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Measuring the Level of Competition for Valuable Minerals

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Resource Monopolies: Measuring the Level of Competition for Valuable Minerals

Measuring Competition for Valuable Minerals

The Chart of the Week is a weekly Visual Capitalist feature on Fridays.

Everybody loves a little competition.

It levels the playing field and ensures prices and products are kept affordable and available. But how do you measure and track the competitiveness of specific sectors?

The Herfindahl-Hirschman Index (HHI) is a commonly accepted measurement of market concentration, and in today’s case, we use it to show which mineral sectors have healthy competition between countries, as well as the sectors that are more monopolistic.

What is the Herfindahl-Hirschman Index?

The HHI is calculated by squaring the market share of each competitor and then summing up the resulting numbers. It can range from zero to 10,000.

The closer a market is to a monopoly, the higher the market’s concentration, and the lower its competition. If there were only one company in an industry, that company would have a 100% share of the market, and the HHI would equal 10,000, demonstrating a monopoly.

Conversely, if there were thousands of firms competing, the HHI would be near zero, indicating almost perfect competition.

  • HHI below 1,500: a competitive marketplace
  • HHI between 1,500 – 2,500: a moderately concentrated marketplace
  • HHI of 2,500 or greater: a highly concentrated marketplace

Interestingly, the same technique is also used by the U.S. Department of Justice to look at market competition and potential anti-trust violators, as well.

Global Metal Production

Today’s chart uses data from the World Mining Congress to look at the competition for global minerals between countries. The HHI scores show the minerals most and least exposed to competition, while uncovering opportunities for countries looking to bolster their own mineral production.

Here are 33 minerals ranked, going from highest score (most monopolistic) to lowest (least monopolistic):

RankMineralHHI ScoreType of Mineral
#1Niobium (Nb2O5)8,413Iron and Ferro-Alloy Metals
#2REE (Rare Earth Elements)7,219Non-Ferrous Metals
#3Oil Sands6,871Mineral Fuels
#4Tungsten (W)6,828Iron and Ferro-Alloy Metals
#5Platinum (Pt)5,383Precious Metals
#6Graphite4,990Industrial Minerals
#7Asbestos3,738Industrial Minerals
#8Vanadium (V)3,573Iron and Ferro-Alloy Metals
#9Coking Coal3,423Mineral Fuels
#10Cobalt (Co)3,184Iron and Ferro-Alloy Metals
#11Palladium (Pd)3,163Precious Metals
#12Aluminum (Al)3,078Non-Ferrous Metals
#13Chromium (Cr2O3)2,942Iron and Ferro-Alloy Metals
#14Molybdenum (Mo)2,812Iron and Ferro-Alloy Metals
#15Boron (B)2,749Industrial Minerals
#16Lithium (Li2O)2,749Non-Ferrous Metals
#17Steam Coal2,639Mineral Fuels
#18Lead (Pb)2,505Non-Ferrous Metals
#19Uranium (U308)2,233Mineral Fuels
#20Tin (Sn)2,036Non-Ferrous Metals
#21Iron (Fe)2,015Iron and Ferro-Alloy Metals
#22Diamond1,904Gemstones
#23Zinc (Zn)1,687Non-Ferrous Metals
#24Manganese (Mn)1,627Iron and Ferro-Alloy Metals
#25Potash1,565Industrial Minerals
#26Copper (Cu)1,136Non-Ferrous Metals
#27Titanium (TIO2)1,120Iron and Ferro-Alloy Metals
#28Silver (Ag)1,015Precious Metals
#29Salt (NaCl)982Industrial Minerals
#30Nickel (Ni)949Iron and Ferro-Alloy Metals
#31Natural Gas884Mineral Fuels
#32Petroleum686Mineral Fuels
#33Gold (Au)557Precious Metals

The data here makes it clear that mineral production is not uniformly distributed throughout the world, giving some countries huge advantages while revealing potential supply problems down the road.

Renewables in the Spotlight

While commodities like gold and oil have robust levels of competition around the world, the renewable energy industry relies on more obscure raw materials to make solar, wind, and EVs work.

Rare earth elements (REE) rank #2 on the list with a HHI score of 7,219, while battery minerals such as graphite (#6), vanadium (#8), cobalt (#10), and lithium (#16) also appear high on the list as well.

According to a recent study, the production of rare earth elements is an area of particular concern. Used in everything from electric motors to wind turbines, rare earth demand will need to increase by twelve times by 2050 to reach emissions targets set by the Paris Agreement.

The only problem is that China currently controls 84% of global production, which increases the odds of bottlenecks and scarcity as demand rises. This ultimately creates an interesting scenario, where a sustainable future will be at the mercy of a few a producing nations.

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Explainer: What Key Factors Influence Gas Prices?

To help understand what’s happening at the pump, it’s important to first know what key factors dictate the price of gas.

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Explainer: What Key Factors Influence Gas Prices?

Across the United States, the cost of gas has been a hot topic of conversation lately, as prices reach record-breaking highs.

The national average now sits at $5.00 per gallon, and by the end of summer, this figure could grow to $6 per gallon, according to estimates by JPMorgan.

But before we can have an understanding of what’s happening at the pump, it’s important to first know what key factors dictate the price of gas.

This graphic, using data from the U.S. Energy Information Administration (EIA), outlines the main components that influence gas prices, providing each factor’s proportional impact on price.

The Four Main Factors

According to the EIA, there are four main factors that influence the price of gas:

  • Crude oil prices (54%)
  • Refining costs (14%)
  • Taxes (16%)
  • Distribution, and marketing costs (16%)

More than half the cost of filling your tank is influenced by the price of crude oil. Meanwhile, the rest of the price at the pump is split fairly equally between refining costs, marketing and distribution, and taxes.

Let’s look at each factor in more depth.

Crude Oil Prices

The most influential factor is the cost of crude oil, which is largely dictated by international supply and demand.

Despite being the world’s largest oil producer, the U.S. remains a net importer of crude oil, with the majority coming from Canada, Mexico, and Saudi Arabia. Because of America’s reliance on imports, U.S. gas prices are largely influenced by the global crude oil market.

A number of geopolitical factors can influence the crude oil market, but one of the biggest influences is the Organization of the Petroleum Exporting Countries (OPEC), led by Saudi Arabia.

Established in 1960, OPEC was created to combat U.S. dominance of the global oil market. OPEC sets production targets for its 13 member countries, and historically, oil prices have been linked to changes in OPEC production. Today, OPEC countries are responsible for about 60% of internationally traded petroleum.

Refining Costs

Oil needs to be refined into gasoline before it can be used by consumers, which is why refining costs are factored into the price of gas.

The U.S. has hundreds of refineries across the country. The country’s largest refinery, owned by the Saudi Arabian company ​​Saudi Aramco, processes around 607,000 barrels of oil per day.

The exact cost of refining varies, depending on a number of factors such as the type of crude oil used, the processing technology available at the refinery, and the gasoline requirements in specific parts of the country.

In general, refining capacity in the U.S. has not been keeping up with oil demand. Several refineries shut down throughout the pandemic, but even before COVID-19, refining capacity in the U.S. was lagging behind demand. Incredibly, there haven’t been any brand-new refining facilities built in the country since 1977.

Taxes

In the U.S., taxes also play a critical role in determining the price of gas.

Across America, the average gasoline tax is $0.57 per gallon, however, the exact amount fluctuates from state to state. Here’s a look at the top five states with the highest gas taxes:

RankStateGas tax (per gallon)
1California$0.87
2Illinois$0.78
3Pennsylvania$0.77
4Hawaii$0.77
5New Jersey$0.69

*Note: figures include both state and federal tax

States with high gas taxes usually spend the extra money on improvements to their infrastructure or local transportation. For instance, Illinois doubled its gas taxes in 2019 as part of a $45 billion infrastructure plan.

California, the state with the highest tax on gas, is expecting to see a rate increase this July, which will drive gas prices up by around three cents per gallon.

Distribution and Marketing Costs

Lastly, the costs of distribution and marketing have an impact on the price of gas.

Gasoline is typically shipped from refineries to local terminals via pipelines. From there, the gasoline is processed further to ensure it meets market requirements or local government standards.

Gas stations then distribute the final product to the consumer. The cost of running a gas station varies—some gas stations are owned and operated by brand-name refineries like Chevron, while others are smaller-scale operations owned by independent merchants.

The big-name brands run a lot of advertisements. According to Morning Consult, Chevron, BP PLC, Exxon Mobil Corp., and Royal Dutch Shell PLC aired TV advertisements in the U.S. more than 44,495 times between June 1, 2020, and Aug. 31, 2021.

How Does the Russia-Ukraine Conflict Impact U.S. Gas Prices?

If only a fraction of America’s oil comes from Russia, why is the Russia-Ukraine conflict impacting prices in the U.S.?

Because oil is bought and sold on a global commodities market. So, when countries imposed sanctions on Russian oil, that put a squeeze on global supply, which ultimately drove up prices.

This supply shock could keep prices high for a while unless the U.S. falls into a recession, which is a growing possibility based on how recent data is trending.

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Real Assets

Mapped: The 10 Largest Gold Mines in the World, by Production

Where in the world are the largest gold mines?

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map of the 10 largest gold mines in the world

The 10 Largest Gold Mines in the World, by Production

Gold mining is a global business, with hundreds of mining companies digging for the precious metal in dozens of countries.

But where exactly are the largest gold mines in the world?

The above infographic uses data compiled from S&P Global Market Intelligence and company reports to map the top 10 gold-producing mines in 2021.

Editor’s Note: The article uses publicly available global production data from the World Gold Council to calculate the production share of each mine. The percentages slightly differ from those calculated by S&P.

The Top Gold Mines in 2021

The 10 largest gold mines are located across nine different countries in North America, Oceania, Africa, and Asia.

Together, they accounted for around 13 million ounces or 12% of global gold production in 2021.

RankMineLocationProduction (ounces)% of global production
#1Nevada Gold Mines🇺🇸 U.S. 3,311,0002.9%
#2Muruntau🇺🇿 Uzbekistan 2,990,0202.6%
#3Grasberg🇮🇩 Indonesia 1,370,0001.2%
#4Olimpiada🇷🇺 Russia 1,184,0681.0%
#5Pueblo Viejo🇩🇴 Dominican Republic 814,0000.7%
#6Kibali🇨🇩 Democratic Republic of the Congo 812,0000.7%
#7Cadia🇦🇺 Australia 764,8950.7%
#8Lihir🇵🇬 Papua New Guinea 737,0820.6%
#9Canadian Malartic🇨🇦 Canada 714,7840.6%
#10Boddington🇦🇺 Australia 696,0000.6%
N/ATotalN/A13,393,84911.7%

Share of global gold production is based on 3,561 tonnes (114.5 million troy ounces) of 2021 production as per the World Gold Council.

In 2019, the world’s two largest gold miners—Barrick Gold and Newmont Corporation—announced a historic joint venture combining their operations in Nevada. The resulting joint corporation, Nevada Gold Mines, is now the world’s largest gold mining complex with six mines churning out over 3.3 million ounces annually.

Uzbekistan’s state-owned Muruntau mine, one of the world’s deepest open-pit operations, produced just under 3 million ounces, making it the second-largest gold mine. Muruntau represents over 80% of Uzbekistan’s overall gold production.

Only two other mines—Grasberg and Olimpiada—produced more than 1 million ounces of gold in 2021. Grasberg is not only the third-largest gold mine but also one of the largest copper mines in the world. Olimpiada, owned by Russian gold mining giant Polyus, holds around 26 million ounces of gold reserves.

Polyus was also recently crowned the biggest miner in terms of gold reserves globally, holding over 104 million ounces of proven and probable gold between all deposits.

How Profitable is Gold Mining?

The price of gold is up by around 50% since 2016, and it’s hovering near the all-time high of $2,000/oz.

That’s good news for gold miners, who achieved record-high profit margins in 2020. For every ounce of gold produced in 2020, gold miners pocketed $828 on average, significantly higher than the previous high of $666/oz set in 2011.

With inflation rates hitting decade-highs in several countries, gold mining could be a sector to watch, especially given gold’s status as a traditional inflation hedge.

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