Material Processing: The Redheaded Stepchild

Today we’re talking about the overlooked redheaded stepchild between mining raw materials and incorporating those into a product…processing. Essentially throwing tons of energy at the ore through several steps and facilities, converting them into usable materials like aluminum or steel.

For the vast majority of materials, this processing is carried out in 1 of 2 locations – China or Russia. This is a result of subsidies or cheap energy. However, all of that is changing thanks to the collapsing demographics of these two societies.

The reason for the redheaded stepchild analogy is that processing is about to become very annoying for the rest of the world. Not because it’s expensive or difficult to do but because the decrease in supply is culminating with an increase in demand thanks to the green movement.

Prefer to read the transcript of the video? Click here

Join me on Feb. 17th for the webinar – Global Outlook: One Year into the Ukraine War.

We’ll dive into the global impacts the war has had on supply chains, agriculture, and much more. After my presentation we’ll have a Q&A portion to answer all those burning questions.

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
 
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
 
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
 
And then there’s you.
 
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

CLICK HERE TO SUPPORT MEDSHARE’S UKRAINE FUND

CLICK HERE TO SUPPORT MEDSHARE’S EFFORTS GLOBALLY

TRANSCIPT

Hello from sunny Colorado, Peter Zeihan here. Today we’re going to talk about processing. So a lot of people are familiar with some of the issues and opportunities that come from any number of industrial materials, whether that’s iron ore or aluminum or lithium or cobalt. But in between the mining and the actually incorporating the product into something that we actually use like lithium into a battery or steel into a car, there is an intermediate processing step that tends to just kind of get ignored and that’s about to become a very large concern for any number of sectors and countries.
Once you get the raw material, the ore, the industrial material itself out of a mine, you then have to basically throw a lot of energy at it. Breaking down the orders to separate out the metals or the other materials that are within is an incredibly energy intensive process that usually takes place over several steps and within those several steps, not always can the same facility do all the same processing.
So for example, you can smelt bauxite in order to get an intermediate product that looks a lot like cocaine called alumina. But then a different facility is needed to basically electrocute the crap out of it in order to transform it into aluminum. And you’ve got processes like this for everything, typically for steel, your first step is to throw it into a foundry with some coal into a blast furnace, and then you get something called pig iron. And then as a rule, another facility will turn it into type of iron and steel that we use every day.
Now, the problem we’re facing is that most of the world’s materials processing is done in two specific locations. The first is in China. Now the Chinese have heavily subsidized their entire industrial base whenever they find a technology that they can master without needing input from another country. And since steel smelting was developed well over a century ago, this is something they have no problem doing. So they are by far the world’s largest producer of raw and finished steel. Though subsidies have taken the form in many cases of financial assistance. Basically, if you can get a bottomless supply of 0% loans and you can build whatever infrastructure you want, and that’s helped drive more profit driven industries out of business around the world.
The second big player is Russia, and this is largely because they have very cheap electricity, because when the Soviet system collapsed in 89, the entire industrial base basically went kaput, except for the electricity generation system. So what the Russians did was they would import raw materials, use their cheap power and their cheap coal to do the processing, and then export a degree of value added materials. And they do this pretty heavily with aluminum. They do this with chromium, they do with this what, titanium materials that they don’t really mine themselves, but they will bring them in for processing. There are very few materials in the world where this is not true. And if you’ve been following me for some time, you know that these are the two major countries that are facing the biggest demographic economic, financial and security crises of the world we’re evolving into.
So we need to prepare for a system where materials that come out of these two countries, intermediate and finished materials, maybe don’t go to zero, but certainly face a significant

collapse in the volume that they produce. There’s nothing about this that can’t be done anywhere else. It doesn’t even take a huge amount of time and it doesn’t even take a huge amount of money because a lot of this is technology that’s, you know, 50 or more years old. But that doesn’t mean it’s free. And that doesn’t mean we can do it overnight. And even if all siting and regulatory concerns vanish, you’re probably not going to put up a smelter for cobalt in the United States and anything less than a year.
So not only with the way technology is evolving do we need a lot more critical materials and not only with the industrialization of the United States, do we need a lot more steel and aluminum? And not only with the green transition, we need a lot more graphite and chromium and nickel. We’re also looking at losing a lot of the world’s processing capacity for these things all at the same time. Something’s going to have to give and that is going to be one of the greatest economic arguments, fights and perhaps even wars of the next ten years.
Stay tuned. We’ll talk about more of this sort of thing on and off for the next several months, because it’s getting to the point where it’s becoming not a hypothetical problem in the future, but a problem in the here and now.
Oh, hey, all this talk of processing reminds me that we are having a webinar on February 17 that is going to be going into the economic implications of the Ukraine war one year on, and the implications for Russian minerals and minerals processing is a big, big part of all of that. So we’re going to include the sign up information for that webinar at the end of this email. Feel free to come. Anyone who signs up is going to get a PDF of the full presentation, complete with the data and the graphics, as well as a link to the video itself for future ruminations.
Okay, that’s it for me. For real. Until next time

EV’s Not-so-little Dirty Secret(s)

Ok ok ok fine I’ll do it. For the past few months I’ve been putting out videos on a host of topics, and in pieces on automotive or trade or greentech or whatnot I’ve mentioned as an aside that electric vehicles are on average a bad idea that will not be with us all that much longer, but I’ve failed to make good on the promise of “a topic for another video”.

Well, here it is. It doesn’t really matter your angle of attack on this topic. EVs in their current form are a disaster strategically, economically and environmentally, and that’s before you consider the withering of Tesla.

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
 
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
 
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
 
And then there’s you.
 
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

CLICK HERE TO SUPPORT MEDSHARE’S UKRAINE FUND

CLICK HERE TO SUPPORT MEDSHARE’S EFFORTS GLOBALLY

Where in the World: Quartzite and Greentech

NB: The following video is one I recorded while on my annual backpacking trip in August; please excuse any potential anachronisms.

After a strenuous trek to Quartzite Peak, the views are what make it all worth it. While we’re on the topic of things that we hope are worth it, let’s talk about Greentech – solar and wind in particular.

The underlying goal of these green solutions is to produce clean energy at scale, that can be effectively used. Solar has surged into the spotlight, but the shadow it casts is often overlooked. I’m not saying there’s no place for solar energy, but hefty considerations need to be made beforehand.

Wind offers a more promising outlook; lower environmental impacts, reliability and better financials. However, both of these technologies have a long way to go before they are powering the world efficiently and effectively.

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
 
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
 
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
 
And then there’s you.
 
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

CLICK HERE TO SUPPORT MEDSHARE’S UKRAINE FUND

CLICK HERE TO SUPPORT MEDSHARE’S EFFORTS GLOBALLY

The Fusion Breakthrough: 70 years in the Making

FUSION. The clean energy of the future. No carbon footprint. Bottomless. Cheap. Sound too good to be true? Well, if it looks like a duck…

Before I express my concerns, I want to acknowledge how monumental this step is. It’s taken 70 years to achieve what has just been done, so slow clap for the team that got us here. However, don’t go buying those fusion lamps just yet.

We still need a few more “breakthroughs” before fusion becomes the energy of the present. Think scale, transmission, and materials. It took us a long time to get here, so what’s another half-century…right?

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
 
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
 
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
 
And then there’s you.
 
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

CLICK HERE TO SUPPORT MEDSHARE’S UKRAINE FUND

CLICK HERE TO SUPPORT MEDSHARE’S EFFORTS GLOBALLY

Why I’m Bullish on Houston

When you think about cities with bright futures, what are the factors you consider? Energy Production? Agriculture? Population? Manufacturing? There’s plenty more, but let’s focus on those.

Houston is a leader in all of that…and more. So once the global supply on each of these inputs and outputs dips into a deficit, Houston will be primed and ready to fill the need.

Established infrastructure + decreased supply = more money = more investment = Houston becoming one of the most dominant players in global production. Does me being bullish on Houston make a bit more sense now?

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
 
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
 
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
 
And then there’s you.
 
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

CLICK HERE TO SUPPORT MEDSHARE’S UKRAINE FUND

CLICK HERE TO SUPPORT MEDSHARE’S EFFORTS GLOBALLY

Tanker Attacks and the Fall of Transport

In the early hours of November 16th, an oil tanker was struck by an armed drone off the coast of Oman. Strikes like this might not sink a ship with 1 or even 5 hits…but it is a sign of the changing times in maritime shipping.

As I mention in the transport section of my latest book – The End of the World is just the Beginning – “Inhibit [safe and cheap transport] and the rest of…everything simply falls apart.” What we saw yesterday was only the tip of the iceberg.

As the safety of the world’s shipping industry becomes more vulnerable, prices will increase and the long-range trade and maritime shipping the world has grown accustomed to will be changed forever.

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
 
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
 
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
 
And then there’s you.
 
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

CLICK HERE TO SUPPORT MEDSHARE’S UKRAINE FUND

CLICK HERE TO SUPPORT MEDSHARE’S EFFORTS GLOBALLY

Something Fishy in the Baltic Sea…

Something’s damaged the Nord Stream supply lines that transit through the Baltic Sea. Inconvenient in the best of times, sure, but in the current geopolitical climate there are tons of theories and fingers being pointed all around. 

Was it the Americans, wanting to prevent the Europeans from crawling back to an abusive natural gas supplier? The Russians themselves (despite already electing to voluntarily halt gas supplies?) Tough love from Baltic Euro states? Ukrainian Saboteurs? A freak accident? 

Frankly, none of the these theories hold up. This is one of those moments where as much as we’d like some immediate clarity, we’re simply going to have to wait and see…

We have never and will never charge for our newsletters or videos, but we do have an ask. If you enjoy our products, we ask you consider supporting MedShare by clicking one of the links below. MedShare is an established non-profit organization that helps respond to medical need globally, including to the ongoing crisis in Ukraine.

CLICK HERE TO SUPPORT MEDSHARE’S UKRAINE FUND

CLICK HERE TO SUPPORT MEDSHARE’S EFFORTS GLOBALLY

Gazprom Declares Force Majeure: How We Got Here

Gazprom, the Russian state’s gas monopoly notified its European customers that it was declaring force majeure in its supply contracts going back to June 14, citing “extraordinary circumstances” preventing the delivery of natural gas. It’s easy to guess what the circumstances referenced are–the conflict in Ukraine, sanctions, etc. Is this just Russian brinksmanship? A negotiating chip?

Maybe. Probably not. We shouldn’t forget that Nord Stream 1, the direct gas pipeline between Russia and Germany, is currently undergoing routine maintenance until later this week. There’s still no strong indication that Russian gas supplies will resume in whole or in part, and with today’s declaration Moscow has legal cover to halt energy supplies to the economic heart of Europe. As if legal cover is all Russia needs. 

In the links below, we’ve included a series of videos I’ve recorded over the past few months that outline Russia’s strategy, Europe’s rather pitiful few options, and the rather bleak reality that Russia increasingly sees itself not just at war with Ukraine, but in direct conflict with Europe. To expect energy supplies to continue as normal is a fantasy that not even the most optimistic German industrialists can pretend to believe in anymore. The EU–especially Germany–and Russia both saw the increase of energy interconnectivity and pipeline politics (or “diplomacy”) or the past few decades as a game of increasing leverage. The question was always, for whom? Europe always hoped that it could entice Russian good behavior through economic linkages and purchase contracts. We’re likely to see in coming days where the power in this relationship, pun intended, really flows from.

April 30, 2022 – Russia’s Natural Gas Strategy

June 21, 2022 – The Ukraine War, a New Flashpoint, and the End of Europe’s Energy Innocence

July 11, 2022 – The End of Germany’s World

Electricity in Transition

California. Germany. Texas. France.

Not a normal grouping of places or policies or politics. Especially when one wants to talk about energy. All four, however, are in the midst of a transition to renewable or green energy production and find themselves with having to grapple with energy reality, popular expectations, the vagaries of climate and weather, and rising costs. And all are experiencing a mix of successes and failures, both in and out of their control.

The End of Germany’s World

Germany shut down the Nord Stream 1 Pipeline today for a pre-scheduled 10-day maintenance period. Whether or not Russian natural gas will resume westward flows to Germany after repairs are made is anybody’s guess. 

The 55 bcm/yr pipeline is a key component of the energy détente forged between Germany–the economic and manufacturing heart of Europe–and post-Cold War Russia. It has also inculcated a German dependency on Russian gas that has shaped German economic and security policy (and, by extension, Europe’s) since the project first entered the planning phase over 20 years ago.

For more information on the nature of Russian and German energy codependence, and the future of both, I would suggest the agriculture and manufacturing chapters of my newest book The End of the World is Just the Beginning as well as the Russia and Germany chapters of the last one, Disunited Nations.