High volatility in the global commodity supply chain in 2022

Food and energy importers were hit by export bans and restrictions in many countries in early 2022. Argentina’s two-year beef ban, Indonesia’s coal ban, Mali’s grain and related product bans, Russia’s and Ukraine’s ongoing wheat export caps.

The Argentine government issued Decree No. 911 on January 3 to curb national price increases and extended the export ban on seven beef cuts until December 31, 2023.

In 2021, Argentina stopped exporting beef to adjust domestic beef prices. Argentina’s President Alberto Fernandez once said that the main reason for the soaring beef prices in Argentina was exports to China, which surpassed the United States as the world’s largest beef importer in 2019.

In addition to beef, the Argentine government announced export restrictions on corn and wheat on December 17, 2021. In 2022, Argentina restricted corn exports to 41.6 million tonnes and wheat to 12.5 million tonnes to secure domestic food supply. Argentina is the world’s second largest exporter of corn, exporting 39.8 million tonnes from 2020 to 2009, second only to the United States. It is also a major wheat supplier to South America, exporting 11.2 million tonnes in 2021.

Mike Sun, a North American private investment consultant, told The Epoch Times: Restricting or banning food exports is not optimistic for the global food supply chain. “

In 2021, at least 13 countries imposed export restrictions to secure domestic food supplies due to pandemics and extreme weather events. International wheat prices have been rising for several months due to tight supply and strong demand. Uzbekistan, which imports 35% of wheat, lifted import tariffs on flour, vegetable oil and other products on December 30, 2021. The exemption is valid until December 31, 2022.

Besides food, Sun believes that the global supply chain for minerals is also “full of uncertainty.” One example is the new president of Chile, Argentina’s neighbor, who proposed to nationalize mineral resources, especially the globally contested lithium.

“Chile’s decision to chase lithium, one of the world’s hottest sources of clean energy, rather than traditional copper, recognizes the value of bulk commodities that should impact global supply. It’s a sign of that, “he said.

Chile is the world’s largest producer of copper and the second largest producer of lithium. On January 4, Chilean lawmakers submitted a bill to the House of Representatives seeking an injunction to thwart the government’s plans for a 400,000-ton lithium mine contract in the country.

Highly volatile energy supply chain

Chile is not the first country in Latin America to restrict mineral exports. Octavio Romero Oropeza, CEO of Mexican state-owned oil company Petroleos Mexiconos (Pemex), said at a press conference on December 28 that the company will move to the United States as it increases its refining capacity to meet domestic fuel demand. He said he plans to reduce crude oil exports. By 2022 it will reach 435,000 barrels per day and will be completely shut down by 2023.

In East Asia, he said Indonesia’s coal export restrictions had hit Japan and the ban had serious implications for the economy and people’s lives, and called on Indonesia to resume exports as soon as possible. On the final day of 2021, the Indonesian government announced a coal export ban in January 2022. Even ships loading coal need to supply coal to domestic power plants.

The Indonesian government has partially lifted the ban on coal exports earlier than planned, but plans to restrict exports of liquefied natural gas (LNG) in 2022.

To combat energy shortages, the Indonesian government plans to require the national oil corporation Pertamina and private LNG producers to prioritize domestic demand in 2022, S & P Global Platts said. It was revealed on January 14th.

In a statement released in early January, the Advanced Oil and Gas Business Activities Special Task Force (SKK Migas) said, “Currently, all parties are concerned about the availability of electricity energy, especially in the first quarter of 2022. We have secured. “

How far can Chinese companies go with overseas lithium bids?

On January 14, a Chilean court accepted a request from the Governor of the Atakama region and the indigenous community to suspend the two lithium production contracts awarded by the Chilean government on January 5. The other is a local Chilean company. Both companies were each awarded an allocation of 80,000 tonnes of lithium ore for a total purchase of $ 120 million.

Huaxi Securities commented in a weekly industry report on January 17th, worried that the acquisition deal signed by Zijin Mining in October 2021 may not be as good as expected for future lithium resource acquisitions. Did. Overseas acquisitions are complicated by the fact that many countries are now upgrading lithium as a country’s key strategic resource. According to Huaxi Securities, the Liberal Party of Canada government on January 12 allowed Zijin Mining to bid on Canada’s NeoLithium Corp without launching a formal national security review, but the first approval of the Government of Canada was We do not guarantee that bids will not be formally reviewed. future.

The Conservative Party of Canada is calling on the government to conduct a national security review of the acquisition. “The foreign acquisition of Canadian lithium mining company Neo Lithium was not subject to a review of national security by the free government,” Conservatives Rep. Michelle Lempel Garner and Ed Fast said in a statement. I’m worried. “

In recent years, as the global production of new energy vehicles has skyrocketed and the demand for power batteries has increased, so has the price of upstream lithium ore. Due to tight supply and demand, the average Spojumen concentrate (6%, CIF China) on December 2, 2021 was $ 1,900 per ton, an increase of more than 150% from August to December. CIF refers to the price of cost plus insurance and freight.

China identifies about 13.8% of the world’s lithium resources, second only to Bolivia, Chile, Argentina and the United States, but most of China’s lithium resources are ecological in the Qinghai Tibetan Plateau, where the natural environment exists. Located in a vulnerable area. It’s tough and the development conditions are bad.

Limited to this situation, Chinese companies have already begun to explode lithium resources around the world. In particular, in September and October 2021, Zijin Mining, Ganfeng Lithium, Contemporary Amperex Technology Co. and Limited (CATL) all acquired the right to develop a lithium mine in Argentina through a stake acquisition, for a total of 1,335 million. It cost a dollar.

Among them, Zijin Mining will acquire 13 mining rights in Argentina if NeoLithium Corp. is acquired in cash and handed over. October 11, 2021, Zijin Mining, Neo Lithium Corp. Announced that it has signed an agreement to acquire all issued common stock issued by the Company for approximately $ 5.1 per share in cash. The transaction amount was approximately $ 758 million.

Neo Lithium Corp.’s core asset is the fully owned Tres Quebradas Salar (3Q) lithium salt lake project in Catamarca, northwestern Argentina. The 3Q project has 13 mining rights, a large amount of resources, high grade, low impurities and good development conditions. Argentine law provides that owners can retain unlimited mining rights as long as they meet the provisions of Argentine domestic mining law, such as annual standard payments and minimum investment commitments.

On January 11, Neo Lithium Corp announced that it had received an environmental impact assessment report on the construction and development of the 3Q project from the Government of Catamarca. This was a condition of signing a contract with Zijin Mining.

Kathleen Lee


Kathleen Lee has been contributing to The Epoch Times since 2009, focusing on topics related to China. She is an engineer and chartered in Australian Civil and Structural Engineering.