According to the United Nations Economic Commission for Europe, by the time the war broke out with the Israeli-US bombing of Iran on 28 February and retaliatory attacks on the Gulf states, a wide range of key minerals and related products were available.UNECE).
But as the conflict escalates, pressure to obtain these same raw materials has increased to ensure continued production of everything from semiconductors to solar panels.
This has resulted in higher prices in commodity markets and a potential shift towards new production sites where geopolitical uncertainty is less, increasing the number of countries that can process minerals such as rare earths.
Sulphur, helium and naphtha shock
“The Gulf War is impacting not only the energy market but also some by-products of oil.” Such as sulphur, helium and naphtha – said Dario Ligutti, Director of UNECE’s Sustainable Energy Division.
All are by-products of oil refining and are used in a wide range of manufacturing applications from fertilizers to pesticides, plastics and matches, as well as cooling and semiconductor production.
Naphtha is another byproduct of oil refining and a major building block of the chemical industry.
“The first reaction – apart from increasing prices of course – is that industries will reduce their usage and hence reduce their production.…Whether it’s solar panels, whether it’s magnets, whether it’s batteries, et cetera, go ahead,” Mr. Ligutti said.
Before the war, fully 30 percent of the world’s sulfur production – used in metal processing – moved through the Strait of Hormuz.
But that was when about 140 ships per day transited the vital trade waterway. Today, shipping is at a virtual standstill following attacks on ships and the ongoing standoff between Iran and the US over use of the strait.
If the conflict situation continues, shortages of key minerals “will become apparent”, the UNECE official continued, forcing the industry to “reduce its production” of critical minerals used in renewable energy equipment and digital technology.
“So over time, that will have an increasing impact first on prices… and then on the availability of that equipment.”
Today, industries that depended on supplies from the Strait of Hormuz are using their existing stocks and they’re using reserves and they’re increasing production elsewhere“, Mr. Liguti said.
Look for new suppliers
He highlighted “the campaign by many Member States around the world to secure those minerals”, which would result in countries building up “strategic stocks” to avoid similar disruptions in the future.
“So far, the situation is being felt in a few regional markets, particularly in South Asia and Southeast Asia, where a lot of refining and processing of these primary commodities is going on. But over time, the geographic scope will become larger.”
In addition to the huge humanitarian cost of the war, the UNECE official noted how the oil and natural gas crisis also threatens to undermine the global shift toward green energy sources.
“You can see how a crisis that is fundamentally focused on the old traditional fossil fuel sector affects the new Renewable energyAnd the change that we’re making and As you know, we really need to accelerate, because we are falling short of the Paris 2030 targets“.
UNECE consists of 56 member states from Europe, North America and Asia; It is attempting to link vital raw materials with the United Nations sustainable development goals.
