The Solution to the Global Energy Crisis

When people talk about “supply chain” issues, it could mean any number of things.

But one of the biggest, nastiest supply chain issues we’re facing right now is an energy crisis that is driving up prices and eating into material production. 

Europe has been especially hard-hit. Scorching temperatures have resulted in droughts so catastrophic that they’ve damaged infrastructure and transport hubs. 

In the most brutal instance, the water levels of one of the continent’s major arteries, the Rhine River, have fallen so low that barges can no longer pass through it. 

That’s a huge problem because the Rhine is what links the massive oil refineries and tank farms in the Amsterdam-Rotterdam-Antwerp (ARA) hub to Germany, France, and Switzerland. 

As a result, those countries are having to draw down their stockpiles ahead of schedule. 

In similarly bad news, diesel and gasoil stockpiles at the ARA hub are also well below their historical averages. This is because Russia’s invasion of Ukraine and the resulting sanctions have imperiled energy supplies from the east. 

Indeed, Russia supplies 60% of Europe’s diesel. The fuel and its distillates, like heating oil and gasoil, are absolutely vital for powering factories, heating homes, and gassing up cars and trucks.

That creates a knock-on effect that drives up prices for energy-intensive manufacturers, which must cut production or pass the higher prices on to consumers.

For example, Norsk Hydro ASA, a leading supplier of casted aluminum, plans to shutter an aluminum smelter in Slovakia at the end of September due to “high electricity prices, which show no signs of improvement in the short term.” 

Aluminum is one of the most energy-intensive metals to produce.

Nyrstar, another major global multi-metals business, has announced it will halt production at its giant Budel zinc facility in the Netherlands. 

These shutdowns will amplify the supply disruption that’s already seen Europe lose half of its zinc and aluminum smelting capacity over the past year.

At least a quarter of Europe’s nitrogen fertilizer capacity has been lost too.

Beyond metals, European sugar giant Südzucker AG has warned of higher prices as it passes higher energy prices on to consumers. 

The company also has emergency plans to switch from gas to other energy sources if Russia halts flows in response to sanctions, but that could be even more expensive, further exacerbating rising grocery bills. 

Indeed, these issues are problematic as it is, but they’re going to get even worse if fuel stocks aren’t replenished by winter. 

Because with Western sanctions set to take effect, the European Union is set to stop buying all seaborne Russian crude oil in early December and ban all Russian refined products two months later.

Of course, European manufacturers aren’t the only ones struggling with higher energy prices.

The aluminum sector in Sichuan, China, has been hampered by a drought that’s undermined crucial hydropower output. That’s forced smelter Henan Zhongfu Industry Co. to halt production there.

In fact, power cuts in the Sichuan province have affected more than 70% of local steel mills, either through production halts or rationing. 

Sichuan also produces a lot of the world’s silicon metal, which goes into everything from computer chips to cars. Its price just jumped 12% in a single week.

And finally, in the United States, Century Aluminum Co, the largest producer of primary aluminum in the United States, said in June that it would idle its smelter in Hawesville, Kentucky, for nine–12 months “as a direct result of skyrocketing energy costs.” 

At least two steel mills have suspended some operations to cut energy costs as well. 

Again, this crisis is only going to get worse. 

But there is one potential solution — and profit opportunity. 

My colleague Luke Burgess has been tracking a metal that is ultra-conductive. 

That’s important because roughly 10% of all the energy that’s produced in the world is lost in the transmission of power itself.

However, this metal, dubbed “Electricus,” can greatly reduce that waste, boosting energy efficiency and reducing power costs.

And Luke, a bona fide mining expert, has the details on the company that’s poised to profit from its widespread adoption. 

He just released a brand new report on it, and it’s a must-read. 

So check that out here.

Fight on,

Jason Simpkins

@OCSimpkins on Twitter

Jason Simpkins is Assistant Managing Editor of the Outsider Club and Investment Director of Wall Street's Proving Ground, a financial advisory focused on security companies and defense contractors. For more on Jason, check out his editor's page. 

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