CRITICAL RAW MATERIALS AND THE LOCAL AND GLOBAL SUPPLY CHAIN
PROLOGUE
In an interconnected world, the security and efficiency of supply chains have become a geopolitical imperative. Access to critical minerals, essential for the energy transition and digital infrastructure, has acquired a strategic relevance comparable to oil or uranium in the last century.
However, this challenge transcends the mere availability of critical raw materials.
It is a comprehensive issue encompassing the production, transportation, storage, and trade of these vital resources. The intermodal transport model has demonstrated the capacity to generate security, certainty, and resilience in the supply chain, standing as an example to follow.
URBI ET ORBI AND ORBI ET URBI
According to the U.S. Under Secretary for Economic Growth, Energy, and the Environment, Jose W. Fernandez, cooperation must be deepened to advance the transition to clean energy and promote private sector investment, as well as support for strengthening democratic governance. Within this deepening, one of the vital issues is to secure the supply chain of critical and strategic minerals and materials.
Critical minerals used in the semiconductor, integrated circuit, micro and nanoelectronics, renewable energy, pharmaceutical and healthcare ecosystem industries, along with technology applied to food sustainability and sustainability at a global level, must have adequate transportation. The North American intermodal transport model fulfills the generation of security, certainty, and resilient supply for current and future demand, meeting the requirements expressed in the June 2021 Report on Executive Order 1407, along with a reduction in the carbon footprint due to the increased use in intensity and productivity of rail, double stack, 53-foot containerization, nodes between different modes that cooperate and create traceability and dynamic transparency with real-time tracking. Another point where North American intermodal has demonstrated its value was in the resilience proven in the response to the large wildfires of 2018 in California where it could not be reached with other modes of transportation to save lives, productive land, wildlife, etc. As well as the thousands of works on the track that elevate them, improving water runoff and strengthening against floods in a world with increasing climate disruptions.
As Under Secretary Fernandez rightly states, supply chains are developed by the private sector and the best example in this regard is the intermodal system as the backbone of the domestic and external economy of the United States, its Defense, and its ability to be more competitive town to town, county to county, metropolis to metropolis, state to state, and all to and from the Globe that is, Urbi et Orbi and Orbi et Urbi (from the local-specific towards the global-universal and vice versa) in an economy of scope and variety of actors of all types, sizes, and all modes cooperating with each other, multiplying the productive rotation of each physical good, passengers, conceptual goods, and know-how of each person who is and feels part of this collaborative, cooperative, and productively integrated system, as expressed by Friar Francisco de Vitoria, where the natural order is based on the freedom of movement of people, goods, and ideas.
A clear example where intermodal transport has allowed and enhanced the supply chain is nearshoring in Mexico, increasing certainty not only by “shortening” the supply chain but also due to the implementation of intermodal transport.
STAR TREK AND ITS PRINCIPLE OF NON-INTERVENTION
Taking the philosophy applied in the fictional Star Trek universe as an example, we observe that “Starfleet General Order 1” prohibits interfering with the natural development of alien civilizations. Its stated goal is to protect “unprepared” civilizations from the danger of starship crews introducing advanced technology, knowledge, and values before they are “ready.”
Can the world afford not to introduce improvements in matters such as the supply chain, both in critical and strategic materials as well as in “non-strategic” ones? There are several examples that suggest that a de facto principle of non-intervention in the supply chain should be completely discarded. Among these examples is the position of Admiral (ret.) Paul S. Zukunft, expressing that for security, governance, and a better economy, there should be a logistical “buddy system” that goes from the North Pole to the South Pole. The application of the intermodal model, which has generated a multiplication of productivity, volume, private reinvestment (more than 800 billion dollars in the case of North American railways between 1980 and 2023, intermodal railroads spends 18% of revenues on capital expenditures ), fewer emissions, etc., should be taken into account in this expansion model of that “buddy system.” Leaving aside excuses for not implementing improvements, the situation of securing the supply chains of these critical goods should challenge us to overcome those excuses and apply them in reality, taking as examples experiences of collaboration and use of high-level know-how and protocols such as the global aeronautical sector or the global public and private nuclear sector (with initiatives like “NUTEC Plastics,” for example).
TANGIBLE CIRCULAR ECONOMY WITH INTANGIBLE TOROIDAL LOGISTICS
The European Raw Materials Alliance (ERMA), which had as its precursor the European Rare Earths Competency Network (ERECON) of the European Union, focuses on the importance of ensuring the supply and procurement of these critical materials. For example, with actions such as identifying and diversifying the origin of the supply of these materials, supporting research and innovation aimed at the efficiency and development of this sector, along with strengthening logistics in a circular and recycling economy.
The circularity of the economy is often discussed; as a conceptual proposal, it could be interesting to observe the characteristics of a toroid. Toroids are found at all scales in the universe (from subatomic particles to sets of celestial bodies) and basically, there is great efficiency in the movement of energy from one place to another in the system, converting input energy into output energy and vice versa, serving the functions of efficiently feeding, inverting, or amplifying energy. This convergence from small to large and from large to small evokes the concept of Urbi et Orbi and Orbi et Urbi expressed in this same article.
Supply Risk Level, Critical raw materials, technologies, and associated sectors
ERMA is a fundamental part of the green transition encompassed in the fulfillment of the Green Deal. Access to supplies of elements with curious names like neodymium, yttrium, etc., has become a geopolitical problem. The materials are necessary for the electronics, motors, generators, and batteries that sustain the world’s digital infrastructure and are essential for the clean energy transition on which so many economic aspirations depend today.
For example, neodymium alloy magnets that maintain a powerful and permanent magnetic field are used in electric motors and wind turbines, two of the key technologies in Europe’s plan to shift its economy to renewable energy. Smartphones contain a variety of rare earths, in magnets, of course, but also in touch screens.
It is not surprising, then, that people have begun to refer to rare earth metals and other critical raw materials such as lithium and cobalt collectively as the new oil.
The important thing is not to see it only as a raw materials challenge but as a much broader industrial challenge about not only who produces the technologies of tomorrow but how they are transported, stored, exported, and imported using ports, intermodal nodes at the domestic, regional or international level.
The supply chains of these critical materials will not be isolated and unaffected by the general supply chain in which it is embedded, meaning that disruptions and lack of improvements in local, regional, subcontinental, etc., logistics in each country in all categories of goods and people transported will affect these strategic materials and vice versa, as they are not two parallel lines that would only touch at an infinity that never arrives; on the contrary.
CONCLUSION: “CITIUS, ALTIUS, FORTIUS, COMMUNITER”
Taking the motto of unity and solidarity that the Olympic Games point out to us, we can be inspired by a greener, profitable and virtuous call to action.
Washington and Brussels affirmed in a joint statement their “close collaboration to diversify global supply chains of critical minerals” expressed in the U.S-EU Joint Statement of the Trade and Technology Council and in the generation of initiatives such as the Transatlantic Green Marketplace west-east of the North Atlantic.
In conclusion I propose to expand these initiatives towards a north-south green marketplace, from the Arctic to the Antarctic, that creates an axis and network with the west-east Green Market Place with all the geo-bioeconomic spaces and intermediate public and private actors in that expanded “buddy system.” This is justified by having part of those strategic materials in the southern hemisphere, as well as being part of the logistics network to be improved and having it as the main or optional alternative in the face of disruptions of all types and intensities.
Leaving underdeveloped regions without support would not only be a luxury too expensive to pay but also, year after year, it would be too late and costly to repair deeply. A cost in a virtuous circle is the option to choose rather than a loss in an avoidable vicious circle.
It is unproductive to generate polarization between the domestic and the global as if they existed in isolated capsules.
The local to the global and the global to the local in toroidal feedback should be the premise, taking as an example the practices already proven in the North American intermodal logistics model that has already demonstrated high performance in productivity, profitability, skilled local jobs, integration of modes, traceability, better lead time, speed, security, conflict resolution system, R&D, private and semi-private pools of goods for use with increased rotation.
AUTHOR:
FEDERICO WEINHOLD
COO OF BALGREEN
SPECIALIST ADVISOR WORLD BANK
CO-AUTHOR
DIEGO BALVERDE
ECONOMIST
EUROPEAN CENTRAL BANK
SPECIALIST CLIMATE FINANCE IN GLOBAL SUSTAINABLE FUTURE NETWORK
