosting demand for minerals such as lithium and cobalt essential for batteries.

The EU and the US are actively pursuing strategies like on-shoring and friend-shoring to reduce reliance on non-democratic regimes and enhance supply chain resilience. Initiatives such as the European Battery Alliance and the Critical Raw Materials Act aim to foster innovation, recycling, and international partnerships to secure critical materials.

Conclusion

Ukraine’s potential as a key global supplier of critical raw materials remains significant despite current challenges. Integrating Ukraine’s resources into global supply chains not only supports Europe’s industrial resilience and green transition but also aids Ukraine’s recovery and integration post-conflict. Investments in Ukraine’s mining sector offer promising opportunities to secure critical materials essential for future sustainable industries.

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