Where do Ukrainian economics matter, or is it 'matter' that matters?
Comment of the Day

February 25 2022

Commentary by Eoin Treacy

Where do Ukrainian economics matter, or is it 'matter' that matters?

Thanks to Iain Little for this edition of his Global Thematic Investors’ Diary. Here is a section: 

The proximate global economic effect will be on commodity supply (the complacent West taking much of the blame). Much has been made of Ukraine and Russia as the largest (30%) breadbasket in the world and the Russian Nord Stream 2 gas pipeline dilemma facing the EU/ Germany. But few would have predicted this week’s announcement by a Democrat President to expand domestic mining in strategic metals (lithium, graphite, rare earths, cobalt, rhodium, nickel, zinc etc). This points to a supply chain challenge where ESG objections now take 2nd place. The USA is dependent on Russia for much of its strategic supply chain: C4F6 gas and neon for chips, palladium for sensors, plating material and computer memory (MRAM), titanium for engines, fans, fighter jet disks, missiles, satellites. Russia needs high end chips, where the USA has edge, but where Russia is said to be able to obstruct the USA’s chip supply chain. These squeezes, offsets and stand-offs occur at a time when inflation is already above 5% for major economies.

Eoin Treacy's view

It currently takes 7-10 years to get a mine permitted in the USA. In Canada and Australia, the average is 2. For the last forty years, outsourcing supply of raw materials, other than oil and gas, has been the de facto position of successive US administrations.

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