Based on the supply chains disruptions currently experienced by most industrial sectors, it is no surprise that many individuals are looking for ways to mitigate the impact these ongoing challenges might have on not only their businesses, but their customers as well. Valve World Americas recently had the pleasure of speaking with Lewis Black, CEO and Founder of Almonty Industries, who has a wealth of experience in the mining industry, and a unique perspective on global markets. He provided insight on many current issues including supply chain disruptions, the impact of the COVID-19 pandemic and the war in Ukraine and offered possible industry-specific solutions to combat the challenges of globalization.
By KCI Editorial
Supply Chain Disruptions
For over 15 years, Lewis Black has dedicated himself to the mining industry. He gained invaluable insights, first as the CEO of Primary Metals Inc., a former TSX-V listed tungsten mining company, and then as head of sales and marketing for SC Mining Tungsten, Thailand. Now as CEO and Founder of a major tungsten producer – tungsten is the dominant metal in many sectors including technology, semiconductors, and batteries – he has a unique perspective of the industrial market.
When asked to discuss the impact of the COVID-19 pandemic on global supply chains, Black was quick to point the finger at globalization. “Governments have all responded to COVID-19 at their own pace and with very different levels of competency. Ultimately, because there has been no coordination globally, in a world that functions as a global economy, it has created a very disruptive effect,” stated Black. The root cause of the issue stems, however, from where raw materials are produced. “Many would agree that the bulk of developed countries’ raw materials come from other countries,” suggested Black. “The issue with outsourcing all your raw materials, even if they are unappealing to produce yourself, is that it makes you completely reliant on others to produce common everyday goods.
As they say, you cannot have your proverbial cake and eat it too; supply chains are disrupted because many developed countries refuse to produce raw materials at home.” If the root cause of these issues continues to be ignored, a snowball effect will occur. Companies need to first off acknowledge that this is a global problem, not just a domestic problem, in order to properly address it. “We are all totally dependent on raw material supply from countries that may not be able to efficiently or effectively provide them.” As an example, Black recalls a time over a year ago when he ordered mills and crushing circuits, which are huge pieces of equipment. The order went seamlessly, and he was able to complete his project. If he were to place the same order today, things would be much different. The delivery would likely take more than two years, the price would be at least seventy percent more expensive, and even that two-year delivery date would be uncertain. Basic materials that were once easy to obtain are now not only problematic to source, but very costly as well.
Impact on the Valve Industry
The impact of the decision to outsource raw material, can be seen in the valve industry. To process Tungsten, which is a very abrasive metal, durable valve and pumping equipment is needed. As many of the materials needed to make these applications are produced locally the valve and pump companies, and by extension the production of tungsten, is impeded.
Supply chain problems affecting the valve and pump industry are not just created by current events; there are geopolitical factors as well. In the past, when industries expanded globally, the geopolitical risk that exists today, did not exist. No one could have predicted the closing of borders between countries during the pandemic, or the reduced or forbidden access to manufacturing sites in Russia and Ukraine. Black warned that “there will be a continuing knock-on effect, and I think it will just keep pouring gasoline on inflation if it is not addressed quickly.” He mentioned large building companies in Australia going out of business because they can no longer honor their fixed priced contracts, and cautions that the same could be true of valve suppliers if the cost of raw materials continues to escalate as it has been.
History Repeating Itself
So, is there a historical precedent for these kinds of supply chain disruptions that we have been seeing? Black says yes, and that we only need to look back about 50 years to see it. During the Cold War, he said “we really saw a sort of clear, defined line between us and them.” This divisive thinking persists into this day and age, manifesting as the current conflict between Russia and Ukraine. Some countries, chose to stockpile raw materials during the Cold War years, and they still do so to this day. Others went another direction and chose to sell their stockpile to make immediate profit. You can imagine which country is better equipped to deal with supply chain interruptions, whether minor or major.
According to Black, “we need to come up with a clear long-term strategy to show some diversification in our supply chain. It is not a question of being anti any country or supplier, it is a question of giving manufacturers the choice of where they can go shopping. Right now, they simply do not have that. As companies adapt to the current situations, individuals will see tier two and tier three companies look to new places for raw materials.” Ultimately, if not addressed soon, he cautioned, “people may start looking the other way, in terms of quality.” Unstable supply chains do not just affect the timing of deliveries and price of goods; they can affect the quality of products as well. Black advocates for supply integrity, both in good times and bad.
Possible Solutions
Knowing what companies and governments should do to maintain supply chain integrity is not the same as putting these ideas into practice. One strategy Black suggests is simply changing perspective. “Take mines, for example. Most developed nations do not want too many mines for raw materials in their backyards. Even if they did, the democratic process to approve and legalize that mine could take years, or even up to a decade. To change this negative view of mines, one need only look at the current global situation. Having access to raw materials on home soil has never been more politically appealing.”
Almonty Industries is currently reopening the world’s largest tungsten mine in South Korea. For South Koreans, this mine is very important because they are among the world’s largest consumers of tungsten. Black explained, “In the village where the mine is located, everyone there has some connection with the mine from the old days, and therefore, they are very supportive of having a mine reopen. Historically, their fathers worked there and their grandfathers worked there, so it is a source of enormous pride.”
One of the best things that governments can do is follow the stockpile model to ensure access to essential products. Simultaneously, Black asserted that, “we need to figure out what we can do about introducing more diversity into raw material supply chains, even if that means buying from the very countries that one is trying to diversify away from.” Companies also need to ensure that their mines are complying to the highest level of, environmental, social, and governance (ESG) criteria. Sometimes that means redesigning old projects to conform to higher standards, and being transparent in the design process, in order to remove the stigma associated with mines.
Lessons Learned
One of the best things that governments can do is follow the stockpile model to ensure access to essential products. Simultaneously, Black asserted that, “we need to figure out what we can do about introducing more diversity into raw material supply chains, even if that means buying from the very countries that one is trying to diversify away from.” Companies also need to ensure that their mines are complying to the highest level of, environmental, social, and governance (ESG) criteria. Sometimes that means redesigning old projects to conform to higher standards, and being transparent in the design process, in order to remove the stigma associated with mines.
“If I said to you three years ago that the governments of the world, could come together and close the entire planet down because of a virus…you would not believe me. It is like from a 70s B movie, it was just an impossible idea.” Black hits the nail on the head when describing these unprecedented times. We have lived through world events that no one could have imagined, and what these past years have revealed is that many globalized industries do not have a contingency plan for when globalization fails, and it is time to change that.