China currently dominates the global tungsten market, producing over 80% of the world’s supply and controlling more than half of known reserves. However, rising geopolitical tensions and export restrictions have accelerated efforts worldwide to diversify sources of this critical mineral. Emerging projects in South Korea, Canada, Australia, and parts of Africa show promise but will require time and investment to significantly reduce China’s market share. While China’s dominance is expected to persist through the early 2030s, these global initiatives mark a strategic shift toward building a more resilient and secure tungsten supply chain.

China’s Hold on Tungsten and the Global Push for Supply Chain Resilience

Tungsten remains a critical mineral underpinning modern industry — from aerospace to electronics — yet its supply landscape is heavily concentrated. However, the growing imperative to secure more diversified and resilient supply chains has sparked activity worldwide. Vietnam, Russia, Spain, and others are expanding existing projects or developing new tungsten deposits. Although promising, these efforts face significant challenges: ramping up production requires substantial investment, advanced technology, and time.

China’s Market Control and Export Constraints

China’s influence is profound — producing ~81% of global tungsten and holding ~52% of reserves. Vietnam and Russia follow distantly, contributing ~4% and 2–3% respectively, with Russia boasting a larger share of reserves at ~9%. Several smaller producers — such as North Korea, Bolivia, Spain, Rwanda, and Austria — add modest output, typically between 1% and 2%, but many lack transparent reserve data.

Interestingly, “other countries” combined hold ~35% of known reserves but account for only ~1% of production. These overlooked resources reveal the untapped potential to reduce the global dependence on China.

In December 2024, China introduced licensing requirements for tungsten exports, heightening export controls and injecting uncertainties into global supply chains. These measures appear part of a broader strategy to wield critical minerals as geopolitical leverage, underscoring the urgency for diversified sourcing.

Tungsten Prices Soar Amid China's Export Control

Tungsten prices have experienced a significant upswing over the past six months, reaching levels not seen in over a decade. This escalation is attributed to China's implementation of stringent export controls in early 2025, requiring special permits for tungsten exports—a move that tightened global supply chains.

Concurrently, increased demand from high-tech and defense sectors, which rely on tungsten for aerospace components and military equipment, has intensified the pressure on available resources. As a result, key tungsten compounds, such as ammonium paratungstate (APT), have seen price increases exceeding 20% in recent months. These developments underscore the urgent need for diversified and resilient tungsten supply chains to mitigate the risks associated with over-reliance on a single dominant producer.

Western Initiatives and Emerging Producers

In response, Western nations are accelerating efforts to lessen reliance on Chinese tungsten. The U.S., which halted domestic tungsten mining in 2015, has committed significant funding toward developing strategic mineral projects at home and with allied countries. The Department of Defense’s recent $15.8 million grant to Canada’s Fireweed Metals Corp. for advancing the Mactung tungsten project exemplifies this approach.

South Korea’s Sangdong mine, operated by Almonty Industries, represents another key development. Projected to yield up to 4,800 metric tons of tungsten oxide annually, Sangdong could supply ~30% of the world’s non-Chinese tungsten output. Almonty has secured long-term contracts supplying half of this output to the U.S., with the remainder serving domestic demand in South Korea.

Other noteworthy projects span continents:

Canada

• Mactung Project (Yukon/Northwest Territories) On May 28, 2025, the U.S. Department of Defense awarded $15.8 million to Fireweed Metals Corp. This funding aims to accelerate development of the Mactung tungsten deposit — one of the world’s largest high-grade resources — supporting enhanced resource definition, metallurgical testing, and a comprehensive feasibility study. The project is central to North America’s strategy for securing critical mineral supplies.
• Sisson North Project (New Brunswick) On February 13, 2025, Spearmint Resources Inc. announced its acquisition of the Sisson North Tungsten Project, spanning 2,582 acres adjacent to the established Sisson Mine.

By April 14, 2025, Spearmint expanded the project area to ~4,890 acres, positioning itself to meet the increasing demand for domestically sourced strategic materials.

United States

• IMA Mine (Idaho) On February 12, 2025, American Tungsten Corp. expanded its holdings by staking 113 federal lode mining claims totaling ~2,000 acres around the historic IMA Mine. This strategic move signals renewed momentum toward revitalizing U.S. tungsten production amid heightened supply security concerns.

Australia

• Dolphin Mine (Tasmania) In February 2025, the Tasmanian Government converted a $10 million loan into an equity stake in Group 6 Metals. This investment ensures the continued operation of the Dolphin Tungsten Mine on King Island, safeguarding ~95 direct jobs and supporting regional economic stability.
• Molyhil Project (Northern Territory) On May 28, 2024, Thor Energy Plc released an updated Mineral Resource Estimate for the Molyhil Tungsten-Molybdenum-Copper deposit. The revised estimate reports 4.65 million tonnes at 0.26% WO₃ and 0.09% molybdenum, reflecting significant improvements in resource confidence and grade that strengthen project viability.

Europe

• Limousin Region (France) In September 2024, geophysical surveys in the Puy-les-Vignes/Saint-Goussaud district identified new exploration targets associated with granite-hosted tungsten deposits. Advanced multimethod geophysical modeling revealed conductive anomalies indicative of mineralization, enhancing the region’s tungsten exploration prospects.

Africa

• Democratic Republic of Congo (DRC) & Rwanda On April 25, 2025, the DRC and Rwanda signed a U.S.-brokered agreement in Washington, committing to draft a peace deal by May 2 aimed at ceasing support for armed groups. This initiative establishes joint security coordination mechanisms to combat illegal mining and mineral trafficking.

By May 20, 2025, reports indicated that these peace efforts could significantly boost Rwanda’s capacity to process Congolese minerals, including tungsten, fostering legal trade and attracting Western investment to promote regional industrialization.

Looking Ahead: Gradual Shifts with Strategic Implications

Despite these encouraging developments, experts agree that China’s dominance will persist in the short term. Even with new sources coming online, China is projected to remain the largest supplier through the early 2030s, although its share may gradually fall below 70%.

This evolving landscape reflects a broad strategic shift: nations and industries recognize the risks of over-reliance on a single dominant producer. Diversifying tungsten supply chains is essential not only for market stability but also for safeguarding critical industrial sectors from geopolitical disruptions.

As new projects mature and geopolitical dynamics evolve, the tungsten market may become more balanced, resilient, and competitive — benefiting global innovation and security.

Romania’s accession to the Schengen Area is expected to significantly enhance its role in Europe’s supply chain, especially in automotive, defense, and other manufacturing sectors. Amid rising labor costs, volatile energy prices, political uncertainty, and supply chain disruptions in Western Europe, Romania stands out with 25–50% lower labor costs, a strong talent pool, and infrastructure equipped for advanced manufacturing. Romania’s trade dynamics, industrial growth, and logistical advancements are expected to strengthen its position as a strategic nearshoring destination in the European market.

Geopolitical tensions, such as the Red Sea crisis and the Russia-Ukraine war, have significantly disrupted global supply chains. Over the past few years, organizations have also grappled with rising inflation. In response, nearshoring has emerged as a prominent strategy, with Romania standing out as an attractive choice for European companies. 

Romania’s full accession to the Schengen Zone eliminates land border controls. This, along with its affordable skilled labor and robust infrastructure, further strengthens the country’s appeal. For industries reliant on fast and efficient cross-border supply chains, such as automotive and manufacturing, the reduction in transit times and logistics costs is a game-changer. The removal of customs delays makes Romania an increasingly viable hub for production and logistics.

Current Trade Dynamics Between Romania and Europe

Romania maintains robust trade ties with Europe. In 2023, its exports primarily included machinery and transport equipment (45%, largely automobiles), manufactured goods (16%), and miscellaneous manufactured articles (14%). The European Union remains Romania’s top trading partner, accounting for 73% of total exports. Within the EU, Germany received 20% of Romania's exports, Italy 10%, France 6%, and Hungary 5%, with the remaining exports distributed among other European countries.

Romania remains a resilient market despite a 13% dip in foreign direct investment (FDI) in 2023. The EY Romania Attractiveness Survey (early 2024) reveals that 67% of investors foresee increased attractiveness over the next three years. Romania outperforms Greece and Bulgaria in securing FDI projects and ranks fifth in Central and Eastern Europe for average jobs created per project. This highlights strong investor confidence in the country as a sourcing alternative. The country’s accession to the Schengen Zone is expected to further ease the moving of goods. This development positions Romania as a prime nearshoring destination, enabling European businesses to strengthen their supply chains.

Industry Growth: New Plants and Expansions

Romania’s manufacturing sector is experiencing significant growth, particularly in the automotive industry, driven by international investments. Gestamp, a Spanish multinational automotive engineering company. has opened a new car parts factory in Argeș County, employing 200 people and strengthening Romania’s role in the European automotive supply chain. Nokian Tyres has commenced production at its zero CO2 emission tire factory in Oradea, with commercial operations set to begin in 2025 and an annual capacity of 6 million tires. German company Schieffer Industries is building a plastic components factory in Hunedoara, which is expected to bolster the automotive supply chain by late 2025. 

Beyond automotive, the Busch Group has expanded its Pfeiffer Vacuum+Fab Solutions facility in Cluj to enhance vacuum technology solutions. South Korea’s Hanwha Aerospace plans to establish an armored vehicle factory in Romania, positioning the country as a regional defense manufacturing hub. These developments are boosting economic growth, fostering technological advancement, improving infrastructure, and creating a skilled workforce, firmly establishing Romania as an emerging European manufacturing hub.

Logistics: A Cornerstone of Romania’s Connectivity

Romania’s strategic location between Asia and Europe and near the Balkans and the Middle East has been crucial to its emergence as a sourcing destination. The country boasts a well-developed logistics infrastructure, including major ports like Constanța, which offers direct access to the Black Sea and facilitates maritime trade with Western Europe. 

Additionally, Romania’s 86,388-kilometer road network and 10,769-kilometer rail network (including 4,000 kilometers electrified) connect major cities like Bucharest, Cluj-Napoca, Timișoara, and Iași to international hubs. This strong logistics framework supports industries like automotive and manufacturing by enabling the timely delivery of components and products across Europe.

Reshaping the Future Supply Landscape for Europe

The establishment of new plants, expansion of existing facilities, and Romania’s integration into the Schengen Zone is expected to redefine the country’s role in Europe’s supply chain landscape. With enhanced manufacturing capacity and a cost-effective, skilled workforce, Romania is emerging as a key supplier for the automotive sector and a leading nearshoring destination for European businesses. Its strategic location and growing industrial base make it an ideal hub for production and distribution to Western European markets.

The removal of border controls streamlines logistics, reduces costs, and boosts trade efficiency, providing European companies with reliable, cost-effective sourcing options. As investments in manufacturing facilities and infrastructure are thriving, Romania’s importance as a hub for automotive, manufacturing, and other industries is set to grow, strengthening Europe’s supply chains and underscoring Romania’s pivotal role in shaping the future of trade and sourcing in the region.

The global semiconductor shortage has caused significant turmoil across sectors, but none has felt its impact as profoundly as consumer electronics. From mobile phones and gaming consoles to household appliances and personal computers, semiconductors are the backbone of modern consumer electronics. The shortage ─ triggered by a combination of factors, such as supply chain vulnerabilities and unprecedented demand ─ has led to production delays, increased costs, and scarcity of products on store shelves.

Factors Contributing to Semiconductor Shortage

• Surge in Consumer Electronics Demand: The pandemic triggered a spike in demand for consumer electronics as people adjusted to remote work, online education, and home entertainment. This sudden spike in demand overwhelmed the already strained semiconductor supply chain, leading to scarcities.
• Complex Supply Chain Dynamics: The semiconductor supply chain is highly intricate, involving multiple stages of production, testing, and assembly. Since the industry depends on just a few manufacturers (e.g., TSMC and Samsung) for specific chips, any disruption to their facilities can have widespread ramifications.
• Geopolitical Tensions: Trade conflicts, particularly between the United States and China, have further strained the semiconductor supply chain. Export controls, sanctions, and restrictions on certain technologies have limited access to critical semiconductor components, exacerbating the shortage.
  
• Natural Disasters and Accidents: Natural disasters and unexpected incidents, such as fires at key semiconductor factories, have compounded the challenges. For instance, a fire at Japan's Renesas Electronics, a major supplier of automotive semiconductors, created additional bottlenecks in the supply chain.
  

Impact on the Consumer Electronics Industry

The semiconductor shortage has had far-reaching consequences for the consumer electronics industry, affecting production timelines, product availability, and pricing, as mentioned below:

• Delayed Product Launches: Major tech companies, such as Apple, Samsung, and Sony, have faced delays in launching new products due to the shortage of critical chips. For instance, the release of Sony's PlayStation 5 and Microsoft's Xbox Series X consoles was heavily impacted by limited stock and delays in availability, frustrating consumers.
• Increased Prices: The shortage has driven up the cost of semiconductors, leading to higher production costs for consumer electronics. These costs are frequently transferred to consumers, leading to higher prices for products like smartphones, laptops, and gaming consoles.
  
• Supply Chain Strain: As companies scramble to secure the necessary components, the shortage has strained relationships between manufacturers and suppliers. Smaller companies, particularly, have struggled to compete with larger corporations for limited semiconductor supplies, leading to production delays and potential losses.
  
• Shift in Consumer Demand: Scarcity of certain electronics has shifted consumer demand, with some opting for older models or alternative brands when new products are unavailable. This has led to a growing secondary market, where consumers buy and sell hard-to-find electronics at inflated prices.
  
• Impact on Innovation: The semiconductor shortage has slowed innovation in the consumer electronics sector. Companies have had to delay or scale back on the development of modern technologies and features due to the unavailability of cutting-edge chips. This has particularly impacted the rollout of advanced technologies like 5G, AI-driven devices, and the Internet of Things (IoT).
  

Strategies to Mitigate the Impact

The consumer electronics industry is adopting several strategies to navigate the semiconductor shortage and build more resilient supply chains for the future:

• Diversifying Suppliers: To reduce dependency on a single supplier or region, companies are diversifying their semiconductor supply chains. This could involve sourcing semiconductors from various suppliers across regions to increase resilience in the supply chain.
• Investing in Semiconductor Production: Leading tech companies are investing in their own semiconductor production capabilities to reduce reliance on third-party suppliers. Apple, for instance, has started designing its own chips, such as the M1 processor, for its devices, reducing its dependency on external suppliers like Intel.
• Rethinking Inventory Management: The semiconductor shortage has prompted companies to reconsider their just-in-time inventory strategies. By holding larger reserves of critical components, consumer electronics companies can better weather future disruptions in the supply chain.
  
• Adopting Agile Supply Chain Practices: Agility in the supply chain is key to navigating uncertainties like semiconductor shortage. Companies are adopting more flexible procurement strategies, such as sourcing alternatives and adjusting production schedules in real-time based on component availability.
  
• Government and Industry Collaboration: Governments and industry stakeholders are increasingly collaborating to address the shortage. This includes government incentives to boost domestic semiconductor production and industry-wide initiatives to increase transparency and coordination across the supply chain.
• Fostering Innovation in Chip Design: Companies are investing in research and development to innovate around the semiconductor shortage. This includes designing products that use fewer chips or can operate with older, more readily available components. Such innovations not only help mitigate the current shortage but also position companies for greater resilience in the future.
  

Conclusion

The chips shortage has significantly impacted the consumer electronics industry, highlighting the vulnerabilities in the global supply chains. However, these challenges also provide the industry with an opportunity to innovate and build more resilient supply chains. By diversifying suppliers, investing in production, and adopting agile practices, consumer electronics companies can better navigate the current crisis and emerge stronger.

The need for semiconductors will only continue to grow as the world becomes more digitally driven. The lessons learned from this shortage will be critical in shaping the future of the consumer electronics industry, ensuring that companies are more prepared to withstand supply chain challenges hereafter.

China's rapid expansion in petrochemical capacity poses a significant challenge to the US, heightening trade tensions. By 2025, China's ethylene capacity is set to reach 50 million metric tonnes (~50–60% increase and its plastics production could hit 120 million tonnes (~30–35% increase over the last 5 years) annually. The resulting oversupply will further depress global prices, threaten the US export volumes to China and other Southeast Asia (SEA) countries and profitability, and reshape global petrochemical market dynamics.

China's accelerated growth in petrochemical capacity positioned it as a major competitor in the global market for petrochemical product exports. This growth aligns with China's economic ambitions, but it creates new challenges and potential trade tensions for the US.

Expansion of China's Petrochemical Industry

China made substantial investments in recent years to boost its petrochemical production. The country's ethylene capacity is anticipated to increase over 50–60% compared to the past five years to reach 50 million metric tonnes by 2025.

By 2025, China’s production capacity in all major segments (methanol, PP, PE) is expected to exceed consumption levels. This increase is driven by domestic demand and a strategic goal to reduce import dependency.

China's broader industrial policies emphasise technological advancement and increased control over supply chains, underpinning this growth. The increased production capacity caters to domestic consumption and enhances China's position as a key exporter.

Impact on the US Trade Dynamics

China's growing presence in the petrochemical sector plays an increasingly pivotal role in global trade dynamics. Major economies like the US have raised concerns over China's growing influence in the petrochemical market, fearing it may exacerbate existing trade disputes.

Asia, with China as a significant contributor, holds a substantial share of the US petrochemical product exports. The ongoing expansion of China's production capacity and the prospects of China becoming a net exporter of petrochemical products pose a considerable threat to the US export volumes. This shift could disrupt existing trade balances, reducing market share and profitability for the US petrochemical exporters. Furthermore, the competitive landscape will likely intensify, compelling the US firms to innovate and seek alternative markets to maintain their global standing.

Global Pricing Implications

The substantial increase in Chinese petrochemical production is poised to create an oversupply in the global market, leading to downward pressure on prices. This development could adversely impact producers in other regions. Specifically, the global ethylene market, valued at approximately $160 billion in 2020, might face significant price fluctuations due to this surge in Chinese output. This potential market disruption generates considerable concern among international petrochemical companies and policymakers.

Furthermore, the expected reduction in prices of plastic resins might lead to a decrease in the consumption of post-consumer resin (PCR). As lower prices make virgin resin economically attractive, efforts to boost recycling rates and sustainability in the industry might suffer setbacks. This shift poses a challenge to global initiatives to promote circular economy practices.

Environmental and Regulatory Concerns

China's petrochemical industry faces substantial environmental and regulatory challenges. The sector is a major source of pollution and greenhouse gas emissions, accounting for about 20% of the nation's industrial emissions. China must navigate stringent environmental regulations at home and abroad as production scales up.

China's target to significantly reduce carbon emissions before 2030 and achieve carbon neutrality by 2060 puts pressure on the petrochemical industry to adopt sustainable practices. Balancing industrial growth with environmental sustainability adds complexity to China's expansion plans.

Conclusion

China's growth in petrochemical capacity represents significant opportunities and formidable challenges. The nation's ability to navigate the complexities of global trade, environmental sustainability and market dynamics will determine the future of its petrochemical industry. Notably, China's petrochemical output is projected to account for 35% of the world's total by 2025, underscoring its influence on global supply chains.

Furthermore, China's potential to drive down global petrochemical prices may lead to significant restructuring within the industry as global players adapt to the new market realities. It is imperative for end-use industries, such as automotive, construction and consumer goods, to consistently monitor and analyse market prices. By doing so, they can strategically establish long- and short-term contracts with resin suppliers. This proactive approach will ensure a competitive edge, effective management of costs and a reliable supply chain.

The US has a high dependence on Chinese imports, which complicates its supply chain decoupling strategies. While shifting final assembly to Southeast Asia and Mexico is relatively easy, intermediate stages like component production remain challenging due to China's established chemical industry and extensive production capacity. The automotive, electronics, and textile industries face significant disruptions when attempting to diversify their supply chains. The expertise, infrastructure, and cost-efficiency China offers are difficult to replicate elsewhere. Effective strategies to reduce dependence include government collaboration, tax incentives, and sustainable practices. A significant shift will be costly and best pursued in stable times, underscoring China’s pivotal role in global trade.

The US has an extremely high dependence on Chinese imports, and the notion of disconnecting from this economic giant is far more complex than it appears. While shifting some parts of the value chain is feasible, many elements pose significant challenges, primarily due to China's established chemical industry and overall production capacity.

The Easy Part: Shifting Final Assembly

Relocating final assembly processes is relatively straightforward. Many manufacturers have already begun moving electronics, automotive, and other assembly operations to Southeast Asia, focusing on countries like Thailand, Vietnam, and Taiwan. Mexico has also emerged as a significant player, now the largest source of US import volume.

The Difficult Middle Stages: Component Production

The real challenge in production often lies in the intermediate stages, where processes such as plastic/metal molding are essential for manufacturing product components. These stages rely on the complicated networks of global suppliers, the majority of which are present in China. Various sectors in the US heavily depend on Chinese components, including electronics, textiles, and industrial machinery. The intricacy of these supply chains makes it difficult to shift production without significant disruption.

China's Expertise and Infrastructure

China's extensive expertise in producing chemicals and intermediate goods is unmatched. It dominates the production of key chemicals like acetic acid and titanium dioxide, which are crucial for a range of industries from automotive to textiles. Accounting for over 40% of global chemical production, China has established itself as an indispensable player in the global supply chain. This dominance is supported by a well-developed infrastructure that other regions find challenging to replicate quickly. The sheer scale and efficiency of China's chemical production capabilities underline its critical role in global manufacturing and industrial processes.

Replication Challenges

Replicating China's capabilities in other regions is a significant hurdle. The expertise and infrastructure that China has built over decades cannot be easily or quickly duplicated elsewhere. Other regions face immense difficulty in matching the scale, cost-efficiency, and quality of production that China offers. This presents a substantial barrier for industries attempting to diversify their supply chains. The dependence on China's well-established systems and the complexity involved in developing similar capabilities elsewhere underscore the challenges faced by global manufacturers.

Industry-Specific Supply Chain Disruptions

US-based industries have faced significant supply chain disruptions amid their efforts to reduce dependence on China. The automotive industry, represented by companies like General Motors and Ford, experienced production delays and increased costs due to global semiconductor shortages and challenges while diversifying supply chains.

In the medical supplies industry, companies like Honeywell reported increased production costs and supply chain disruptions when sourcing products outside of China during the COVID-19 pandemic.

The electronics industry, with giants like Apple, Samsung, and HP, faced production delays, increased costs, and logistical challenges when shifting manufacturing to countries like Vietnam, Thailand, and India.

Similarly, the textile industry, including brands like H&M and Nike, encountered higher production costs, logistical challenges, and backlash when reducing reliance on Chinese cotton due to alleged human rights violations in Xinjiang.

Strategic and Sustainable Solutions

To effectively reduce dependence on China, a multifaceted approach is necessary, involving collaboration between governments and manufacturing companies. Key strategies include offering tax breaks and infrastructure support to incentivize relocation and implementing omni-shoring strategies to diversify sourcing locations, thereby mitigating geopolitical risks. In addition, sustainability considerations are crucial, as addressing the environmental impact of global trade ensures long-term acceptance and viability. By integrating sustainable practices, companies can meet regulatory requirements, enhance brand reputation, and contribute positively to the environment. This combined effort creates a more resilient and diversified supply chain network, reducing over-reliance on any single country and fostering a balanced global trade system.

The Big Picture: China's Role in Global Trade

Over 2023-24, China accounted for approximately 15% of global merchandise exports and about 14% of global imports, solidifying its position as a central hub in the world's supply chains. The country's chemical industry alone constitutes over 40% of global chemical production, underscoring its critical role in manufacturing and industrial processes.

A significant shift of supply chains away from China will be an expensive endeavor, best undertaken during times of relative peace and stability rather than crises. The interconnected nature of modern manufacturing implies that while the initial phases of relocation are manageable, the deeper, more value-added stages require substantial investment and coordination. Addressing these challenges proactively will ensure resilience and sustainability in global trade.

A major cocoa shortage in 2024 has raised concerns across industries reliant on the commodity. Shifts in weather patterns induced by climate change have disrupted cocoa cultivation, resulting in lower yields. The scarcity has major implications for processors and chocolatiers heavily dependent on cocoa production, particularly amid expectation for strong demand growth. The cocoa prices are likely to remain elevated, hovering at USD 6,800–7,000/MT in 2H24 and USD 6,000/MT in 2025, and a return to 2023 pricing levels is not anticipated for the next 3–4 years. Procurement organizations across end-use industries must mitigate supply chain risk by scouting alternate sourcing geographies, exploring cocoa-free alternatives, and leveraging potential value chain opportunities.

The prices of cocoa touched new records in 2024, reaching USD 4,441/MT at the start of the year and skyrocketing to USD 10,215/MT in April 2024. The historical highs in 2024 have resulted in a 2.3x price surge during the year, making cocoa more expensive than copper in the commodities market. The primary factor driving this price hike is the global shortage of cocoa beans, exacerbated by poorer-than-expected harvests in the Western African countries of Ghana and Ivory Coast. Simultaneously, climate change and desertification have reduced the available land suitable for cocoa cultivation, while demand for cocoa continues to grow rapidly.

Supply chain disruptions leading to cocoa shortage

High supply chain dependencies coupled with production decline in Africa

Ghana, Ivory Coast, Nigeria, and Cameroon together produce more than 75% of the world’s cocoa. The processors of cocoa into cocoa mass, cocoa butter, cocoa powder, chocolate, and other cocoa products across Europe (leading processor: 35% share), APAC, and the Americas are highly dependent on the African supply. 

Cocoa production in Ivory Coast and Ghana has declined sharply by 448 KT (down 20%) and 467 KT (down 45%), respectively, over the past three seasons, contributing to the current shortfall in global cocoa production and eventually leading to the price surge. 

Changing weather conditions and crop diseases

Major cocoa producing nations, including Ghana, Ivory Coast, Nigeria, and Cameroon, have experienced significant declines in crop yields due to droughts, fires, and climate change. 

The El Niño weather pattern, which brought unusually heavy rainfall in December last year, triggered a widespread outbreak of black pod disease, severely affecting the crops. Additionally, the ongoing impact of climate change and the persistence of El Niño resulted in extreme heat in the subsequent months, further hindering the harvests.

Aging trees and diminishing arable land

Aging cocoa trees have also been largely contributing to lower harvests, as they are more vulnerable to disease. This implies they are high on maintenance, forcing multiple farmers to abandon old cocoa trees/farms for greener pastures.

The rise in unlicensed mining activities in West Africa, driven by rich deposits of metals and minerals like gold, uranium, and iron ore, has led to extensive deforestation and loss of arable land. This environmental degradation and declining water quality have further diminished cocoa production over time.

Rising financial troubles for cocoa producers

Farmers are not seeing corresponding benefits due to higher production costs and lower yields despite the increase in cocoa prices. Consequently, many are opting to sell their cocoa farms and lands to mining companies.

Chocolate producers often trade cocoa futures, locking in cocoa bean prices well before the harvest to mitigate the risks of price volatility. However, this practice often leaves farmers vulnerable, as they may receive lower payments for their produce if prices rise beyond the futures market predictions. This financial instability has resulted in minimal reinvestment in aging plantations, further exacerbated by considerable regional inflation and currency devaluation in the region.

Continued elevated demand adding to price pressure

Strong demand from processors/end-use industries

Despite global supply challenges, the results for cocoa grinding across North American, European, and Asian regions were better than anticipated. North America, in particular, recorded a 3–4% increase in grinding volumes, contrary to expected declines. This strong performance highlights robust demand and indicates increased pressure on the already limited cocoa supplies. Reflecting this demand, cocoa prices surged, hitting USD 10,000+/MT in May 2024. 

The supply-demand mismatch is projected to leave the market with a deficit of 374 KT this season, up from 74 KT last season. The interplay between reduced supply and stable or increasing grinding volumes underscores significant market pressure, underscoring the urgent need to closely monitor supply and demand trends in the cocoa industry. 

Companies passing the pressure

Chocolate brands are struggling with higher cocoa costs, often passing this burden onto consumers through price hikes. In Europe, Mondelēz raised prices by 12–15%, while Mars increased prices by 15% in the US. Key companies such as Lindt and Toblerone have already raised prices for their popular chocolate bunnies and eggs by approximately 50% compared to 2023. 

Manufacturers such as Hershey’s are encouraging the sales of non-cocoa products, such as its cookies and cream range, gummy bears, and other candies, to offset the higher chocolate prices.

Steps ahead – Mitigation strategies

Procurement organizations within chocolate and cocoa-dependent industries are carefully reassessing their strategies amid the cocoa shortage and soaring prices. Some of the potential mitigation strategies that companies are actively deploying to build resilience are mentioned below.

Building supply chain resilience

Since weather and fungal diseases have damaged existing trees across West Africa, potentially leading to a mid-to-long-term impact, companies including cocoa processors are seeking alternative sources for cocoa to secure future supplies. Key alternate sources include the following: 

• Indonesia and Papua New Guinea are the key cocoa producers in Asia with >200 KT production. 
• Brazil in South America is another major cocoa producer with ~220 KT of production.

Scouting for cocoa alternatives

Companies have started scouting for close alternatives such as plant-/regenerative-based substitutes, cocoa butter equivalents, extenders, and artificial flavors to develop cocoa-free products, synthetic chocolates, and so on. Key examples include the following:

• Voyage Foods has partnered with Cargill to develop sustainable alternatives to cocoa. 
• Planet A Foods has partnered with Meiji to develop chocolate with cell-cultured cocoa powder. 
• Nukoko, a UK-based company, is scaling up its technology to produce chocolate from fava beans.

Value chain intervention 

Companies are exploring value chain intervention opportunities by leveraging partnerships to support cocoa cultivation, improve the cocoa community's well-being, and maximize market price transfer. Key examples include the following:

• Unilever is partnering with cocoa farmers to rebuild communities and secure the cocoa supply chain. 
• Nestlé has partnered with Cargill and ETG/Beyond Beans to regenerate land for cocoa farms. 
• Berry Callebaut’s Forever Chocolate initiative plans to uplift 500,000 cocoa farmers and establish a sustainable direct supply chain.

Conclusion

The chances of mid-crop reversing the current market deficit are very slim since 80–85% of the cocoa production for the current season has been harvested already. Forecasts hint at a potential softening of cocoa prices to USD 6,800–7,000/MT for 2H24 and USD 6,000/MT in 2025, though relatively low crop yield could limit the softening.

This projection underlines the urgency for manufacturers to adapt their strategies to build supply chain resilience by exploring alternate geographies, scouting for cocoa-free alternatives, and evaluating potential value chain intervention opportunities.

The supply of battery and battery materials in South Korea has increased exponentially (around 1.5–2 times) over the last couple of years. The rapid growth of the global Electric Vehicle (EV) market is encouraging South Korean manufacturers to expand their battery manufacturing business both domestically and beyond. Additionally, with a 35% year-on-year surge in cathode material exports, South Korea has become the world’s leading exporter of cathode materials.

Amid the ongoing geopolitical tensions between the US and China, the US government has augmented incentives for Free Trade Agreement (FTA) countries supplying batteries. In addition, diverse battery manufacturing technologies are increasingly motivating Korean manufacturers to increase production footprints in the country. 

The expansion of the South Korean battery supply chain is due to the following reasons- 

Supply Increase and Supplier Expansion

Established Players: Leading South Korean battery manufacturers like LG Chem are the key drivers of the domestic industry’s expansion. LG Chem and B&M are anticipated to invest around USD 385 million to initiate mass production of cathode materials, with an annual capacity of 60,000 tonnes, in the South Korean city of Gumi in the latter half of 2024. The expansion project is projected to conclude by the end of 2025. Other South Korean battery manufacturers, Samsung SDI, and SK Innovation, have also announced substantial investments in securing battery materials through joint ventures and partnerships, leading to a collective increase in Korean battery supply.

New Entrants in the Market: Beyond established giants, new South Korean companies are entering the battery supply chain, further diversifying the landscape. For instance, a South Korea-based emerging player Copra BM, announced a partnership with BASF in 2023 to build a cathode active material (CAM) plant in South Korea. This collaboration brings new ability and production capacity to the table, bolstering the country’s overall battery supply chain. Furthermore, companies such as LG are diversifying their product portfolio to manufacture other components that can be used in batteries such as anode materials, separation membranes, and Carbon Nanotubes (CNT) in South Korea.

Trade Growth and Regulatory Support

South Korea is the leading exporter of cathode materials to the US and European markets. South Korea is also considered the hub for the EV battery supply chain. The US Inflation Reduction Act (IRA) presents a significant opportunity for South Korea's battery supply chain as the country is listed under the free trade agreement (FTA) with the US. The strict sourcing model qualifies Korean-made batteries with compliant sourcing for the US EV tax credit, making them more attractive to American consumers.

Additionally, the battery manufacturers are following JV in North America to set up the battery supply chain market to diversify production and reduce the dependency on single-country imports (in South Korea) while enjoying tax credits and incentives to set up or expand battery production facilities in the US or partner with established Korean manufacturers.

Raw Material Availability and Supply Chain Resilience

Increased raw material requirements have led South Korean companies to buy stakes and indulge in strategic partnerships with mining and refining companies, to invest in their midstream manufacturing capacities in South Korea or other countries such as the US. Battery manufacturing companies have established major active partnerships for materials such as nickel, lithium, and graphite for which the country was highly dependent on imports from China.

Companies are exploring local partnerships based in South Korea as well as the countries that are rich in cathode materials such as Indonesia, Australia, Argentina, and South Africa.

Technological Advancements and Market Impact

South Korea is at the forefront of innovation in the battery supply chain, focusing on advancements that address key areas-

• Sustainability and Responsible Sourcing: Leading companies, such as LG Chem, are working on developing hydrometallurgical technology to efficiently recover materials such as nickel, cobalt, and lithium, as well as reduce dependency on virgin materials while promoting a circular economy. Another leading company Samsung SDI unveiled “Super gap” technology for its solid-state batteries comprising rapid charging capabilities and an extended lifespan, along with a clear roadmap for mass production. This distinct technology is in line with the company’s commitment to fostering a greener and more sustainable world through innovative technology solutions.
• Next-generation Battery Technologies: Solid-state batteries by LG Energy Solution and Samsung SDI are actively researching the technology as it offers increased energy density, quicker charging rates, and enhanced safety than conventional lithium-ion batteries. Furthermore, SK Innovation is exploring lithium-sulfur batteries with significantly higher theoretical energy density than lithium-ion batteries. This could potentially lead to longer-range electric vehicles.
• Automation and Efficiency: Implementation of Industry 4.0 principles by integrating automation, robotics, and artificial intelligence (AI) into their battery production facilities optimizes the production process, reduces waste, and improves efficiency. AI enforcement helps create a transparent and efficient digital supply chain.

Conclusion

While China currently dominates the global battery supply chain, South Korea is emerging as a strong contender that is quickly gaining significant market share. Its substantial contribution to cathode material supply, a crucial component of cells, positions it favorably to establish a battery hub. Furthermore, the presence of leading battery manufacturers facilitates strong partnerships and joint ventures through strategic collaboration, enabling strong and diverse supply in South Korea and partner countries.

Most industries are now moving towards “reducing CO2 emissions and targeting to become carbon neutral by 2050”. Companies have already set sustainability targets to reduce CO2 emissions. Methane processing techniques are being evaluated as a potential decarbonisation process compared with commercially available CCS/CCU techniques. These techniques decarbonise natural gas and form a feasible business case for companies adopting it, as hydrogen produced can be re-titrated to natural gas stream to achieve up to 100% sequestration of carbon content and solid carbon (carbon black/graphene) produced can be traded in various end-use industries, including tyre, construction, and ink & coating industries.

Carbon black is a mature and low-priced market ($1-2/kg) with the tyre industry contributing to >70% of the demand. While graphene is a high price point market ($100-1,000/kg), the actual demand of graphene is still optimistic and highly dependent upon the mass adoption by major end-use applications such as cement, concrete, etc.

Type of Methane Processing Techniques and Their End Products

The waste stream of methane is connected to the reactor of a methane processing technology. The gas flows into the reactor where it is exposed to temperature and other conditions in presence of energy that triggers a chemical reaction, converting methane molecules into hydrogen gas and carbon products. 

There are multiple technology providers available majorly across the US and Europe that provide methane processing technologies to decarbonise natural gas. A few APAC countries, such as Japan, South Korea and Australia (having significant reserves of natural gas), also have ambitious decarbonisation goals and are actively adopting methane pyrolysis. Technology providers, such as Ekona Power, offer a system of 200-kilogram-H2-per-day to demonstrate hydrogen and carbon production from natural gas feedstock.

The different types of methane processing technologies and their end products are:

Solid carbon (Carbon Black, Graphene, Graphite) produced by methane processing technologies represents a significant commercial opportunity in existing and emerging global markets where solid carbon, as a co-product, adds economic and environmental value, not cost, to the bottom line.

Current Supply Scenario for Carbon Black and Graphene from Methane Pyrolysis Technologies

Carbon Black

Currently, methane processing technology accounts for <0.1% of the current global production of carbon black. Monolith is the only technology provider that has commissioned a methane pyrolysis unit on a commercial scale in the US to convert natural gas into clean hydrogen and carbon black. In 2020, the company collaborated with MHI to manufacture carbon black from methane pyrolysis. The company is currently operating its first commercial-scale production facility in Hallam, Nebraska, the US, with a production facility of 14,000 MT of carbon black. In addition, Monolith is expanding carbon black production by 194,000 MT, which would come online by 2025.

Future Scenario: By 2025, >1% of carbon black is expected to be produced by methane processing technologies. The adoption is expected to increase due to high CO2 taxes on traditional carbon black producing methods.

Graphene

Graphene is produced using multiple processes, including Exfoliation, Chemical Vapour, Deposition, Epitaxial Growth and Methane Processing. End-use industries are in the process of exploring the opportunity to source graphene produced by methane processing. Technology providers, such as Levidian, provide solutions for decarbonising methane and producing graphene as a byproduct.

Increasing Demand Across End Use Industries

Carbon Black

The global carbon black market is majorly dominated by the tyre industry. It is the largest consumer of carbon black, contributing to ~70% of the total demand.

Other than tyres, growing demand from the fibre and textile industry, as carbon black is used as a colouring agent in the production of synthetic fibres. Further, carbon black provides flexibility and strength to industrial products such as gaskets, conveyor belts, air springs and hoses.

Increase in specialty carbon black demand has encouraged traditional carbon black suppliers to shift their production for this material.

Graphene

Current graphene demand is relatively low versus carbon black, as end-use markets are still in the process of understanding its potential use in their products. Although graphene has been scientifically proven to be used in multiple applications such as cement, concrete, rubber, elastomers and PVC, commercial demand for graphene is not expected to be significant until 2025.

In the optimistic scenario, if graphene’s mass adoption in bulk commodities such as cement and concrete materialises, then graphene demand may reach >2 million MT by 2030.

Pricing Analysis

Carbon Black

In 2022, the average price of carbon black was $1-2/kg. The price is expected to slightly increase in the next one year, driven by increased demand from the automotive and rubber industries, partially offset by a rise in supply.

Graphene

Typically, the price of graphene manufactured with a chemical exfoliation process varies from $100-1,000/kg depending upon the type of manufacturing process, surface area and particle size. The higher the surface area, the higher the price.

Prices of graphene are expected to remain on the higher side as the methods of producing graphene are still not cost effective. However, due to the expected increase in demand for graphene, companies are in the process of developing cost-effective methods of producing good-quality graphene.

Conclusion 

Most industries are now moving towards “reducing CO2 emissions and target to become carbon neutral by 2050”. Companies across the globe have already set sustainability targets to reduce CO2 emissions. Therefore, an expected increase in adoption of methane processing techniques for the decarbonisation of natural gas to reduce CO2 emissions. In addition to 90-95% CO2 sequestration, these techniques provide an alternate revenue stream based on the end products (graphene/carbon black), resulting in yearly revenue and reduced payback period.

Prices of gas and electricity increased substantially across Europe in 2021–22 and are expected to rise further in 2022–23, as Russia began limiting gas supply to the region in response to the sanctions imposed. However, individual countries have taken several initiatives such as expanding storage capacity and coal and oil generation to reduce dependency on gas; reducing industrial, residential, and commercial demand; increasing imports from other countries; and investing in new infrastructure that would help secure supply and ultimately lead to stability in prices.

Russia is the second-largest natural gas producer globally and the largest exporter to Europe. It accounted for ~40% of the total natural gas exports to Europe in 2021. However, with Russia’s Ukraine invasion, supply reduced to 10–20% in Q2 2022 and is expected to fall further in H2 2022 and H1 2023. 

European countries: Reducing dependency on Russian gas

Many European countries decided to reduce imports from Russia due to the stringent initiatives taken by the latter.

Units: BCM

Impact on prices

Limited supply from Russia pushed up prices in 2021–22. Prices surged 2x times from $16/MMBTU in Q3 2021 to $32/MMBTU and are forecasted to rise until H2 2023. However, the growth rate is expected to slow down in 2023 vs. 2022 due to various initiatives by multiple countries.

Initiatives taken by European countries to secure natural gas supply

Increase in storage capacity

The EU aims to achieve 80% storage levels by the end of this summer (H2 2022) and 90% by 2023. France and Germany have set above 90% target in H2 2022.

Increase in coal and oil generation to reduce dependency on gas

Coal capacity is expected to increase to 8 GW (Gigawatt) in Germany and the Netherlands for coal-fired generation by early 2023.

Reduction in industrial demand up to 9 mcm/d

Countries such as Germany and Italy have been trying to reduce industrial demand by at least 10% by the end of 2022 or early 2023.

Cutback in residential and commercial (heating) demand up to 28 mcm/d

Countries such as Germany and Italy have been trying to reduce heating demand by at least 5–10% by the end of 2022 or early 2023.

Increase in Western European LNG imports up to 20 mcm/d

Imports from other regions such as Africa, the Middle East as well as within Europe, including Norway and Netherlands, have been initiated.

Additionally, individual countries are extending contracts with partners other than Russia as well as investing in infrastructure.

Germany

Extended contracts with other partners: Germany increased the sourcing of natural gas from Norway and the Netherlands. Norway is expected to increase production from 114 BCM to 122 BCM. Furthermore, Germany is making new legal arrangements with Denmark and Austria for gas supply in 2022–23. It has also approached Qatar for LNG supply.  

New investments/government initiatives: The country is building two liquefied natural gas (LNG) terminals that are expected to start by 2023. The government has rented 4 FSRUs (Floating Storage Regasification Unit (FSRU)) to import LNG from Norway. It is also planning to flow Algerian gas to Germany by expanding pipeline capacity connecting Spain and France. The government is incentivizing the saving of gas by industry and has already restarted coal-fired power plants as a substitute for gas.

France

Extended contracts with other partners: France signed a strategic energy deal with the United Arab Emirates (UAE) for joint investment in sectors like hydrogen, renewable, and nuclear energy.

New investments/government initiatives: The country plans to install an offshore terminal to receive LNG at the northern port of Le Havre in September 2023. France could requisition gas-powered electricity generation plants if gas supplies are threatened.

Italy

Extended contracts with other partners: In 2022, Italy concluded a deal to progressively increase Algerian gas deliveries to Italy through the Transmed pipeline by up to 9 billion cubic meters annually in 2023–24. The country is already in the process of entering into an agreement with Qatar and the US for gas supplies.

New investments/government initiatives: Italy is planning to expand its methane fields. The government has put mandates on the minimum and maximum levels for heating and cooling across the country. The Italian government is lending state-owned firm Gestore dei Servizi Energetici (GSE) 4 billion euros ($4.17 billion) to buy gas to boost stockpiles.

Poland

Extended contracts with other partners: The country has increased supply from Lithuania via the GIPL gas link. Poland is quadrupling its gas import capacity with a pipeline from Norway — dubbed Baltic Pipe — and an LNG terminal. It could soon be able to aid Germany and eliminate the need to import from Russia.

New investments/government initiatives: Poland's PGNiG plans to expand gas storage capacity to 4 billion cubic meters (+25%) by next year. The country’s few existing gas storage facilities are 97% full, but the current storage capacity of 3.2 billion cubic meters (bcm) is small compared to the annual consumption of about 20 bcm.

Czech Republic

Extended contracts with other partners: Energy company ČEZ and the Czech state have secured storage capacity in a liquefied natural gas (LNG) terminal in the Netherlands that will reduce dependence on Russian gas by roughly one-third. The terminal at Eemshaven, Netherlands, is still under construction and will go into service in Q3–Q4 2022.

New investments/government initiatives: The Czech Republic and Germany signed an agreement to accelerate the transition to low carbon energy and reduce Russian fossil fuel dependency. The Czech Republic plans massive expansion of nuclear energy to ensure energy security by 2036. Also, it has been filling up gas storage facilities, which are now about 80% full, to mitigate supply issues.

Bulgaria

Extended contracts with other countries: In July 2022, Azerbaijan agreed to supply Bulgaria additional 0.5–1 BCM of natural gas per year. In Q1 2022, the country agreed to deliver 1 BCM as well. A new pipeline via Greece will help the country import additional natural gas from Azerbaijan.

Government investments: Bulgaria and Greece completed the construction of the EUR 220 million gas interconnector with an annual capacity of 3 BCM that allows gas from Azerbaijan to flow to Italy and the wider Southeast Europe (SEE) region.

Romania

Extended contracts with other countries: The country is in talks with Hungary to sign a deal to increase the capacity of the current pipeline from 1.7 BCM to 2.5 BCM and subsequently to 3 BCM. Also, it has increased sourcing from Azerbaijan, Qatar, Egypt and the US.

Government investments: It is planning to tap into the offshore reserves of >200 BCM in the Black Sea. Furthermore, the government aims to increase coal-generated electricity production by 300 MW at the Oltenia Energy Complex, and production of energy from wind and solar sources by 950 MW.

Turkey

Extended contracts with other countries: Turkey is in talks with Israel and Turkmenistan to supply additional natural gas. The country also plans to increase supply from Algeria and Azerbaijan via TANAP.

Government investments: Turkey plans to rely on alternate sources of energy and targets to complete phase 1 of the 4.4 GW nuclear plant (Turkey’s first) by May 2023.

Therefore, the EU has taken steps to meet its energy requirements and reduce dependence on Russia. While it is a long process, it will help Europe gain self-sufficiency and tide over this lean period.