It is tempting to look at the events in Tunisia, Egypt and Libya and, as shocking as the loss of life and bloodshed have been, at least console ourselves that this is a Middle Eastern problem, a product of decades of autocratic rule on a people who have only recently benefited from wider access to education, the Internet and rising aspirations. The impact on the oil price and on gold have been dramatic on the upside, while stock markets have taken a hammering as a consequence of fears over the impact a higher oil price could have on the global economies. Local stock markets have suffered even more, with Saudi Arabia’s dropping 20 percent according to an Economist article.
Whatever the ramifications for metals – in terms of heightened risk aversion by investors and so on – none of the countries involved so far are significant metals producers, largely consuming what they produce, as in the case of Egypt’s steel industry. But what happens if other populations gain a whiff of freedom and try standing up for their rights? China has been extremely sensitive to this risk, promptly jumping on the slightest hint of copycat gatherings. More vulnerable, Zimbabwe rounded up 46 leading dissidents, tortured them and locked them up last week for doing no more than holding an academic debate over the consequences for Zimbabwe of the events in North Africa. Zimbabwe has been treated by the rest of the world as an insignificant backwater, but for platinum and ferrochrome consumers, Zimbabwe is an important supply source and a major disruption there would have the potential to move prices.
Bolivia’s President Evo Morales has been forced to recant changes to natural gas prices following an uprising of popular opposition across the country. His government is not under any imminent danger of collapse but Tunisia’s unrest started from just such a rise in the cost of living for the poorest in society. Bolivia is a major source of zinc, silver, tin, lead, antimony, wolfram, and gold, not to mention a holder of what is estimated to be the world’s largest deposits of lithium for electric cars and modern electronics.
FT reports this week of an attempted coup in the Democratic Republic of Congo’s capital Kinshasa and, although it sent shivers through the copper and cobalt market, is probably more an indication of a power struggle or disgruntled corrupt minister than a popular uprising – however deeply unpopular President Joseph Kabila may be. The DRC is a major copper producer and the world’s largest source of cobalt by far, producing half the world’s output according to the latest USGS numbers.
Largely overlooked so far is the possibility of unrest in one of the many ex-Soviet central Asian republics, the “Stans” as they are sometimes collectively known. Kazakhstan, Uzbekistan and Tajikistan are all ruled by despots or strongmen with no interest in the democratic process, as is ex-Soviet Belarus. They all have disgruntled populations, are deeply corrupt, suffer from widespread nepotism and many have fractious religiously diverse societies – sound familiar? These countries are major sources of natural gas, oil and coal, but also iron ore, chromium, bauxite & aluminum, copper, gold, lead and zinc. While these countries tend to look more towards the unrest in neighboring Georgia and Ukraine than the Middle East, we should not underestimate the impact Tunisia and Egypt have had on populations everywhere. Unlike those countries, though, access to the Internet is very limited and foreign news channels are often not available, so the sensor has more opportunity to control events. Nevertheless, a breakdown of order in one could domino to others with profound implications for metals supply.
By. Stuart Burns
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