If the graphite in your smartphone could talk, what story would it tell? From the miners who extract it under unsafe working conditions to the traders who make or lose fortunes bringing it to market, graphite and other commodities steer the course of human lives up and down the supply chain.
The
precise details, however, have long remained a mystery to consumers. They might
see news reports of conflict minerals fueling civil war, children working in
mines, and environments razed and ruined by unsustainable practices, and can
only hope that they are not complicit. Commodity traders and investors are
similarly forced to grope their way through the dark, not just on point of
origin but also pricing, as many of the strategic commodities fueling the green
transition are not traded on public markets, muddying the waters on business
planning and procurement.
Such
unknowables have existed for as long as commodities have been traded. But
technology is now intervening to disrupt convention, paving the way for new and
ultimately more sustainable paradigms. Asset tokenization via blockchain
technology specifically holds out the promise of revolutionizing supply chains
by disclosing the mine source, chain of custody, and ESG practices of a given
commodity. This information is a game-changer for consumers looking to make
informed purchasing decisions: the graphite in their smartphones will finally
be able to tell its story.
Technology
alone is not enough; traders, investors, and consumers must be able to put it
to good use. What’s needed is for companies to step up and bridge the gap. One
notable example is Savala, which has partnered with DComm Blockchain to launch
an innovative trading platform that will initially focus on premium graphite
before expanding into other commodities. Transactions on the platform will be
facilitated via the DComm Blockchain Coin ($DCM), marking a leap forward in the
marriage of digital currency and commodity trading. But unlike
cryptocurrencies, which tend not to be backed by any hard assets, every token
will represent one ton of graphite.
This
novel approach can help alleviate longstanding issues in the commodity trading
space. For one, it allows grassroots investors to engage directly in commodity
markets for the first time, thus encouraging the democratization of a market
that has historically been dominated by elite interests. Two, it provides a
level of transparency hitherto impossible for traders and investors, opening
the door to better investment decisions. For example, investments can be guided
by a sense of social responsibility (purchasing from miners with a record of
ESG best practices) or geopolitical considerations (purchasing from miners
unlikely to be targeted by sanctions). And most importantly, trading portals
can act as a conduit for ESG-minded miners to raise capital, linking them up
with publics that had previously lacked the opportunities and technological
means to invest in commodities on their own terms. Commodity traders also
benefit from improved price discovery since portals can help pull the curtain
back on the opaque and top-heavy arena of privately traded commodities. End
users such as auto OEMs can leverage this price discovery to hedge or even buy
necessary inputs directly.
It’s no
coincidence that Savala has opted to focus on the premium graphite market, as
the commodity exemplifies many of the pitfalls of the status quo. In terms of
its importance, there can be no question – as a durable and excellent conductor
of heat and electricity, graphite finds its way into all manner of industrial
and consumer products. Chief among them, at least in the context of the global
energy transition, is lithium-ion batteries, which are expected to propel
graphite demand to new heights over the coming years. Yet sources of this
highly strategic commodity remain restricted to jurisdictions that carry
significant geopolitical or ESG risk. China, for example, accounts for 65% of
global graphite production and 90% of global refining, but its government
instituted export curbs in late 2023 citing national security concerns. Rights
organizations have expressed concern about Mozambique, the world’s
second-largest graphite producer at approximately 13% of global output, where
local livelihoods and ecosystems have allegedly been upended by large-scale
mining. In particular, nearly all graphite mining takes place in Cabo Delgado
province, home to a bloody and ongoing insurgency that has caused thousands of
deaths.
In light
of these supply chain issues, it comes as no surprise that Western governments
are scrambling to secure new avenues of graphite production and refining
capacity. The Savala portal can assist in the effort by tapping into new
sources of capital and channeling it toward responsible operators. Amid a
global energy transition at a critical time, the stakes couldn’t be higher. But
for the first time in human history, we can at the very least hold out hope for
a commodity boom that leaves the planet in a better state than what it found it
in.
**Richard
Garner has acted as an advisor to Savala Global. The views expressed in this
article belong to the authors alone and do not necessarily reflect those of
Geopoliticalmonitor.com.