At a time when supply chain experts are preaching the benefits of diversified sourcing, an alarmingly small number of manufacturers seem to be practicing it.

Everywhere we look today, we find dominance if not near-monopolies of critical raw materials such as nickel, lithium, neon, palladium, titanium and a host of rare earth minerals. Recent supply chain disruptions triggered by COVID-19 and Russia’s invasion of Ukraine, to name just two global crises, have hammered home the danger of relying on just one or two countries for the components that make up so many essential products. But are companies paying attention 

Take tungsten, the primary alloy used in steel for cutting tools as well as for electrical, biochemical, military and other manufacturing purposes. Industries requiring tungsten include automotive (especially electric vehicles), aviation (for rivet holes in planes), medical (as shielding for MRI machines), semiconductors (in the form of tungsten gas), batteries (for anodes and cathodes) and nuclear power. “There’s a little bit of tungsten in just about everything in your life,” says Lewis Black, chief executive officer of Almonty Industries, Inc., a global miner and processor of tungsten.

China is currently responsible for 83% of the world’s supply, followed by Russia with around 8%, according to Black. When China entered the tungsten market in the 1980s, he says, it essentially crashed the market and led to the closure of most mines in the West. “Since that day, there hasn’t been any dramatic development of tungsten assets around the world, because China is very effective at taking care of the market.”

Which demands the question: Are manufacturers comfortable with this state of affairs?

The Great Recession of 2007-2008 was followed by a lot of talk about the need for diversification of global manufacturing supply chains. Some companies even shifted a portion of their purchasing out of China to Russia. But they’ve had to shift right back because of the war in Ukraine, which has only served to strengthen China’s dominance in tungsten.

The trend has caused a surge in demand for the element for military use, especially in Europe. Tungsten is the primary metal in bullets, shells, projectiles from drones and other types of armaments. Germany, for one, is diverting 2% of its gross domestic product to military spending on items like tank shells. “With Britain now out of the European Union, and the U.S. not putting boots on the ground in Europe, they have to face the harsh reality that they need a basic level of military power,” Black says.

The need for tungsten in weapons is especially vexing for a country like Germany, which as a member of the EU can only deal with two qualified suppliers of tungsten for producing munitions — one that sources from Russia, and the other owned by one of the largest companies in Vietnam 

“So there you are, trying to make munitions and having to source tungsten from political systems that don’t share your point of view,” says Black. “What happens when they say no? What do you do?”

The situation serves to validate what experts in supply chain risk have been warning for years: “If you’re not careful, you’ll find raw materials becoming weaponized,” Black says.

An increase in the consumption of green technology has spurred dramatic price rises in tungsten over the last 12 to 14 months, he notes. But that assumes that manufacturers can even get their hands on an adequate supply.

Tungsten, of course, is far from the only raw material over which one country — usually China — asserts dominance. But western governments aren’t doing much to break its stranglehold. And when a crisis of availability dies down, amnesia sets in 

“You lurch from one crisis to the next,” says Black. “You can’t develop domestically — nobody in democracies wants mines. In many ways, we’re victims of our own laziness. We believe that as long as we can pay for that raw material, it will always be available.”

For the U.S. to take control of its raw materials supply chain and begin producing domestically, it would require a long-term plan, much like the one in the 1960s that landed a man on the moon, Black says. But the issue doesn’t resonate politically. “Decisions made now are not going to reap you a win in your election cycle. In China, it took more than 30 years.”

Making matters worse, he says, is the program by the U.S. Defense Logistics Agency to sell a portion of its stockpile of essential raw materials into the open market, rather than keep them exclusively for domestic use. (Domestic traders might be buying on behalf of a foreign client.) “The U.S. has no domestic source [of the top strategic metals],” Black says. “So why does it continually sell in the area of 3% to 4% of the world’s supply from that stockpile?”

Which raises another question: What will it take to awaken the U.S. government and western manufacturers to the need for diversifying and domesticating the raw material base? Black might not have the answer, but he nevertheless offers a glimmer of optimism about the prospects for a long-term solution.

“I’m a great believer in the market, in the ingenuity of some of these companies,” he says. “If they can pull their socks up, they can find solutions faster than you could possibly believe. You just have to strategize.”

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