In the Appalachian Mountains region in the United States, old coal mines leak red, acidic water loaded with heavy metals that are harmful to the environment, but they also contain rare metals, which are indispensable materials in several technologies, which have become of great importance on the geopolitical level.
These metals are used to make very powerful magnets, electric vehicles and windmills, as well as drones and combat aircraft.
These strategic resources fall into the core of the existing rivalry between the United States and China, which dominates the production and refining of these minerals.
Washington sees this quasi-monopoly as a danger and seeks to reduce its dependence on Beijing, search for new suppliers and develop its local companies.
The United States has only one rare earth mine, in the Mountain Pass region of California, where “light” elements are extracted. As for the “heavy” ones, the most difficult to extract and most in demand, the majority come from abroad.
“What is lacking nationally is raw materials,” said Mark Gavin, vice chancellor of West Virginia University. Researchers from his university discovered about 10 years ago that the acid mine drainage that comes from their exploitation and harms the environment contains some of these rare metals.
Thanks to public funding, researchers developed a prototype facility on the site of a former Appalachian coal mine in the Mount Storm area. The water seeping from the mine is initially collected in a basin in which red spots clearly indicate the acid drainage process. The water is then transported to a small factory slightly above the hillside, where it passes through three basins and is treated to remove pollutants and extract concentrated rare minerals. When the water comes out of the opposite part of the factory to be discharged into nature, its color turns blue.
Lance Lane, who manages the project, explained, “This process fulfills two goals: reclaiming the environment and recovering rare metals that constitute a valuable by-product.” The researcher pointed out that this process is becoming increasingly important, as acid mine drainage stores rare, naturally dissolved “heavy” metals whose extraction does not require the establishment of new mining projects.
However, the capacity of the facility at Mount Storm is limited and is equivalent to about four tons of rare metal oxides per year; Approximately 45 percent of them are “heavy” metals, which is a very small percentage of the American demand for these resources. The university intends to establish the project in different locations to create more supplies.
David Hoffman, an engineer at the university, pointed out that “if we produced 300 tons of rare earths per year from acid mine drainage, we could meet 7 to 8 percent of global demand.” Tommy LaRochelle, an engineer who specializes in developing rare metal extraction and refining processes, doubts the commercial benefit of the project, but he sees it as “a source of rare metals to ensure minimum supplies for military industries.” He pointed out that this is “possible in the short term if the political will and funding sources are available.”
After the concentrated rare metals are extracted, they must be separated from other elements and converted. However, the capabilities of the United States are limited in this area. In order to compensate for the delay, Washington is investing huge sums in companies for sorting, refining, and manufacturing magnets. This year, the startup company supervising the university project concluded an initial agreement with the REalloys group to process rare metals extracted from acid mine drainage water.
However, Mark Gavin noted that “even if we form similar partnerships, the problem will not be completely solved.” He added: “Without a doubt, we can add a significant amount of heavy rare metals to the supply chain that will allow the production of the magnets we need nationwide.” He asked: “Are we the solution?” both. Are we part of the solution? certainly".
The pressures facing global energy markets do not lie solely in rising crude oil prices; As supply disruptions continued in the Middle East and Russia, an important part of it moved to refineries that convert crude oil into gasoline, diesel, and jet fuel, so that the value of these products jumped compared to the cost of the crude that entered the refineries. These developments indicate that the refined fuel market has become more narrow than the crude market, at a time when refineries are operating at high rates to meet demand and compensate for the shortfall resulting from the failure of a number of facilities and the decline in exports of some producers.
The result is an increase in what is known as “refining margins,” which are one of the most important indicators that determine the profitability of refineries, but at the same time they help explain part of the increase that ultimately reaches the consumer at the gas station.
Simply put, the refining margin represents the difference between the value of the petroleum products a refinery produces and the cost of the crude oil it uses to produce them. One of the most famous of these indicators is the “3-2-1” crushing margin, which is a common standard in the American market. It assumes that the refinery buys 3 barrels of crude oil and converts them into two barrels of gasoline and one barrel of diesel. According to data reported by the Wall Street Journal, the “3-2-1” margin in the United States exceeded $70 per barrel last month, compared to usual levels in the low tens range.
The main reason is that the world is losing quantities of refined products at a faster rate than it is losing crude products. The war in Iran and unrest related to the Strait of Hormuz, along with Ukrainian attacks on Russian energy facilities and China's restrictions on fuel exports, have reduced the supply of gasoline, diesel and jet fuel. Here the paradox appears: refineries are still able in several regions to obtain crude and operate their units, but obtaining refined products has become more difficult.
Disturbances in the Strait of Hormuz have rearranged flows of oil and refined products around the world. In Europe, refineries replaced part of Middle Eastern supplies with crude from the United States, Kazakhstan, the North Sea, West Africa and Latin America. These changes mean that oil is still available, but it has become more expensive and complex to get to where refineries need it.
The pressure is not limited to the Middle East; The continuing Ukrainian attacks on Russian energy infrastructure have led to a decline in Russian refinery production to its lowest levels in more than two decades, according to Kpler data. Developments in Russia are particularly important for the diesel market; Moscow was one of the largest global exporters, before it imposed temporary restrictions on diesel exports, which led to a reduction in supplies available to European markets.
As for China, it presents a different case. The country has significant refining capacity, but it has imposed restrictions and quotas on fuel exports with the aim of enhancing domestic energy security. This policy limits the quantities of gasoline, diesel, and jet fuel available to foreign markets, prompting other Asian refineries to increase operating rates to compensate for the shortage.
It may seem at first glance that high refining margins mean that all oil companies are making equally huge profits, but the picture is more complex. The refinery benefits when the price of the products it produces is high compared to the cost of the raw material. Therefore, refining sector profits can rise even at a time when crude prices are not rising at the same rate.
High refining margins do not remain confined to the energy sector; The higher the cost of producing gasoline, diesel, and jet fuel, the greater the pressure on fuel prices, before its effects gradually spread to the transportation, shipping, aviation, and commodity sectors. In the United States, the average price of gasoline exceeded $7 per gallon this year, compared to about $3.16 a year ago. Thus, the refinery crisis could turn into a broader inflationary wave, because fuel is directly or indirectly included in the cost of transporting most goods and services.
The pressure is increasing because refineries in the United States and Europe do not have much space to raise production; After years of closing a number of refineries as a result of high operating costs and the shift towards low-carbon energy, available refining capacity has become more limited. Analysts say that operating refineries at more than 90 to 95 percent capacity means that the margin of operational flexibility becomes very small. In this case, the failure of a single refinery or the cessation of a major production unit can have a much greater impact on the market, because other refineries do not have enough spare capacity to quickly compensate for the shortage.
Pressure on refining margins may remain high in the coming months, especially with the start of seasonal refinery maintenance work, starting in September. These markets face a sensitive equation: constant demand for fuel, limited refining capacity, and more unstable global supplies.
