Scarcity of Minerals: A Strategic Security Issue

Will states use access to or possession of minerals as a strategic resource? Will relations between states that have access to minerals and those that don’t change due to scarcity? Are future wars about minerals rather than oil, territory or water?

These are the questions posed in a report produced last year by the Hague Centre for Strategic Studies, which examines mineral scarcity and the potential impacts on resource markets and security issues. The report, entitled Scarcity of Minerals: A Strategic Security Issue, uses empirical data and national policies to assess the security and geopolitical impact of mineral scarcity. In its 145 page entirety, the report is a thorough read, providing insightful perspectives on how government policies and technological development are shaping global supply and demand for strategic minerals.

The report examines 15 individual elements and two groups of elements (rare earths and the platinum group of metals), in particular focusing on three groups of minerals, which it classifies as: (1) Mass Consumables, (2) Doping Agents, and (3), Precious Metals. Mass consumables include: Copper, Manganese, Nickel, Tin and Zinc. Doping Agents include: Gallium, Lithium, Molybdenum, Niobium, Hafnium, Tantalum, Tungsten, Zirconium and REEs. And precious metals refer to the platinum group of elements. The report further considers mineral policies for ten advanced economies and emerging markets, as well as eight international organizations.

Throughout its analysis, the report pays particular attention to a number of themes, including the increasing dependence on China as a source for strategic minerals, as well as the relationship between energy prices and mineral prices.

The report’s successful analysis and conclusions stem not only from its thorough analysis, but also its effort at avoiding cliché assumptions about resource scarcity that are often characteristic of mainstream media reports about resource scarcity and supply disruptions. HCSS takes case with what they refer to as the “static scarcity paradigm”, which emphasizes that there exists only a finite amount of resources and, therefore, development, consumption and competition will deplete resources to a point where we will be left with a world in conflict over limited resources. This theory works well in a closed economic system where consumers have little to no foresight into the impact of their consumption habits, but as the HCSS report points out resource consumption is heavily influenced by increasingly efficient consumption patterns and material substitution. As they note:

While scarcity is a fact of life, mineral scarcity in the absolute sense does not exist. Scarcity of minerals in the 20th century has actually decreased, mainly because mineral reserves shrink and grow in response to price shifts or technological advances. Recycling of materials and substitutes also influence the availability of minerals. Thus, mineral reserves are not a physical but an economic variable. Scarcity of minerals is not about depleting existing stocks but about the amount of extraction that becomes profitable under existing market conditions.

In their conclusion, the report emphasizes the role that a dynamic economy will play in adjusting to mineral scarcity, without completely neglecting the influence of increasing demand in a resource limited world:

Demand, supply, recycling, and exploration dynamically adjusts to changing prices and over time act to mitigate scarcity to some degree. Nonetheless, scarcity of minerals may occur and create tight, volatile markets that are sensitive to supply interruptions and speculative hikes.

Looking forward, government resource policies and growing demand are seen leading to three likely outcomes: (1) Scarce minerals may increasingly be traded amongst major corporations with government backing, (2) supplies may be denied to countries regarded as adversaries, and (3) strategic minerals may be mined where it is not economical to do so in order to guarantee a minimal degree of self sufficiency.

For a more thorough understanding of the current dynamics and very likely future shape of strategic mineral markets, we highly recommend reading the report in its entirety.

Scarcity of Minerals. A Strategic Security Issue. The Hague Centre for Strategic Studies. 2009. N°02/01/10. Jaakko Kooroshy, Christa Meindersma, Richard Podkolinski, Michel Rademaker, Tim Sweijs, Andre Diederen, Martijn Beerthuizen and Sophie de Goede. Available: http://www.hcss.nl/en/news/1286/Scarcity-of-Minerals.html