Brian Swint

The mineral-rights deal signed April 30 was good news for Ukraine's war effort because it gives the U.S. more reasons to support the country in the fight against Russia. But for technology companies and artificial intelligence, practical benefits from the deal are years away.

The agreement gives the U.S. preferential access to resources in Ukraine and sets up a fund to invest in their extraction. It doesn't only cover minerals that are important raw materials, but also traditional energy resources such as oil and gas.

President Donald Trump's insistence on getting such a deal in exchange for continuing to support Ukraine on the battlefield can be seen as part of the global race for resources that will intensify over the coming decades.

Though reliable data are limited, Ukraine probably has an abundance of materials such as lithium, used in batteries, and titanium, which is used in everything from aircraft to golf clubs. It also has rare earth elements, which are used in electronics, lasers, and wind turbines. The problem is that the country doesn't have any commercially viable mines, at least not yet.

As the U.S. tries to wean itself off imports from China, one critical bottleneck for tech companies is that the world's second-largest economy is currently the biggest exporter of key minerals. That's not because China is the only place that has them. In fact, most of the minerals required to make the machines that will power AI in the future aren't that scarce, they're just not easy to access. Mining these materials is expensive, time consuming, and can be harsh on the surrounding environment.

It takes an average of 18 years to develop a mine, and costs $500 million to $1 billion to build one along with a separation plant, according to the Center for Strategic and International Studies.

This is where China is miles ahead of everyone else. It has the largest-scale extraction facilities. The U.S. Geological Survey calculates that more than half of U.S. needs for rare earths are met by imports from China. Some 93% of U.S. needs for yttrium, an element used in making LED lights, came from China last year.

The reliance on just a few countries for supplies is a particularly big issue for AI as tech firms such as Nvidia, Intel, and Amazon.com ramp up investment.

"As of 2023, 37% of AI - related imports were highly concentrated, with nations relying on three or fewer supplier countries per product -- 5 percentage points higher than non-AI trade," said analysts at Barclays led by Zornitsa Todorova. "More crucially, AI trade struggles to find alternative suppliers, unlike non-AI trade, which is typically concentrated by choice, rather than necessity."

The hope is that countries with undeveloped resources such as Ukraine will ease the bottleneck. But there's little prospect of that happening any time soon.

Write to Brian Swint at brian.swint@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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May 02, 2025 11:34 ET (15:34 GMT)

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