Chinese-built Artificial Intelligence (AI) systems have closed the performance gap with models from Silicon Valley.

Demand for Chinese AI is booming, across global enterprises.

Chinese systems are open-source, and cost about a tenth of comparable platforms from the United States.

China is taking over the "token economy" of AI, and is "exporting tokens" to users across the world.

Today most US tech companies, even the largest ones, use Chinese LLM's.

Report:

Good morning.

Upon the release of DeepSeek’s Large Language Model early last year, we predicted that it would be banned in Western countries. DeepSeek’s performance was on par with the best LLM’s out of Silicon Valley, and it didn’t cost anything to use. It is also open-source, so can be deployed easily by tech engineers.

That release of DeepSeek closed the gap in performance between Chinese AI systems, and those of the leading American models. In just one year, the difference in performance dropped by over 75%. And our thinking was, that DeepSeek was so transformative, and such a threat to other AI systems like OpenAI, that Western policymakers would have little choice but to ban it, along with the other Chinese LLM’s.

Since DeepSeek, Chinese labs have released over a dozen new top LLM systems, and narrowed that gap even further. And our thesis rested on that simple math, that the market capitalization of Wall Street itself has been driven by the Artificial Intelligence theme, and upstart Chinese companies are producing models that perform just as well, and for a fraction of the cost, so Washington would inevitably ban Chinese models, just like they did with Chinese electric cars.

None of that happened, and Chinese LLM’s are taking over everywhere. China’s newest export boom is in the AI tokens used to power these systems, as these Chinese labs have effectively commoditized the technology.

A “token” is the smallest unit of AI input, or output, and counting up tokens is how the industry measures itself. It’s a tiny chunk of data, just a handful of characters. Most AI companies offer their basic services for free, to users who don’t use a lot of tokens. But for bigger companies and creators, they cost, and users pay to make queries, and to generate results. The output costs much more than what it costs for the user to ask the questions, and questions that are more complex burn up a lot more tokens and computing power.

Chinese models now are the top three LLM’s used for this work: Xiomi, Alibaba, and DeepSeek.

Here in China, token usage increased over a thousand times in just two years. Again, this is a measure of AI usage itself, so we can say that Chinese companies and individuals are using AI at over a thousand times the levels of two years ago. Overall, AI usage here is almost twice as high as in the United States, and Chinese Large Language Models are also booming, everywhere. Not only here.

At the beginning of last year, China had five of the top 50 most-used LLM’s; now it’s twenty. And for the top 20 most used models, Chinese AI processed 98 trillion tokens last month, compared to US models at 53 trillion. Token demand is soaring, everywhere; it’s just growing much faster in China. Token usage in the United States grew by 43% in a single month, but in China it more than doubled:

These data also led us to believe that lawmakers would slam the door on these Chinese models in the American market. Chinese labs deploy their models at a far lower cost, compared to the hyperscalers in Silicon Valley:

This year, Chinese CapEx for AI from their top names is estimated at about $100 billion; those five American companies will spend $764 billion. The forecast for 2027 is for over a trillion dollars in new capital expenditures for American AI, over eight times what Chinese tech companies plan to spend.

We’ll pull back here to point out that those massive increases in demand—here in China—is putting a strain on some companies in the industry. In the beginning, AI users were making simple queries. Then as these models gained popularity, so did the complexity of the tasks, which grew to 10,000 tokens, and now to over 50,000 tokens, on average.

Chinese AI providers are making more money; Zhipu’s revenues went up 60 times in Q1 compared to last year; Alibaba is the company behind Qwen, and their revenues are up 15 times just since the beginning of this year. The lion’s share of the profits, though, are still being realized by the hardware side; the chipmakers, at least for now. The model companies’ revenues are rising, and steeply. But so is their cost of compute.

That dynamic is causing some Chinese labs to raise prices; the cost to use Tencent Cloud increased by over five times in March, and Alibaba, Zhipu, and ByteDance also hiked prices.

DeepSeek, however, went the other way. Their latest version is priced at just a fourth of their introductory product, and they rolled out dynamic pricing that is aimed at corporate users, who use their models during the workday.

But even with these price increases, Chinese models just cost far less than those on offer from Silicon Valley, and explains those big jumps in the exports, we can say, of Chinese AI tokens. The LLM’s out of China are “90% as good at 10% of the cost”, and American firms are buying more tokens from Chinese companies. In early 2025, token demand from Chinese LLM’s was about zero. Even the release of DeepSeek didn’t move the needle much, but by the end of the year the secret was out, and it’s been a choppy but steady ride up to 46%, today.

In the end, the enterprise users are switching to the Chinese models, because of far lower cost, with little impact on performance. DeepSeek’s V4 costs 14 cents per million tokens, compared to ChatGPT 5.5 at $5.00. For the high-volume enterprise consumers, the difference in cost is orders of magnitude higher, and so now DeepSeek and Alibaba combined are over 30% of the total token usage across the world.

This report concerns how commercial real estate firms in the United States are migrating to Chinese models, and why. Processing a 30-page lease agreement costs a few dollars using a Silicon Valley LLM; using a Chinese model costs a few pennies. For big real estate companies that manage lots of leases, that’s a material impact to their financials.

The stories are piling up, now, of companies—even major ones—in the United States who are dumping LLM’s put out by Silicon Valley companies, that are just up the street. Token usage is going up, compute costs are going up, and companies have no choice but to switch over. Lindy was using Claude, and moved completely—100%--of its AI work to DeepSeek. Their cost curve “crashed to the ground”, the company will save millions of dollars, and using DeepSeek means their company will survive, instead of going under.

Be Good.

Resources and links:

DeepSeek will be banned: it's good, it's fast, and it's free. So it cannot be allowed.

Another week, another DeepSeek, and another insane valuation for OpenAI
youtu.be/mmdX3yjTVic

The AI Trade Hits Overdrive, Powering Stocks to Historic Gains
https://www.wsj.com/finance/stocks/ai-stocks-trade-e7b19a9f

Just a Handful of AI Stocks Are Carrying Everything. History Says It Doesn’t Have to End Badly
https://www.aol.com/articles/just-handful-ai-stocks-carrying-143519000.html

AI Stocks Drive Nearly All of S&P 500’s Gains, Data Reveals
https://finance.yahoo.com/markets/stocks/articles/ai-stocks-drive-nearly-p-094305210.html

What is ‘tokenomics’ and how would China gain the edge in artificial intelligence era?
https://www.scmp.com/tech/big-tech/article/3347495/how-china-could-dominate-ai-eras-tokenomics-vast-power-grids-and-low-cost-models

‘Token economy’ emerging as AI use soars in China, experts tell conference
https://www.scmp.com/tech/article/3359974/token-economy-emerging-ai-use-soars-china-experts-tell-conference

AI TRENDS | China AI Model Weekly Token Usage Tops U.S. by More Than Fourfold, OpenRouter Data Shows
https://www.binance.com/en/square/post/07-13-2026-ai-trends-china-ai-model-weekly-token-usage-tops-u-s-by-more-than-fourfold-openrouter-data-shows-344159634300961

China’s AI Models Process 98 Trillion Tokens, 85% Above US
https://tech.yahoo.com/ai/articles/china-ai-models-process-98-123726333.html

The AI token takeover in China
https://www.businesstimes.com.sg/startups-tech/technology/ai-token-takeover-china

AI’s token economy revolution creates new China tech winners
https://www.businesstimes.com.sg/companies-markets/telcos-media-tech/ais-token-economy-revolution-creates-new-china-tech-winners

Cheaper AI is better: Soaring bills are reshaping how businesses choose models
https://www.businesstimes.com.sg/startups-tech/technology/cheaper-ai-better-soaring-bills-are-reshaping-how-businesses-choose-models

Chinese AI Models Now Capture Up to 46% of US Enterprise Token Usage
https://finance.yahoo.com/technology/ai/articles/chinese-ai-models-now-capture-020440715.html

Chinese AI models are gaining ground with U.S. companies as OpenAI, Anthropic costs surge
https://www.cnbc.com/2026/07/07/chinese-ai-models-costs-us-openai-anthropic.html

Chinese AI Models Hit 46% of US Usage: What It Means for CRE Investors
https://www.theaiconsultingnetwork.com/blog/chinese-ai-models-us-usage-cre-investors-2026

Why 80% of US AI Startups Switched to Chinese Models
https://www.newline.co/@Dipen/why-80percent-of-us-ai-startups-switched-to-chinese-models--9b216c28

Airbnb CEO Brian Chesky Called Chinese AI Fast And Cheap. Now, Congress Wants Answers
https://www.forbes.com/sites/anishasircar/2026/05/21/airbnb-ceo-brian-chesky-called-chinese-ai-fast-and-cheap-now-congress-wants-answers/

Companies that buy directly from Chinese manufacturers enjoy substantial cost savings, compared to going through local distributors and big box stores.

But there are other major advantages. Companies who do so are assured of new supply, even during times of supply chain stress.

In the construction industry, strong storms and other natural disasters result in acute shortages of materials needed to rebuild.

Globally, the industry suffers from a severe lack of construction supplies and materials, and despite soaring demand for tens of millions of new homes, builders cannot bid for jobs without those supplies on hand.

China's industrial trade fairs attract tens of millions of visitors a year, many from abroad. Tariffs and freight charges are surprisingly irrelevant in most of their sourcing decisions.

This is a transcript, for the YouTube video here:

Report:

Good morning.

This week our group is in Guangzhou, for the International Building Materials Show, . It’s a huge fair, the biggest in Asia, so we’re here along with 200,000 others, and nearly 10,000 from overseas.

In our previous video we walked through real-world examples, of why property developers and homebuilders in G7 countries are here, or sending their representatives to Guangzhou this week. There are enormous cost savings, even for small companies, by working directly with factories in China to source products. And those savings make for a competitive advantage in markets in the United States and Europe, for companies who are bidding on jobs.

Simply by eliminating the middleman companies and local distributors, and the big box stores, translates right away to double-digit percentage savings in materials costs.

There are other advantages in moving up the supply chain, and those involve ensuring that your own company can get materials in the first place, at price points and on delivery schedules that you control. Costs are rising, and steeply, and especially across the product lines that are hit by higher tariffs:

Building contractors in the United States face these higher costs for plumbing, heating and HVAC equipment, and lighting fixtures. For anything coming out of Chinese factories and heading to the US, higher tariff rates apply. And construction companies are paying them. That’s to say that local distributors, or big box stores like Lowe’s and Home Depot pay inbound freight and customs fees, and pass along those higher costs to their local customers.

You’re paying these tariffs and freight charges anyway, just paying someone else to do the paperwork and mark up the price for taking the trouble.

But another major driver of the higher costs, besides those tariffs, is the massive boom in materials demand every time there’s a fire in California, or a hurricane on the Gulf Coast. Builders everywhere have lots of work to do, but they can’t get materials. Clever local governments and contractors should have bought in bulk, in advance, and just pay the bill for storage so at least the materials are there when needed. Most did not, and do not, so builders are only now looking for substitute materials that ARE available.

This story in North Carolina is typical of builders almost everywhere—long wait times for high-quality building materials and appliances, which slow down projects and build times for companies, and for cities.

Builders who source direct from China, then, have far better control over their input costs, and avoid the problems of stockouts almost completely. They know that they have more containers on the way, and so can compete for jobs that other builders cannot. So that explains why there are a lot of visitors here from North America, in Guangzhou this week.

And there are thousands more from countries, where tens of millions of new housing units are needed to satisfy demand, right now, from booms in their middle class. Indonesia is the 4th largest country in the world by population, and has one of the fastest-growing economies in the world. What’s more, the country is spending $40 billion to move their capital.

Vietnam is another; the government there is building over a million new apartments over the next five years.

Of all the countries that will grow their consumer class by double-digit percentages in the next five years, only one—Egypt—is not in Asia. And that emerging middle class in Asia—they want new homes.

But the housing crunch is everywhere. It’s global. South and Central America need to build 100,000 homes a day, every day, for the next three years to meet today’s demand. Mexico needs 800,000 new houses a year; builders in Colombia need to build 400,000 a year.

So it’s a worldwide problem, and lots of people from lots of companies in lots of countries are here asking mostly the same questions. We are business buyers, buying in bulk, and we need them put on a ship. The people who are here aren’t looking for a sauna or a spa for their apartment in Shenzhen. They build apartments in Boston, or Bogota, and need 20 a month. And it’s the same story for all the exhibitors here. They’re meeting with buyers who need 5,000 smart doors and 20,000 windows.

Whole-home construction companies are here for custom builds in luxury markets; you send them the plans, they build the house, send it to you, and your crew puts it together.

We used the example in our previous video, of companies that build patios and decks, and the companies here in Guangzhou sell billions of dollars’ worth of supplies for that industry segment, to over a hundred countries.

Windows and doors. One company made $380 million selling armored doors. Another has everything you’ll need to build a football stadium or a convention center. So the booths for the armored doors and the stadium buildings don’t get as much foot traffic as most of the others, but the customers who do talk to them have all the money in the world. Or they are agents for the people who have all the money in the world.

There is another huge section that is mostly for the other Chinese companies here. The construction materials manufacturing industry requires expensive and complex machinery, so that they can offer wider and deeper product selections, at low cost.

Manufacturers have Minimum Order Quantities. But with this specialized heavy equipment here, building materials companies can scale up new production of small and custom orders, and offer low MOQ’s to their customers. And that’s a common feature in these Chinese industry fairs, too—giant sections that are for Chinese manufacturers, mainly, who need the newest and best equipment.

And these industry shows are everywhere in China, and attract tens of thousands of international visitors, coming for the same reasons. The same supply chain cost dynamics that drive small – but growing building contractors, source their most commonly used materials directly from factories China, are also motivating companies in the maritime industry to do the same thing.

Same for toys.

The foreigners who show up to the Beijing auto show, for example, or especially to the aftermarket car parts show--they’re not looking to buy a new sports car, or a new muffler. They need a hundred cars a month, or a thousand transmissions a year.

Industry trade shows are still the best way ever invented, whereby it’s possible to see in just a few days the new products that are coming to the industry, and to meet personally with the engineers who build them, and the companies that ship them to wherever you are.

An example here, of a company that my own group hopes to work with, as an OEM. They build soundproof cubicles and workstations that can be set up in airports, for example. I see them all the time in Asia, paid to use one a few months ago, and just learned how much they cost and that the payback period on them is just a few months. Put them in a nice area with internet, and those things are a license to print money, and if money is one of those things that you like, it’s another reason to hit these industry shows, to learn of these opportunities before other people in your neighborhood do.

Be Good.

Resources and links:

Are higher construction materials prices the new normal?

https://www.bcis.co.uk/insight/are-higher-construction-materials-prices-the-new-normal/

Why are construction material prices rising?

https://www.constructionnews.co.uk/sections/long-reads/why-are-construction-material-prices-rising-14-05-2026/

The Battle for Recovery Supplies Is On in a Disaster-Strewn America

https://www.wsj.com/business/the-battle-for-recovery-supplies-is-on-in-a-disaster-strewn-america-46d191bf

Construction Costs on the Rise: Unpacking the PPI Price Surge

https://news.constructconnect.com/construction-costs-on-the-rise-unpacking-the-ppi-price-surge

IFC Scaling Housing Finance in Africa

https://www.ifc.org/content/dam/ifc/doc/2024/scaling-housing-finance-in-africa-factsheet.pdf

LATIN AMERICA RESIDENTIAL REAL ESTATE MARKET SIZE & SHARE ANALYSIS - GROWTH TRENDS AND FORECAST (2026 - 2031)

https://www.mordorintelligence.com/industry-reports/residential-real-estate-market-in-latin-america

Latin America will need to build 100,000 homes per day until 2030 to meet housing demand, warns the World Bank

https://inmobiliario.do/en/latin-america-will-have-to-build-100-000-homes-a-day-until-2030-to-meet-housing-demand-warns-the-world-bank/

Insight: The Top 5 Global Construction Markets

https://www.oxfordeconomics.com/resource/insight-the-top-5-global-construction-markets/

The World’s Largest Consumer Markets in 2030

https://www.visualcapitalist.com/the-worlds-largest-consumer-markets-in-2030/

https://www.china-toy-expo.com/en

https://www.chinabizgateway.com/china-trade-fairs-2026/auto-china-2026-beijing

The International Building Fair attracts tens of thousands of homebuilders and property developers to Guangzhou, along with thousands more sourcing agents.

Building materials and supplies are in shortage in most global markets. Soaring costs for land transport, and for warehouse services, mean that even small building companies can save hundreds of thousands of dollars per year, by directly sourcing their materials from Chinese factories.

Eliminating local distributors and box stores cuts product costs by up to half, including freight. It also eliminates the stockouts problem that is such a challenge to builders.

We run the numbers on three small- and medium-sized businesses. Should they source their products directly from Chinese factories? And should they use their own trucks to pick up containers at the nearest port of entry? Or should they outsource freight operations completely?

Report:

Good morning.

This week we are at the International Building Fair in Guangzhou, which is the biggest show in Asia for the construction and building industry.

There are 200,000 visitors overall, including 8,000 buyers from across the world from over a hundred countries. We’re all here to buy direct, from these Chinese companies, most of whom in turn have large manufacturing facilities nearby, here in Guangdong province. It’s convenient, then, for visitors here to visit the factories personally.

This is yet another feature of China’s industrial clustering policy—companies are deliberately grouped together, to share the same labor pools, raw materials supply chains, and logistics systems—inbound and for export.

So thousands of foreign visitors flew in to attend, and tens of thousands more companies are sending their China-based sourcing agents to the fair. This is Alexander, he’s from Brazil, and lives in Zhongshan, about 90 minutes away. That puts him next door to the factories that build half the furniture in the world in Foshan, and 80% of the world’s consumer electronics.

He also knows our channel, and told us that all the business his group does is in local currencies only—companies in Brazil deal in real, companies here in Chinese RMB, no US banks, no US dollars. Millions of dollars a month going through financial networks and systems that did not exist three years ago.

Kamal is back and forth between California and Foshan, and his team works with major developers in the United States and India. They build hotels, hospitals, restaurants, even amusement parks—turnkey, for the biggest hospitality brands in the world. They source everything from China, including the furniture and signage, put them in containers, and ship them to local construction crews.

And that’s why that 8,000+ number is misleading. Just in the cases of Alex and Kamal, they are just two guys, but represent dozens of companies, buying hundreds of millions of dollars in products every year.

Their careers exist because companies in their home countries need people here on the ground, who can do sourcing and quality control, and who live and work here in China full-time. They exist, in the case of this particular trade fair, because when construction companies and property developers across the world grow to a certain size, they make a lot more money by sourcing their materials directly from the factories who are here.

Let’s use three examples of typical small- to medium-sized businesses in the United States. We’ll go to Google and use their AI to help us. Example one: A company in Arkansas installs air conditioning units. Average home size is 1800 square feet, and they install 4 systems a week. Right now they’re buying the units from local suppliers, or a box store, and they want an estimate on what cost savings there may be, to buy directly from China, and whether they should consider a change to their supply chain:

Answer: Yes, probably. Estimated net savings are over $100,000 per year, and over $500 per installation. The company is doing 200 units a year, and buying directly from Chinese manufacturers means big cost savings at the manufacturer level, but of course now the company is paying for the transportation and tariffs that right now are paid by their wholesaler.

There are some other considerations—buying their AC units by container allows for 11 weeks of inventory for each shipping container, so they’ll need warehouse space available for that. And there are documents they will need from the Chinese factory, so they will be approved for the Arkansas market.

I added this question above to the AI agent, and shared it onscreen and it will save you time, because it breaks out the same, every single time we run the numbers. Most construction companies have their own trucks, and they ask us if they can save money by picking up their containers at the port when they come off the ship. This company has its own trucks, should they drive to Houston themselves, and pick up their shipment? Answer. On paper you might save some money. In the real world, you will not. We’re coming back to this later.

Scenario two. A company in Kansas City builds decks and patios. They use composite decking materials, do about 170 jobs a year, and a third of those include jacuzzis. The projects involving spas they price on a cost-plus basis. Average base project of $20,000, with a materials cost of $6,000. Should they consider sourcing those materials from China, yes or no?

Answer here is unequivocal, and they need to be here in Guangzhou right now. At those business volumes, they will put over $400,000 a year directly to their bottom line, by sourcing their decking materials and spas from factories here.

Those cost savings can go to profits, by maintaining present sales volumes and pricing to their customers, or they can serve as a key competitive advantage in competing for other work in the Kansas City market, by lowering their price.

I asked the same question as before: This company has their own trucks, should they go to the Port of Long Beach to pick up their containers? Answer to that one is a hard no, but they should look carefully into sending their trucks to the intermodal transportation yard to pick up there. Using their company trucks for that leg, back and forth to the railroad yard, might save over a thousand dollars a month, and $500 to $800 per container. That assumes the drivers and trucks aren’t otherwise committed doing something else more valuable, but we have an idea of what that number is.

That’s a good rule to remember for inland transportation and logistics—you never want to use your own trucks for ocean port pickups—don’t even think about trying to get into the Port of LA or Newark or Houston. But if there is an intermodal shipment by rail, if your trucks are compliant, then the math changes completely.

Scenario 3: a builder of apartments and hotels in Florida. Next year they will build 800 1- and 2-bedroom units in 10 locations, and want to know about direct sourcing of cabinets, flooring materials, and windows.

So we have another example of a company that is not a huge developer, building thousands of homes. They’re also not too small, and doing one-off builds. They have a standard bill of materials across most of their business:

Answer: Overall, sourcing from China will result in cost savings of $4,000 to $8,000 per unit, and at 800 units that is over half a million dollars in cost savings. So it is a firm “yes” on the cabinetry and flooring materials. Savings of 40-50% there by buying direct from China.

On the windows, they will realize a savings of 30-40%, but “proceed with extreme caution”. Florida has some of the toughest building codes in the country, and the windows and doors and the roofs need to survive major hurricanes.

Guangzhou is in South China, and hurricanes are called typhoons here, and these factories build millions of windows a year for climates that are just like Florida’s. The trick is to work with factories here who have the documentation, in English in this case, that can be shown to local building inspectors.

So in the case of this company, they should be here looking at the flooring and cabinet suppliers, and talking very closely with the factories here who have export experience in South Florida.

A few more important points. Building contractors and homebuilders already know the local building codes and regulations that need to be followed, to get projects approved by inspectors. And the factories here in Guangdong have deep experience building for developers across the world, and in compliance with all those building codes.

And they are already supplying materials to your market, right now. These are factories your company is already buying from, but via middle men and the big box stores. And the companies that are here, buying direct, faced the same math problems we just ran earlier. The economics of supply chain management argue hard against using distributors for products that your business buys and consumes in bulk.

For what we mean, consider these charges from Amazon, for their stores. Amazon runs a program called Fulfillment By Amazon, or FBA. It’s an end-to-end system of logistics and delivery, order fulfillment, and warehousing. Amazon has one of the most efficient inventory management systems in the world, and millions of sellers are on the FBA platform, who use Amazon to handle their product inventories.

This is their fee schedule, to do that work for e-commerce companies. And there are very high fees for large and bulky items. There are also high handling fees for heavy items.

Bulky products take up a lot of shelf space, which is an opportunity cost problem, and Amazon charges their stores for that, which are passed along again to the end buyer.

Heavy products need special equipment to move them off one truck, on a shelf, and then to another to ship it to the final customer, and the end buyer pays for that. Lowe’s and Home Depot have those same problems, and so do specialty distributors. They unload a container, break open the pallets, store the products in their warehouse, wait for orders to come in, load them onto trucks—either theirs or yours—and pass along their costs for all that, with a high markup.

Building materials are heavy, they are bulky, and need to be handled carefully, often by two or more people, or even equipment. Your company is doing that work, now, in your own warehouse. And that is where those savings come from, when just sourcing these materials yourself. Your shipping costs are going higher, as a line item—you’re paying to send them from China, instead of from down the street. But your product costs overall drop by between 30 and 50%, including the shipping.

This show is for the building trades, and for companies across the world who source directly from the factories here in China who manufacture the construction materials and supplies. But those same inventory management and supply chain economics that inform homebuilders and property developers in their businesses, are also applied by companies in other industries, and explains why those executives head to other trade shows here in China, and arrange for direct sourcing and shipping.

And that leads to a final point, which is that some of the most important people you work with are the shipping agents. When your company moves to sourcing products directly from China, you’re likely making these decisions for the first time, and it’s a steep learning curve to buy customs bonds, for example, or to know whether CIF or DDP shipping terms are most appropriate for your company, and why.

Answering those questions intelligently involves a deep understanding of shipping costs, customs procedures, tariff schedules—and few companies have those resources in-house to know the answers. There are teams of people at every single one of these trade shows, and in every single industrial zone in China, who handle all that business for dozens of factories, and for thousands of foreign companies who buy from them.

We used an example earlier, of how sending your own company trucks to the port to pick up your own containers is a lousy idea, a hundred times out of a hundred. I feel the same way about this—especially in the beginning of that process for your company, use people here in China to figure out the best way to get your materials to you, and prepare all the documentation for the government agencies between here and there.

You will not save money, or time, doing that yourself until several inventory turns in, so don’t try it until later. By buying direct, your cost savings are hundreds of thousands of dollars a year, IF the customs paperwork is right at the point of entry, and IF the logistics run smoothly from the back door of the factory here to the front door of your company.

Let these guys here focus on those things, and your guys there can focus on building decks and apartments.

Be Good.

Resources and links:

International Building Show
https://www.cbdfair-gz.com/en

Production locations in Guangdong
https://www.guangzhousourcing.com/blog/procurement-services-2/production-locations-in-guangdong-which-kind-of-products-are-being-made-where-10

2026 US FBA fulfillment fee changes
https://sellercentral.amazon.com/help/hub/reference/external/GABBX6GZPA8MSZGW?locale=en-US

Graphics: Typhoons in China over past 70 years
https://news.cgtn.com/news/2019-07-12/Typhoons-in-China-IfupsSShaw/index.html

Urbanization and industrial clustering power China's rise in innovation

A Guide to Understanding International Trade Incoterms
https://www.accb.nyc/single-post/demystifying-incoterms-a-guide-to-understanding-international-trade

Contact info:
Alexander (Brazil-China)
WeChat is +86 173 2242 1357
WhatsApp +55 37 99868 2032

Kamal (US-India-China)
Kamalwalia@abssupplychain.com
+17078584711

Massive deposits of industrial metals and rare earths are over two kilometers below the earth's surface.

Identifying the location of those reserves requires revolutionary, ultra-high-powered antennas.

Breakthroughs in boring technology and materials science are necessary to recover those metals at depth, safely and at scale.

China has monopolies on both the antennas, and the large boring machines that make the deep mining of the Earth's lithosphere possible.

Report:

Good morning.

The whole world is now aware of the rare earth metals problem, and where they are. Three fourths of the most important raw materials that will power the rest of this century are in the Global Majority countries, and the demand for all these metals is accelerating. The BRICS bloc is growing, and so is the strategic value of their raw materials.

And the fact that those countries have such a dominant position in the rare earths industries means that it is they who can work together, and exchange technologies and capital, in ways that countries outside that bloc cannot. BRICS members are self-reliant, right now, and their position is only going to strengthen, over time, as new countries join.

That means that the so-called developed countries are already far behind, and are racing to catch up. At the G7 meeting that just finished, they agreed that no single country should be the source of more than 60% of their rare earth imports, and set that target for 2030. Past that, they hope to get it down to 50% as soon as possible.

Those targets were aimed at China, in particular, and in particular again on behalf of NATO weapons makers. This was the only topic that the G7 reps could agree on, given all the problems with Iran and the Hormuz closures and the trade wars. On this question though, “the members were all aligned” on the need to diversify their supplies of critical minerals.

China has firm control of the refining of these materials, with monopolies on several of them. But China is just one of those countries who, collectively, have most of the world’s reserves to begin with.

It is that problem that animates the high interest from Washington to take over Greenland. Rare earths are necessary for the manufacture of magnets, and China has a monopoly on the permanent magnets too, and makes nine times more magnets than the rest of the world, combined.

So companies are setting up in Greenland and signing mineral rights deals, in the hope of landing big Pentagon contracts. And under US law, time is running out. Six months from now, contractors cannot deliver any materials that are mined or refined or separated or melted or produced in China or in Russia or in Iran or in North Korea.

The Pentagon is doubtless going to ask for and get a waiver for that rule, just like they did for the law to “rip and replace” Huawei telecom gear from defense communications networks across the world. They’ll never make it by the 1 January deadline. But that rule makes for a traceability problem for Pentagon suppliers. They are required to know the source of every piece of metal inside every component that goes into a weapons platform.

The second problem is how to source enough new supplies, fast enough. And hauling the metal ores out of Greenland is just the first step—then comes the “messy middle”—the separating and refining – before the manufacturing process can even begin.

China has a problem too, though. Most of the world’s minerals aren’t near the surface of the earth, but deeper down. Geologists discovered that 85% of total deposits, and all of the largest ones, are along the fringes of the earth’s lithosphere. That is the Upper Mantle, and the crust, up to about 170 kilometers below the surface. Up until now, geologists poke around with hammers to learn where new mines are supposed to go.

But that’s not enough for what we’ll need from now on. Over the next 25 years, base metals demand will be higher than all the output from all the mines, in human history. To put that into perspective, this is the global mining output for just one single year, 2022.

Iron ore was 2.6 billion tons. All the industrial metals totaled 185 million tons. Put another way, iron ore extraction– steelmaking -- is 14 times larger than all the other industrial metals, combined. And production of all those industrial metals is 120 times greater than that of strategic and precious metals. And it is those metals that are in highest demand by heavy industry, technology, and defense contractors, and where we need to produce, again, in the next 25 years the combined historical production up to now.

And the only way to make that happen, is to go deep, to where the biggest untapped reserves are. The China Geological Survey estimates that they have over five times as much antimony up to 2 kilometers deep. In the case of tungsten, there is three times more at depth, than near the surface. That 3-to-1 ratio holds for other critical minerals, and for gold, zinc, and lead it’s four to one.

So the Chinese are building new technologies to go after them. This giant antenna is five times the size of New York city, and is used to identify ores and energy deep under the earth’s surface. So far, they’ve discovered the world’s largest deposit of gold, and vast new uranium reserves. Chinese geologists are deploying these massive wireless electromagnetic systems across the country, to find new deposits between 500 and 2,000 meters under the surface. There is a trade-off between power and accuracy, but high-powered systems are crucial to drown out the other signal interference.

All the ultra-high-powered systems in the field, globally, are in China. So the Chinese have monopolies now on the large antenna systems to find deep reserves. But that’s only half the problem.

Part II is getting down there. This is a 500-ton boring machine, used to drill a kilometer down. Mining is much slower and riskier the deeper they go, so mining engineers need to invent a different way. During the testing of that machine, efficiency dropped by half when it bumped into dense rock. First idea was to go right through it, then they learned that angling the tools broke the rock open faster. Then the next problem was how to get those chunks out of the way; they need to be brought to the surface, and for six months the engineering team couldn’t figure out how to do it. Apparently, they took some time off to visit a park in Hunan, saw a 2,000-year-old irrigation system, and built one just like it at their mine. Now it hauls up the equivalent of 10 truckloads at a time.

Then they had to figure out how to keep the sidewalls from caving in. Borehole walls tend to quickly collapse on themselves, so the researchers created a system of concrete reinforcements which can be deployed from the surface, while allowing for the drill to continue its work tunneling down.

This is deep mining at industrial scale, and it’s another race all its own. The countries that can do this work safely, in high volumes, will enjoy long-lasting advantages. And here we run into Chinese monopolies again.

Chinese firms have built over 4,000 tunnel boring machines, and have 70 percent of the world’s market share. China also has all – 100% -- of the ultra-high-powered antennas that can inform their geologists where to send those boring machines.

And let’s remember again the advantages these BRICS countries have, by virtue of their partnerships with each other—those are the countries that will share and use and further develop all these technologies, that China has monopolies on.

Be Good.

Resources and links:

G7 Aims to See China Supply No More Than 60% of Rare Earths
https://www.bloomberg.com/news/articles/2026-06-17/g7-aims-to-ensure-china-supplies-no-more-than-60-of-rare-earths

China is killing the race for critical minerals with the largest antenna on Earth
https://www.scmp.com/news/china/science/article/3325178/china-killing-race-critical-minerals-largest-antenna-earth

Mining revolution: China’s 500-tonne ‘underground carrier’ tunnels a kilometre to mine ore
https://www.thestar.com.my/aseanplus/aseanplus-news/2026/04/10/mining-revolution-chinas-500-tonne-underground-carrier-tunnels-a-kilometre-to-mine-ore

Tunneling machine highlights rise of Chinese manufacturing
https://english.news.cn/20251109/47a9230d643347faabc90178e82c930b/c.html

Global distribution of sediment-hosted metals controlled by craton edge stability
https://www.nature.com/articles/s41561-020-0593-2

All the metals mined in 2022
https://www.reddit.com/r/Infographics/comments/17w2ctk/all_the_metals_we_mined_in_2022/#lightbox

China finds uranium at ‘impossible’ depth: scientists
https://www.scmp.com/news/china/science/article/3179441/china-finds-uranium-impossible-depth-scientists

BRICS expands to 56% of world population, 44% of global GDP: Vietnam joins as partner country
https://geopoliticaleconomy.com/2025/07/04/brics-expansion-population-gdp-vietnam/

Geologists Identify Deep-Earth Structures That May Signal Hidden Metal Lodes
https://science.fas.columbia.edu/news/geologists-identify-deep-earth-structures-that-may-signal-hidden-metal-lodes/

The Pentagon and FCC have a big Huawei problem: there are no substitutes, and there's no more money

The Russian gas industry is under heavy sanction by Western governments.

Nevertheless, high volumes of Russian helium and other energy supplies find their way into global markets, via middlemen in China.

In the opening days of the Persian Gulf War, Iran hit Qatar's massive Ras Laffan gas complex with drones and missiles, immediately switching off a third of the global supply of helium for up to five years.

Helium distributors are rationing shipments, raising prices, and prioritizing deliveries to hospitals and the highest-margin customers in the tech industry.

Report:

Good morning.

The BRICS and Global South countries are re-organizing the trade flows of the world, and thereby working around sanctions from Western governments. And then the War in the Persian Gulf, and the closure of the Strait of Hormuz, have blown up supply chains across the non-BRICS countries.

Today we’re on the helium problem. There are Western sanctions on Russian producers of helium, so markets had to find another way to get it. Chinese firms stepped in and now serve as a conduit for helium gas markets, by buying surplus supplies and exporting them to other countries, including in Europe, who just pay higher prices for Russian helium by transshipping it via Asia first. Russian shipments to China last year were 38 million cubic feet per month on average, which was an increase of over 60% from 2024. Last December, helium exports from Russia to China were more nearly twice that, at 71 million cubic feet.

The demand for Russian energy never went away—Russia is a low-cost producer of almost everything. What the BRICS countries have done is build a trading system that gets around all those Western economic sanctions. The EU has 20 comprehensive sanctions packages targeting Russia.

But last month 20,000 delegates from 100 countries showed up in Saint Petersburg, to learn how to do business with Russia using the new financial systems set up in the new economic bloc.

Back to helium. China uses a lot of helium, and last year Qatar supplied over half of China’s total import demand.

This is a chart of 2025 helium production. The United States supplies over 40% of total production, and Qatar was at over 2 million cubic feet, which was a third of global supply.

That’s all past tense, because this year, 2026, brought us the War on Iran, and in the opening days of the war Iran hit that refinery, in Qatar, with drones and missiles. Suddenly that one-third of global helium supplies disappeared. And no matter what happens in the so-called peace talks, the helium supply chain out of Qatar is a years-long repair job, and helium distributors urgently began rationing their supplies.

Helium is used across many key industries, and dealers immediately began prioritizing their customers, with healthcare providers on the very top, and everybody everywhere paying higher prices, if they can get the gas at all. Airgas is a US company; its headquarters is in Pennsylvania. And the US produces 42% of the world’s helium supply—and it’s even a lot higher than that now that Qatar is gone—but nevertheless American companies selling American helium to American buyers are cutting down shipments and adding surcharges.

The shortages will last for up to five years, no matter what happens with shipping through the Hormuz. And it’s not a money problem either. Gas turbines for the refrigeration compressors are backlogged by at least 2 years, and only three manufacturers in the world make them.

So here’s a table that is helpfully updated to show where the industry is. These are individual helium production facilities, and the top two by volume are in the United States. At #6, the Ras Laffan plant in Qatar is offline, 33% gone out of the market completely. There’s Russia at #11, at about 10% of the market pre-Iran, but those supplies are under sanction and unavailable to everyone who isn’t already working with a Chinese middleman.

Unlike other gases, and crude oil, which can be stockpiled over years and drained to keep prices artificially low during wartime, helium cannot be. The helium supply chain is wholly reliant on constant production and delivery, and there is another problem with those special super-cooled containers. There are only 2,000 of them in the world, and a lot of them are stuck in the Gulf:

Here is a map that shows the problem faced by the Qataris, and everyone else in the world who needs helium. There is only one way out, many of the helium container ships are stuck, and emergency stockpiles—which are small to begin with because of the chemical nature of helium itself—are almost all gone:

Semiconductor manufacturing is a trillion-dollar industry, but even chipmakers take a back seat to hospitals during a helium shortage. The semiconductor industry is forced to implement “allocation tiers” to prioritize users there. AI server hardware is the most profitable use of helium, so they’re probably first in line.

This is the Bloomberg Intelligence forecast for what is coming next, for the tech industry.

Short term: chipmaking for consumer electronics will be delayed, along with new product releases and shipments. Data Center growth will be limited, because of hits to cloud storage networks. So that’s the good news for summer.

Medium term. Big impacts for wafers, and in memory packaging. Shortages of AI accelerators, and enterprise AI software costs will shoot higher.

Governments “likely to mandate permanent structure exit from Middle Eastern raw material agreements”, which will force companies to sign long-term contracts with American suppliers, at higher cost. And remember that Airgas can’t supply their own customers, right now.

Long term, countries with access to natural gas fields and helium reserves will gain a permanent operational and financial advantage over everyone else.

That sounds like Russia. We’re back to them again; they have vast reserves, lots of pipelines, and lots of natural gas. So it’s a boon to Russian helium producers like Gazprom.

Where does that leave everyone else?

Canada sees an opportunity too: Canadian companies produce three percent of global supply, but has large, untapped reserves. Currently Canada exports their helium to the US for processing and liquefaction.

So their idea, now, is to try putting some new policies in place, then drive fresh capital investment into the sector, and then build their own liquefaction industry, and get their fields in Saskatchewan producing three times more helium than they do now. That will create “a secure helium supply chain for Canada” and their allies. Five years from now.

Be good.

Resources and links:

Russian sanctions drive China’s expanding role in helium trade
https://www.gasworld.com/story/russian-sanctions-drive-chinas-expanding-role-in-helium-trade/2252158.article.article.article/

Charted: Helium Production by Country
https://elements.visualcapitalist.com/charted-helium-production-by-country/

2026 Helium Shortage: Why Recovery Will Take Years, Not Weeks
https://westairgases.com/blog/helium-shortage/

The Iran war has spiked helium prices. Here's which products and industries could get more expensive.
https://www.businessinsider.com/helium-prices-iran-war-increase-products-industries-more-expensive-2026-4

Cloud data storage impacted by helium supply shock
https://www.gasworld.com/story/cloud-data-storage-impacted-by-helium-supply-shock/2251688.article.article/

Iran war squeezes critical supplies and global alliances
https://www.gisreportsonline.com/r/iran-war-strains/

Helium Supply Shock and Semiconductor Volatility in the Context of the Iran War
https://bisi.org.uk/reports/helium-supply-shock-and-semiconductor-volatility-in-the-context-of-the-iran-war

‘There’s a global supply crisis’: Helium shortage prompts call for more Canadian production
https://www.ctvnews.ca/ottawa/article/theres-a-global-supply-crisis-helium-shortage-prompts-call-for-more-canadian-production/

The Increasing Scarcity of Helium
https://priceonomics.com/the-increasing-scarcity-of-helium/ helium reserve shut down

Russian govt brings in temporary authorization procedure for helium exports until end of 2027 - document
https://interfax.com/newsroom/top-stories/117116/

Helium prices soar as Qatar LNG halt exposes fragile supply chain
https://www.reuters.com/business/energy/helium-prices-soar-qatar-lng-halt-exposes-fragile-supply-chain-2026-03-12/

Iran attacks wipe out 17% of Qatar’s LNG capacity for up to five years, QatarEnergy CEO says
https://www.reuters.com/business/energy/iran-attack-damage-wipes-out-17-qatars-lng-capacity-three-five-years-qatarenergy-2026-03-19/

Iran war halts Qatar helium output, threatening global tech supply chains
https://apnews.com/article/iran-chips-semiconductor-helium-exports-war-fe934332f7c83bb722ca87db22cd57d0
Iranian Strikes Limit Supply of Gas for MRI Machines, AI Chips
https://www.bloomberg.com/news/articles/2026-03-24/airgas-curtails-helium-orders-after-qatar-lng-field-damaged

Russian gas exports to China expand as pipelines and LNG reshape supply routes
https://globallnghub.com/report-presentation/russian-gas-exports-to-china-expand-as-pipelines-and-lng-reshape-supply-routes

The US is attracting millions fewer international travelers, compared to forecasts from just two years ago.

Foreign travel to the United States plunged in 2025, to levels last seen in 2012.

The hospitality industry expected a boom in 2026, with 11 cities hosting World Cup events, and huge per-person tourist spend.

But most host cities in the United States continue to show declines from even last-year's dismal numbers.

China has probably already surpassed the US as the number one global tourist destination, with leisure and business travel up sharply, along with spending.

Report:

Good morning.

This is from 2024, and is a forecast from the International Trade Administration, part of the US Department of Commerce. The National Travel and Tourism Office is projecting international visits to the US, for 2025. They called for an increase of 6.5% from the 2024 numbers; “The United States set to welcome 77 million international visitors” the next year, 2025. They expected a full recovery -- a return to pre-COVID levels of international travel to the United States -- by this year, 2026.

For 2027, the NTTO projected 90 million international visits, with spending over $279 billion, or over $3000 per person.

The full-year 2025 numbers came in, but went in the other direction. The number of international visitors was supposed to increase by over 4 million, but they dropped by over four million instead. 2025 was the first year the number of arrivals to the US dropped since the pandemic ended.

But worldwide, the travel industry is growing, just not back and forth to the United States. The drop in US tourism for 2025 was even sharper than the decline during the Great Financial Crisis in 2008, which was global. It was the worst one-year decline in twenty years, and the international tourism industry in the United States is back to the same levels as in 2012:

Here are the biggest drops in absolute numbers, by country. Canadian visits to the US dropped by over 4 million, from 2024 to 2025. Big declines from Western Europe: Germany and Denmark down by double-digit percentages; tourists from dropped by 116,000:

There is even further deterioration in 2026, and the numbers may be even worse than the official reads. This is from the University of Toronto, and is a study of cell phone activity by Canadian users in the United States. They found a 42% year-on-year decline in Canadian visits, which is far higher than the 25% estimate that was based on the number of border crossings. They conclude there that the border crossing data are failing to account for the real decline in Canadian business travel, and when the Canadians do cross over, they’re visiting fewer places, staying for less time, and certainly spending less money.

Here are the city-level data for Canadian cell phone use, over a two-year period. Four of the top seven are Florida, with over 50% drops. Besides serving as major tourist attractions, Orlando and Miami are also convention and trade show cities. We can say the same of Las Vegas and New York, and Canadians’ cell phone usage there is also down by over half. If they’re going at all, they’re spending a lot less time there.

We’re now deep into 2026; the Commerce Department two years ago projected 85 million foreign tourists for this year, with over 42 million flying in from abroad. North America is also hosting the World Cup, and industry insiders knew there would be a boom, right now, in the inbound travel numbers, who are also spending a lot of money. Eleven American cities are hosting games, and expected visitors to spend $5,000 each. But those forecasts are falling apart too. 80% of hotels report that actual reservations are far below what they planned for.

The boom in travel from Europe just never came. In May, European visits to the US dropped 7% over 2025, and remember that 2025 was lousy. And for June and July, flights from Europe to the World Cup cities are down, even compared to years there are no World Cup games to watch. Flights to New York from Europe are down over 15%. That is a disaster for hotels in New York; the trade association there cut their estimates for the World Cup revenues by 60%. New York area hotels expected revenues of $150 million for the World Cup; now they’re hoping for $60 million.

Hotel bookings for the World Cup, overall, are up 0.5% year-over-year, but that is largely because of big spikes in demand for the games in Mexico City and Monterrey.

Families and business people still are traveling. There are just far fewer going to the United States. This is from the World Travel and Tourism Council, and they forecast that China will replace the United States as the top international destination, and probably already did. 68 million foreign travelers came to China in 2025, which is the same as the United States for last year. Visits to China were up over 15% year over year; travel spending by those travelers is also rising, up over 10%.

This is a business channel, and we wanted to look at that data point, because we think there is a lot there, under the surface. China ranked second worldwide for business travel spending, at $192 billion. And we’re back to the Purchasing Power Parity problem; a travel dollar goes a lot farther in China than almost anywhere else, and that is a major advantage for China’s industrial sectors too.

Here’s what we mean. In July my group will be at the International Building Show in Guangzhou. It runs from 8 through 11 July, and it’s at the Canton Fair complex. I go to a lot of these shows, and look for the same thing, every time. I want a hotel that is in short walking distance of that building. I want breakfast included, and I need a gym.

These hotels are within a 10-minute walk, and you can see the prices. And the brands. Four and five stars, most of them. I can walk a few more minutes and get a nice place for around $80 per night, and this is during one of the busiest trade shows in the world for the building industry.

There is a comparable event in New York City, in October. The Greenbuild International Conference is at the Javits Center, and let’s pretend I want to go there. I still want eggs in the morning and heavy exercise at night, and I want to walk to the show instead of fighting for a cab. And we need to take the prices from Guangzhou and multiply by five to get the same room, nearby the same industry event:

What’s that mean? It means that if your company is in South America or in Europe or in Africa, and obviously anywhere in Asia, you can send five times as many people to Guangzhou for the same money compared to the show in New York.

Or, more likely, you’ll send the same group, but will spend a lot more time and money at the factories in Guangdong that you just met at the show in Guangzhou.

Be good.

Resources and links:

NTTO Forecast of International Visitation to the United States
https://www.trade.gov/feature-article/ntto-forecast-international-visitation-united-states

Visitors to US dropped by millions last year in biggest decline since Covid-19 pandemic
https://www.independent.co.uk/travel/news-and-advice/us-tourism-decline-usa-international-visitors-b2984288.html

U.S. Tourism Takes Massive Hit with 4 Million Fewer International Visitors Last Year: Report
https://people.com/u-s-tourism-takes-massive-hit-with-4-million-fewer-international-visitors-last-year-report-11985347

Staggering dip in US tourism is a troubling sign for the future
https://edition.cnn.com/2026/05/25/travel/analysis-tourism-fewer-international-visitors-2025-vis

US lost 4 million tourists in 2025 — and the World Cup won't fix it
https://boingboing.net/2026/05/25/us-lost-4-million-tourists-in-2025-and-the-world-cup-wont-fix-it.html

U.S. Inbound Tourism Drops 14% in April, Erasing Two Months of Gains
https://skift.com/2026/05/11/us-inbound-international-tourism-april/

European Visitors To U.S. Dropped 7% In May—As Tourism Industry Seeks World Cup Turnaround
https://www.travelpirates.com/captains-log/us-tourism-drops-14-percent-summer-2026

Economic Impact of China’s Travel and Tourism
https://researchhub.wttc.org/product/factsheet-china-travel-tourism-economic-impact

China on track to surpass US as world’s leading travel and tourism economy
https://www.independent.co.uk/travel/news-and-advice/china-tourism-economy-overtake-united-states-b2990253.html

Pricey World Cup keeps fans away, hits US hotels, airlines
https://www.reuters.com/sports/soccer/pricey-world-cup-keeps-fans-away-hits-us-hotels-airlines-2026-06-11/

America’s tourism slump will outlast the World Cup
https://unherd.com/newsroom/americas-tourism-slump-will-outlast-the-world-cup/

How much has Canadian travel to U.S. cities declined?
https://mappingtariffs.org/canada-us-visits

Countries and firms are borrowing billions of dollars by accessing China's debt markets, which offer some of the lowest interest rates in the world.

Panda Bonds are available to some borrowers of Chinese renminbi, to finance business operations in Mainland China, even by banks and companies outside China.

Chinese regulators maintain strict safeguards on who can borrow and use RMB abroad, and for what purposes.

Companies are swapping US Dollar-denominated debt for Chinese capital, and cutting borrowing costs by over half, while reducing FX volatility and and eliminating risks of sanction and asset seizure.

Report:

Good morning.

Countries and companies are shifting away from the US dollar, and from the Western banks. And the process is accelerating.

The demand for an alternative system was always there, but the plumbing was not. That’s to say that new networks had to be established and tested. Bilateral trade agreements, outside the US dollar and European banks, were set up and today are growing fast. New commodities exchanges needed to be set up, with regulations and procedures for those new trading systems.

Now we’re seeing strong demand to borrow Chinese renminbi, instead of US dollars or euro, by major bond market issuers. Countries are borrowing renminbi to pay higher-cost US-dollar denominated debt, and here we can see why.

These are the 10-year government bond yields. The US Treasury borrows for 4.39% for ten years; it follows that companies borrowing US dollars in capital markets, or from banks, pay higher rates that the American government does.

Japan had a zero-interest rate policy until recently; now they’re at 2.6% and companies borrowing yen are paying over 4% coupons for new money. But the outlier on that chart is China, at just 1.73%. So companies are borrowing in Chinese renminbi, to repay loans denominated in other currencies. And other companies are borrowing RMB to refinance loans that are maturing, and which need to be rolled over at new, higher rates than when first issued.

The problem for most would-be borrowers is that China’s capital markets are not open to everyone. Chinese regulators protect their currency from speculators. And the renminbi is not a source of capital for Wall Street traders using low-cost foreign money to do carry trade operations, as they did for years with the Japanese yen.

It is, however, a strong alternative for companies that do real trade, and real business with China. Brazil is a fellow BRICS member and a major trading partner with China, and its central bank is issuing Panda bonds for the first time.

And there we see who Panda bonds are for. Companies in Brazil asked the government there to create capital pools in RMB, so those firms can more easily borrow in RMB, in Brazil and here. Using RMB will reduce the interest rate and FX volatility, and their overall costs. Brazil’s mines and farms do massive trade with China, and need more renminbi in banks there to expand. That all comports with what Beijing wants to do anyway: deepening trade relationships using renminbi, while keeping guardrails up on who is allowed to borrow and use the Chinese currency outside China.

Emerging markets like Brazil are naturally seeking alternatives outside the US dollar. And the booming trade in Brazilian soybeans and Brazilian crude oil, for example, needs to be completely outside the US dollar and the European SWIFT system to insulate that trade from threat of sanctions, or asset seizures.

Brazil has the 10^th largest economy in the world, and trade between Brazil and China went from “does not exist” twenty years ago to one of the biggest bilateral trading relationships in the world.

In 2009, Brazil’s exports to the United States and China were roughly the same; fifteen years later Brazil’s exports to China were four times higher than to the US. That means that Brazilian companies were doing business with China, but in USD, and are desperate to get away from high-cost US dollars and US banks to make this trade go, and telling their government officials in Brazil to get them a better way to do that business.

Pandas are bonds denominated in the Chinese currency, and issued here, in China, by institutions outside China. Those borrowers include Chinese owned-companies across the world, and foreign companies that do business here in China. Also, “sovereign entities”—central banks, in Brazil’s case, who have Brazilian companies who need access to Chinese renminbi. Panda bonds have been around for over 20 years, but demand is booming because of high interest rates everywhere else, geopolitical problems, and Chinese regulators opening up their debt markets to new borrowers.

Foreign institutions are using the renminbi as long-term funding vehicles, and central banks are holding more RMB in the FX reserves, and for their domestic companies to expand trade with China.

Companies who can access new capital at low rates have an advantage, over companies who cannot. Cost of capital is a major driver of competitiveness, and we have this weird situation now: companies who are doing trade with China, and who can borrow in RMB, can borrow at lower rates than even their own governments. Fortescue is an Australian mining company, and last year borrowed 14 billion RMB – that’s $2.1 billion US -- at 3.8% a year. That’s almost a full point lower than the Australian government itself can borrow. The Australian government is a sovereign issuer of debt, and can raise taxes to pay that debt, or just print money. But an Australian company doing lots of business with China borrows at lower rates than the Australian government.

Indonesia is another BRICS country, and another that does a lot of business with China. They, too, are hitting Panda markets to finance growth. The Indonesian economy is booming; GDP growth over 5%, and trade with China is up over 22% over the trailing 12 months.

Global companies everywhere need low-cost capital to grow, and Wall Street and European banks have a big problem if other banks can borrow and lend in RMB, while they cannot. Morgan Stanley and Deutsche Bank are raising billions of RMB at rates below 3%, which is far less than they can borrow in USD or Euro. These are too-big-to-fail banks in the US and Europe, yet even they need to be active in China’s Panda bond markets to have any chance of keeping their bank customers who do business with China. That’s the thinking of most of these financial institutions; banks are more active now in the Panda bond markets than governments and large companies, for that reason.

So now issuance of these bonds is hitting records, rising twice as fast as last year. In Q1 of 2026, issuance was already two-thirds of all of 2025. Panda bonds are more difficult to issue than Dim Sum bonds, and Panda’s are not actively traded in secondary markets. That’s to say again that Panda’s are lousy for speculators or active traders. They’re held to maturity by borrowers.

Besides banks and governments, companies are accessing Chinese bond markets directly, to fund their operations here. BASF is shutting down facilities in Europe, and expanding operations in China, and doing so with low-cost capital from Chinese debt markets. Same thing is going on at VW.

Everything costs more in Europe, compared to China. Even the money.

Be good.

Resources and links:

Resources and links:

Fast-growing panda bond market helping repay US dollar debt
https://www.financeasia.com/article/fast-growing-panda-bond-market-helping-repay-us-dollar-debt/507620

Yuan Bonds Boom as Borrowers Shift Away From U.S. Dollar Funding
https://www.caixinglobal.com/2026-04-10/yuan-bonds-boom-as-borrowers-shift-away-from-us-dollar-funding-102432518.html

Global government bond yields, 10-year
https://tradingeconomics.com/bonds

Brazil plans largest panda bond debut to 'test' waters
https://www.reuters.com/world/americas/brazil-plans-up-5-billion-yuan-panda-bond-issuance-says-finance-minister-2026-06-25/

Brazil to issue first sovereign panda bonds in Latin America
https://www.globaltimes.cn/page/202606/1364484.shtml

Indonesia's Panda Bond issuance remains on track for early July
https://en.antaranews.com/news/420500/indonesias-panda-bond-issuance-remains-on-track-for-early-july

Panda Bonds explained: understanding China’s growing bond market
https://www.db.com/news/detail/20250228-panda-bonds-explained-understanding-china-s-growing-bond-market?language_id=1

Why Wall Street banks and foreign borrowers are rushing to tap China’s cheap money
https://www.cnbc.com/2026/06/18/china-panda-bonds-yuan-funding-costs-foreign-borrowers.html

The panda bonds: how China uses assets to boost yuan’s profile, cement partnerships
https://www.scmp.com/business/banking-finance/article/3357883/panda-bonds-how-china-uses-assets-boost-yuans-profile-cement-partnerships

China's panda bonds on track for record issuance
https://asia.nikkei.com/business/markets/trading-asia/china-s-panda-bonds-on-track-for-record-issuance

Overview of the Opening up of China's Bond Market and Panda Bond Market
https://www.icmagroup.org/assets/documents/About-ICMA/APAC/NAFMII-and-ICMA-English-version-PANDA-BONDS-Raising-Finance-in-Chinas-Bond-Market-case-studies-September-2021-021121.pdf

Indonesia-China Trade Surges to 90.33 Billion USD in LTM Mar 2025 - Feb 2026
https://gtaic.ai/trends/indonesia-china-trade-report-ltm-mar-2025-feb-2026

Indonesia posts fastest economic growth rate in three years
https://www.reuters.com/world/asia-pacific/indonesia-q4-gdp-growth-beats-forecast-highest-since-2022-2026-02-05/

How Australia’s mining giants are helping China to globalise the yuan
https://www.scmp.com/economy/china-economy/article/3353274/how-australias-mining-giants-are-helping-china-globalise-yuan

China pushes to de-dollarize commodities markets, sets up new metals exchange

The BRICS trading system is already wiping out US farmers, as global price discovery is destroyed

The Japan Carry Trade Unwinding
https://blog.marketresearch.com/the-japan-carry-trade-unwinding

De-dollarization in Australia

BASF to exit hydrosulfites business and close production facility in Ludwigshafen
https://www.basf.com/global/en/media/news-releases/2025/09/p-25-181

Volkswagen to Cut 100,000 Jobs and Close Four Plants: Report
https://eletric-vehicles.com/vw-group/volkswagen-to-cut-100000-jobs-and-close-four-plants-report/

VW Group speeds up production cycle with ‘In China, for China’ strategy
https://www.automotivelogistics.media/supply-chain/vw-group-speeds-up-production-cycle-with-in-china-for-china-strategy/2629663

Chinese exports to Japan of tungsten and rare earth metals has collapsed, with trade in some metals dropping to zero.

Japanese manufacturers are snapping up scrap, and investing heavily in new recycling capacity.

China's export bans to companies with military ties are deeply impacting Japanese factory groups.

The Trump Administration and Pentagon is also investing billions into new mining projects, including a mine in Kazakhstan that is partly owned by members of the Trump family.

Report:

Good morning.

The wars in the Persian Gulf and Ukraine are blowing up stockpiles of munitions. And all the supply chains to replace them run through Global South countries, who are shutting off exports to weapons makers.

That poses a major problem for civilian manufacturers, who need those same raw materials to build equipment.

Tungsten is one of those metals that have vast dual-use applications. China produces most of the tungsten in the world, and China has very tight export restrictions on materials that are used by foreign militaries—not just for weapons makers in the United States, but everywhere. Chinese exports of tungsten to Japan have plunged, compared to last year, and in the first quarter of the year, new exports to Japan dropped to zero.

Japanese manufacturing has been deeply impacted. Tungsten prices are soaring, and Mitsubishi Materials is tripling the prices on some of their cutting tools and equipment. Sumitomo Electric is also raising prices. Tungsten is one of several rare earth metals that China has monopolies on, and restricts their exports for military contractors.

The tungsten recycling industry is taking off, and both Mitsubishi and Sumitomo are investing heavily to build recycling capacity in Europe and in Japan. But those are massive companies, and even if they can find new sources for tungsten, for themselves, smaller manufacturers will struggle.

Immediately after China announced new export bans on rare earths, Japanese firms’ imports collapsed. In March and April, Chinese exports to Japan dropped by over 80%. Dysprosium and terbium dropped to zero on the year, and Yttrium imports fell by over 90%. Yttrium is used in medical devices and laser cutting, and chipmaking. But yttrium is also critical in advanced weapons platforms: Shipborne radar systems used by the Navy, precision-guided munitions, and thermal coatings on military jets and missiles.

China is a key supplier of these materials to Japan, while Japan in turn is a major supplier of components and equipment, containing those materials, to the United States. So the Trump Administration requested a resumption of those exports, from China to Japan. “Washington is concerned about the dwindling global supply of Japanese high-tech products”, and at high-level meetings called on China to avoid damage to supply chains for those products.

Japan is a top producer of MRI scanners and other diagnostic equipment, and if Japanese firms can’t source the materials from China, they cannot build them for America, is how the thinking goes there. But Chinese companies also build all that equipment, and American hospitals can simply buy them from China, is how the thinking goes here.

This is from the US Geological Survey. US domestic production of tungsten is zero, since 2015. Globally, China is 80% of tungsten mining, and Japan is also not a producer of tungsten. The top five global producers are China and its neighbors, and they’re friendly neighbors.

Japan doesn’t have any mines, so they’re stepping up their imports of scrap, from wherever they can get it. There is the chart for US exports of tungsten scrap, and lots of that headed to Japan:

Global demand is soaring because of the war in the Middle East, and anyone who builds electronics, or chips, or weapons, or cutting tools needs tungsten.

China has cut off access to many buyers, so the scrap markets are booming. This is a press release from Mitsubishi Materials Group, part of an outreach to companies across the world to sell scrap to Mitsubishi. Remember that this is the same division of Mitsubishi which increased prices for their products, citing the high cost of inputs.

But Mitsubishi’s real problem is that their other divisions are large manufacturers of munitions.

In February, a group of 20 Japanese companies, including Mitsubishi, were specifically restricted from imports of Chinese rare earth metals. Those companies are deeply involved in the production of ships, planes, radars, and missiles. There is the announcement in Chinese:

From 24 February, Chinese firms are prohibited from exporting dual-use items to those companies. And the first five, on that list, are divisions of Mitsubishi. Japan is remilitarizing, and doubling their defense spending. Chinese companies exporting to any of the companies on that list needs to apply for an individual license, each time, for any dual-use item—and that means the metals and any other components—and provide a guarantee that whatever is sent to those companies “would not contribute to enhancing Japan’s military”.

That is an almost impossible standard to meet; after the materials leave Chinese jurisdiction, the buyer can do about anything, and sell to about anyone. So this is a hard ban on anything from Chinese companies to those Japanese companies, for anything that conceivably has a military purpose.

And that is the problem for everybody. Every time something blows up in Europe or the Middle East, Pentagon defense contractors scour the world for the materials they need to build more. That’s the problem with all those metals. China and China’s next-door neighbors own the supply chains for tungsten at the same time civilian and defense manufacturers are fighting over the same pile:

There is no short-term answer to the problem, and long term the only way out for Western companies is to mine and refine these metals at home, or in friendly countries.

Kazakhstan is much more friendly with China than with the United States, but optimism abounds that Kazakhstan will one day serve as a profit center for the Trump family, and a supply chain node for the Pentagon. Eric Trump and Donald Jr. are investors in a company that will merge with a mining operation in Kazakhstan, now owned by Cove Kaz Capital, and Cove Kaz just got $1.6 billion in new federal financing to develop new tungsten projects.

Cove Kaz has also asked for $400 million from the War Department. It takes years to bring new mining projects online, and that is only the first step in the process of building usable materials for the Pentagon or the IDF. And the Trump Administration will be gone, and the White House under new management long before any tungsten moves out of Kazakhstan to help out Mitsubishi or Raytheon. If ever.

Lots of money moving right now, though.

Be Good.

Resources and links:

China tungsten exports to Japan halve amid tightened controls
https://asia.nikkei.com/business/materials/china-tungsten-exports-to-japan-halve-amid-tightened-controls

'Our time is now': Vietnam tungsten firm rides high on Chinese export curbs
https://asia.nikkei.com/business/markets/commodities/our-time-is-now-vietnam-tungsten-firm-rides-high-on-chinese-export-curbs

China's rare-earth exports to Japan drop 80%, sending companies scrambling
https://asia.nikkei.com/business/materials/china-s-rare-earth-exports-to-japan-drop-80-sending-companies-scrambling

US asks China to resume rare-earth exports to Japan
https://asia.nikkei.com/politics/international-relations/japan-china-tensions/us-asks-china-to-resume-rare-earth-exports-to-japan

US tungsten scrap exports to Japan soar on Chinese curbs
https://asia.nikkei.com/spotlight/supply-chain/us-tungsten-scrap-exports-to-japan-soar-on-chinese-curbs

US Geological Survey, Tungsten
https://pubs.usgs.gov/periodicals/mcs2026/mcs2026-tungsten.pdf

Special Feature : Delivering to the world the material of possibilities - TUNGSTEN Vol.3
https://withmaterials.mmc.co.jp/en/233

Japanese companies tackle tungsten shortage amid rift with supplier China
https://www.marketscreener.com/news/japanese-companies-tackle-tungsten-shortage-amid-rift-with-supplier-china-ce7f5dd2da8dfe27

China, tungsten and a supply shock in metal critical for war that will last far beyond Iran conflict
https://www.cnbc.com/2026/06/03/china-metals-national-security-defense-weapons-supply-tungsten.html

China imposes export controls on 20 Japanese entities to curb ‘remilitarisation’
https://www.reuters.com/world/asia-pacific/china-adds-20-japanese-entities-export-control-list-2026-02-24/

Mitsubishi Materials to lift tungsten carbide prices on tight China supply
https://asia.nikkei.com/business/companies/mitsubishi-materials-to-lift-tungsten-carbide-prices-on-tight-china-supply

U.S.-Kazakhstan Tungsten Venture Advances as Critical Minerals Cooperation Deepens
https://timesca.com/u-s-kazakhstan-tungsten-venture-advances-as-critical-minerals-cooperation-deepens/

China's new export ban on tungsten shocks defense contractors as Pentagon races to find new supply

DARPA and the Pentagon hope to build revolutionary new batteries that will power the next generation of weapons systems.

But the global supply chains and manufacturing centers for batteries run through China.

China has tight export restrictions on battery technologies that are intended for military use.

Chinese researchers lead the field in advanced battery tech for heavy equipment, drones, and aircraft.

Report:

Good morning.

DARPA is the Defense Advanced Research Projects Agency, and they are looking for suppliers who can build batteries that can be used in drones, trucks, and other military gear. The batteries they’re looking for need five to ten times the energy density, compared to batteries built today.

They need developers to design new battery cells, using materials and architectures that haven’t been discovered yet. Batteries fielded in Pentagon weapons systems require high energy density, and high levels of power density, and they provide an example of what the difference is. A drone parked over a target needs high energy density, but one moving and launching weapons needs high power density. The War Department’s new batteries must have both.

There’s also the battery charging problem that needs to be overcome. If those batteries can get built, but take forever to charge up again, that poses an OPTEMPO problem.

But the biggest hurdle of all is China: the United States doesn’t produce most of the components for batteries, nor have the raw materials to do so, and battery buyers are reliant on China. The supply chains are outside American control.

China controls those supply chains, and the US needs to find another way, another method that American companies and industry can take over.

Batteries have vast dual-use applications—obviously for the civilian sector, mainly—but also for defense: drones, sensors, communications, robotics, and in military vehicles.

China’s export business for batteries is booming. But China limits sales of their battery technologies only for civilian applications, and restricts shipments to defense contractors. To the Atlantic Council that means that Beijing is weaponizing their battery monopolies, by refusing to let foreign weapons makers buy them. So the US needs to develop a strategy to ensure that the Pentagon isn’t reliant on China for batteries.

The rest of that paragraph is the tricky part: like we saw before from DARPA, new battery sciences need to be invented. The Pentagon program must jump ahead of current battery tech to develop different types of batteries, that don’t depend on Chinese supply chains. That would “have the potential to” to give the US a technological and operations edge.

Later they admit that Chinese researchers are already tackling the energy and power density problems, and have substantially cut the time it takes to recharge their batteries.

China builds tens of millions of batteries for the electric vehicle market, and that’s important too. Chinese companies already have big markets; they’re already making money, so can fund new research and production for defense purposes. Our companies are starting from scratch.

This report is from the IEA and runs 159 pages, and we can see what DARPA and the Pentagon are up against. Battery prices are collapsing in price, over time. So any new battery manufacturers would be walking into an already crowded and highly competitive field, if they hope to sell products to the mass market:

Chinese firms also lead the way on batteries for medium and heavy trucks, and heavy construction and mining equipment, which have even greater power demands than what the Pentagon would need for their trucks:

Chinese battery makers also have their domestic market mostly to themselves, which is over half the global demand, as it is:

While it’s true that the Chinese battery industry has received high levels of government support, it’s actually lower than other G8 countries. Over a four-year period, China government support was $3 billion, for buying incentives; in the United States, it was $44 billion total for EV incentives, charging, and batteries:

So NATO governments are already spending tens of billions of dollars to subsidize industries there to develop battery technologies, and encourage consumers to buy. But those efforts haven’t gone anywhere.

Red on this chart is China, who enjoys massive advantages in battery supply chains. The raw materials are mostly sourced from China, or from countries very friendly with China: Chile, the DRC, Indonesia, and Russia.

Material processing is solid red bars. Cell components and battery cells, all China again:

That all results in these data, for production. China is the green part of those bars, where the world’s lithium batteries made. Far more than the rest of the world combined:

So the Pentagon has a big problem, and we see the same problem in civilian sectors too. This is a press release from ProLogium. They are working with Elysian Aircraft to build battery-powered planes. And it’s interesting to see all the conditional and hypothetical tenses in this document. It’s a Memorandum of Understanding—not a contract—that the two parties will have discussions and assessments about the potential application of next generation batteries. Both parties “intend to explore” new generation battery cells, and “lay the groundwork” for zero-emission air travel. Then a “focus on assessing the feasibility” of using batteries in planes. “As the companies explore a potential cooperation”, “expected to focus on battery technologies” that “support the requirements of big planes flying 750-1000 kilometers, or up to 620 miles.

That company press release made it all sound very tentative, but Interesting Engineering picked up the story and made it seem like the planes are coming any day now.

But once again we learn that the Chinese have already done all that, and more: A surprise successful test flight of a large battery-powered plane. CATL builds 37% of all the EV batteries in the world, and built a new, condensed battery with an eye to invent the aerospace battery industry in their own lab:

CATL teamed up with COMAC, and engineers from both companies got busy fast. CATL says that in the next two years their plane will be in production, with a range of between 2000 and 3000 km. Remember in the MOU from Elysian and ProLogium they were talking and assessing and thinking about building the foundation for a program for a plane with a range of a thousand kilometers.

CATL did their project in secret, and issued their announcement only after it was successfully done. The aerospace industry was “shocked” and it will “change the jet age forever.”

This piece does a good job on the science of the new battery, and they explain that CATL’s breakthrough was in the battery’s cycle life. We’ll link to these.

This is the original paper from CATL in Nature Nanotechnology, and here is a good explanation and summary that is easier to understand, and how CATL’s new battery achieves the energy density required to power large aircraft.

CATL is already invested heavily in Research and Development, with over 43,000 patents for batteries. DARPA and the Atlantic Council are talking about building some batteries for the Pentagon, some day. ProLogium and Elysian are talking about building some batteries they can use in an airplane, some day. But CATL and COMAC are building the batteries, and the planes, right now.

Be good.

Resources and links:

DARPA launches program to build next-gen military batteries
https://defence-blog.com/darpa-launches-program-to-build-next-gen-military-batteries/

Atlantic Council, the US needs a comprehensive battery strategy to ensure its battlefield edge
https://www.atlanticcouncil.org/blogs/energysource/the-us-needs-a-comprehensive-batteries-strategy-to-ensure-its-battlefield-edge/

Next-gen ceramic aircraft batteries could enable 621-mile electric flights
https://interestingengineering.com/energy/next-gen-ceramic-aircraft-batteries-flights

Shock in Aerospace as China Reveals High-Energy Battery Capable of Powering Electric Aircraft and Disrupting Jet Age Forever
sustainability-times.com/energy/shock-in-aerospace-as-china-reveals-high-energy-battery-capable-of-powering-electric-aircraft-and-disrupting-jet-age-forever/

Surprise test flight heralds ultra-long-range electric aircraft by 2028
https://newatlas.com/aircraft/catl-worlds-largest-ev-battery-manufacturer-aircraft/

China firm sets 2027 target for electric plane with 1,800 mile range
https://interestingengineering.com/innovation/chinas-battery-electric-aircraft-1800-mile

Application-driven design of non-aqueous electrolyte solutions through quantification of interfacial reactions in lithium metal batteries
https://www.nature.com/articles/s41565-025-01935-y

ProLogium and Elysian Aircraft BV Sign MoU：Exploring Next generation Battery Applications in Aerospace to Advance the Vision of Zero-Emission Aviation and Future Mobility
https://prologium.com/prologium-and-elysian-aircraft-bv-sign-mou%EF%BC%9Aexploring-next-generation-battery-applications-in-aerospace-to-advance-the-vision-of-zero-emission-aviation-and-future-mobility/

CATL electric plane to support 2,000 km flight
https://www.chinadaily.com.cn/a/202406/25/WS667a5675a31095c51c50ab4d.html

Quantitative mapping reveals key failure mechanism
https://www.batterytechonline.com/materials/catl-achieves-breakthrough-in-lithium-metal-battery-technology

Chinese electric trucks pay for themselves in five years. They may be half the market in three.

China Now Controls Nearly 70% of the World’s EV Batteries
https://www.autoblog.com/news/china-now-controls-nearly-70-of-the-worlds-ev-batteries

China and Iran built a bilateral trading system that moved millions of barrels of oil to China in exchange for infrastructure.

The BRICS countries are highly motivated ditch the US dollar across their banking systems, and thereby protect their own.

Iran's closure of the Strait of Hormuz stopped most outbound oil shipments from Persian Gulf countries, except Iran itself.

The MOU between Iran and the United States will unfreeze $100 billion in sanctioned Iranian funds.

Report:

Good morning.

China, Russia, and the other Global Majority countries have set up their own financial system, outside the US dollar, and in particular outside the Western banking system.

The new system is expanding; the BRICS countries are doing much more of their trade in their own local currencies, and thereby completely avoid the risk of having their money frozen or seized by regulators in Washington or in the EU.

This is a fantastic primer of how the US dollar system works. American citizens, if we’re honest with ourselves, can understand how coercive the dollar trading system is, and can understand the risk that companies and countries have when doing business with US dollars.

Consider this map. Iran has been under economic sanction for most of our lives, no matter how old we are right now. So the first question, right away, is how the United States can freeze Iran’s funds, outside the United States? Iran has $2 billion in deposits in the US, but tens of billions more in Iraq, India, Korea, and Qatar. There may be as much as $50 billion of Iranian funds locked up in banks in China.

These funds, in US dollars, are for energy that Iran delivered, and is still waiting on payment for. That part is important. The US can stop countries from paying Iran for oil because of the petrodollar system. And the Treasury Department can block banks from the entire dollar system if they release those funds to Iran, in this case.

The question is, how? If the money is sitting in a bank in Switzerland or China, how can Washington stop the money? And the answer is that the US has absolute control over US settlements, no matter where those dollars happen to be at the moment. American regulators can simply switch off access to the whole system and effectively freeze funds.

Obviously that is a very powerful tool, at the sovereign-state level, and is one that policymakers are always tempted to use, and always do. Understanding how it works is important to understand the risks involved to countries outside the United States, who trade with each other using dollars. And it’s also important to understand why there is such an urgency for those countries to set up their own system.

This is how the system works, in a nuts-and-bolts way. A US dollar held in a non-US bank is a digital record, and is an obligation of that foreign bank to its customer. The value of that relationship is wholly based on whether or not that customer can use those dollars, held on deposit. To make that go, all the banks outside the US need a correspondent bank, in the United States.

Let’s suppose a company in Germany is buying from a company in Japan, and needs to pay $100,000 USD for the products. These are all friendly countries, then, lately anyway: Germany, the United States, and Japan.

First the bank in Germany takes $100,000 out of the company’s account, there. From the buyer.

Then, the German bank sends an instruction to its correspondent bank in the United States, to transfer $100,000 from the German bank’s account, probably in New York, to the Japanese company’s correspondent bank, which is also probably in New York.

Those two correspondent banks then clear and transfer the funds; funds move to the correspondent bank of the Japanese company’s domestic bank.

That done, the Japanese supplier is credited with the $100,000. The seller’s bank, in Japan, gets $100,000 USD, or the yen equivalent.

That’s the system. Obviously, this transaction takes some time, and generates fees for the American banks that aren’t really doing much of anything at all except receiving and sending messages between themselves, just down the street from each other, and very often inside the same bank.

Almost every US dollar transaction happens this way.

Now come the sanctions. The Office of Foreign Assets Control is part of the Treasury Department, and they enforce the economic and trade sanctions of the United States. OFAC maintains a list called the SDN, which is people, companies, organizations, ships, industries, and governments.

When the United States imposes sanctions against one of those parties, they go on that SDN list. All American companies and people and banks are banned from doing business, and required to block the transfer of any property in their custody. When a foreign bank is put on the SDN, those correspondent banks are legally required to immediately freeze all the funds held on deposit there:

At that point, nothing moves. No money is going in, or getting out, of those accounts. The bank cannot process any USD trade. If they try to send a payment it will be blocked, and if a payment comes in, the funds are frozen at the correspondent bank level. That’s another risk—the bank may be under sanction, but the individual customers may not be, and their accounts are frozen anyway.

The US Treasury also works closely with regulators in Europe. SWIFT is a messaging system between banks, and the SWIFT system makes it even easier for regulators to lock up funds. SWIFT is used by banks everywhere, even those not using dollars. So locking banks out of the SWIFT system effectively shuts down trade in USD, and also in euro. It’s not a “freeze”, in the way being put on the SDN list is, but moving money around without SWIFT is really hard to do. Also, that is, until lately.

This was a watershed moment in global finance, and geopolitics. The BRICS countries wanted to set up their own system, eventually, but they were taking their time about it.

But then the assets of the Russian Central Bank were frozen in the EU and in the United States, and that turbo-charged the effort of the Global South countries to get away from our system. $300 billion in Russian gold and FX reserves were held in custody in banks outside Russia; that was money that Russian companies had already earned, selling energy to Europeans. Suddenly they couldn’t access it anymore.

Back to Iran. The United States cut off any bank from the dollar system if that bank does business with banks in Iran. South Korea, Japan, and India bought oil from Iran. That oil was delivered, by Iran, but the dollars were frozen there. India is a BRICS country and was a major buyer of Iranian crude. Now they cannot use dollars to buy any more.

Iraq buys electricity and gas from Iran, which is next door. For years there was a waiver from the United States that allowed for those sales, in dollars, so that Iraq could keep their lights on. But last year the Trump Administration put the sanctions back, on even that trade.

The policy was aimed at Iran, but it left the Iraqis scrambling to buy electricity and gas from somewhere else, obviously at higher prices. A spokeswoman for the American embassy in Baghdad explains that “Iraq needs to eliminate its dependence on Iranian energy” sources as soon as possible.

There are consequences to all of this. Anyone who is concerned about whether one day in the future they may run afoul of American policy, for some reason, needs a new system, and is happy to do business with anyone who sets one up. And the BRICS countries have done exactly that.

Iraq cannot buy electricity from Iran, because they must do that trade in dollars. That’s because of the treaty with the United States, which routes the proceeds of Iraq’s oil sales through banks in the United States directly, then disbursed later to the Iraqis. Even those funds are subject to freezing and seizure.

But China buys millions of barrels of Iranian oil, outside the US dollar system. The China-Iran oil trade is similar to a bartering system: Iranian oil is shipped to China, who builds infrastructure in Iran.

This is the plumbing that China and Iran set up, and at no point are US dollars used, nor, obviously, are any funds zipping through correspondent banks in New York. Iran exported $43 billion of oil last year, and 90% of that oil came here:

In the Memorandum of Understanding between Iran and the United States to end the war and open the Strait of Hormuz, Iran is allowed to immediately sell oil on open markets, and the sanctions come off. About $100 billion will be un-frozen, along with another $300 billion on the way for reparations.

This is a key point here: Iran was smuggling out the oil anyway, and earning billions of dollars. Iran closed the Strait of Hormuz for oil sales for everyone else, except for their own, and were getting far higher prices for that oil than before.

The United States was in an impossible position, and the thinking there is that they may as well take all the chains off in exchange for oil flowing smoothly again, for everyone. And American banks can’t make billions of risk-free profits skimming off the top of the Persian Gulf oil trade until it’s moving again.

We can think of it this way. China set up that system, which is outside the US dollar and US banks. Iran sold oil last year, despite the sanctions, using that system, going around the US dollar. This year, oil tankers went around the US blockade, and got Iranian oil to other markets here in Asia. And all that trade was outside the dollar too.

Iran. China. Russia. Those are BRICS countries. And they’ve blown up petrodollar system for themselves, and for anyone else who wants to join.

Be Good.

Resources and links:

Dollar Architecture: How U.S. Sanctions Freeze Assets Abroad
https://ofacblockedfundslawyers.com/us-sanctions-freeze-dollar-assets-abroad/

See Where Iran’s Billions of Dollars in Frozen Assets Are Held
https://www.wsj.com/world/middle-east/iran-frozen-assets-7e926b39

Trump, Aiming at Iran, Puts a Squeeze on Iraq
https://www.wsj.com/world/middle-east/trump-aiming-at-iran-puts-a-squeeze-on-iraq-d37622e8

The Trump-Iran Deal Allows Tehran to Immediately Sell Oil
https://www.wsj.com/world/middle-east/the-trump-iran-deal-allows-tehran-to-immediately-sell-oil-37a1ebe5

How China Secretly Pays Iran for Oil and Avoids U.S. Sanctions
https://www.wsj.com/world/middle-east/how-china-secretly-pays-iran-for-oil-and-avoids-u-s-sanctions-b6f1b71e

Now it's oil: China, BRICS and OPEC+ build new trading system, locking out US suppliers and banks

Iran's shadow oil trade endures near Singapore despite war
https://www.france24.com/en/live-news/20260416-iran-s-shadow-oil-trade-endures-near-singapore-despite-war-1

Ships With Iran Oil Anchor Off India as Trump Announces Blockade
https://www.bloomberg.com/news/articles/2026-04-13/ships-with-iran-oil-anchor-off-india-as-trump-announces-blockade

Iran still exporting millions of barrels of oil through Strait of Hormuz even as other traffic paralyzed
https://edition.cnn.com/2026/03/16/business/iranian-oil-exports-hormuz-strait-intl-cmd

How the U.S. controls Iraq's oil revenues
https://www.reuters.com/business/energy/how-us-controls-iraqs-oil-revenues-2026-01-23/

U.S. Withholds Iraq’s Own Money Over Ties to Iran
https://www.nytimes.com/2026/04/22/world/middleeast/iraq-us-dollars-shipment-iran.html

Sanctions List Search
https://sanctionssearch.ofac.treas.gov/

China isn't dumping dollars. They're dumping banks, and setting up a new financial system.

The world is critically short of the aggregate materials to build concrete.

Over a billion people in the developing world will move to cities in the next two decades, and dredging companies are ripping up river beds and seafloors to find concrete-quality sand.

China moved its construction industry to artificial aggregates, and will source future volumes from construction and demolition waste.

Chinese researchers also hope to turn their giant piles of coal gangue into usable building material, and thereby solve two major environmental problems at once.

Report:

Good morning.

China urbanized at one of the fastest rates in world history. In 1980, less than 20% of China’s population lived in cities; today over two thirds of Chinese are in urban areas. In the provinces along the Pacific coast over 70% of residents live in cities. In Southwest China, it’s 59%.

This is a comparison of the urbanization trends in the United States and in China, after moving China’s timeline up 70 years. So the begin date for the US is 1880, when 30% of Americans lived in cities, and 70% were rural. In 1949, China’s population was 90% rural and 10% urban. In both the US and in China, it took about another 70 years to build cities for two thirds of the population: in the US, that milestone was hit in 1950, while in China it was in 2020.

But China has a far larger population, and so in just one three-year period China poured 6.6 billion tons of concrete, while during the entire 20^th century the United States poured 4.5 billion tons:

We want to consider those data from the Chinese perspective, instead of the US one. The United States and Europe urbanized before China did; again, 70 years before.

But today large populations here in Asia, South America, and Africa are urbanizing, and in the next 25 years, another billion people worldwide will move from the countryside to cities, which approximates what the Chinese did here.

That means the world will need a lot of concrete, and that means a lot of the special kind of sand that is used to make concrete. And the world doesn’t have nearly enough. Over the past few days we learned that the word “sand” is a lot more expansive that we imagined, and to people using concrete, only a certain kind of sand will do.

Aggregate is what makes concrete so valuable for building, and aggregate comes from gravel and sand. Most of the world’s sand, though, is too smooth, and the grains too small, to be used as aggregate, and in concrete. The best sources of concrete-grade sand are quarries and riverbeds.

Today the demand for sand is so high that dredgers are scraping beaches and the ocean floor. Sand from those sources also contains heavy traces of salt, which need to be completely removed to prevent the corrosion of other metals in the building. That’s expensive, but worth it. Cities tend to be near the ocean anyway, and the price of sand is high enough to cover the costs of ocean dredging and salt removal.

China is the world’s biggest consumer of sand, powered by that construction boom that urbanized a billion people here. But the rest of the world is catching up.

The extraction industry for sand and gravel is even greater than for fossil fuels.

85% of all mineral extraction is for sand mining, almost all of that is for the production of concrete. These materials all have specific chemical and physical properties, which we have linked to here, and below.

China plans to further urbanize and develop its Western provinces, and continues to invest heavily in new infrastructure, throughout the entire country. But China’s demand for aggregates peaked ten years ago, as the Chinese concrete materials industry shifted from natural aggregates, to man-made. And the percentage of natural is dropping, fast, and after 2030 recycled concrete will be a major source of base material.

“Natural” are river and lake sand, pebbles, and “natural” also includes seafloor sand that has been desalinated.

“Manufactured aggregates” are from crushed stone. “Recycled” aggregates are sourced from Construction and Demolition Waste, or CDW. Not all CDW is suitable for all uses of concrete, used for heavy loads and bridges, for example.

By 2020, Manufactured Aggregate was over 75% of the Chinese sand market. Stone crushing is a very capital-intensive process: from raw rocks, through the feeders and crushers, then the sand-making machine itself, then to be sorted and washed. It’s expensive. But the alternative is dragging sand out of riverbeds in massive volumes, which is an environmental problem.

The global demand for sand and gravel is 50 billion tons a year, and using manufactured sand allows building to go on, with a far smaller impact on the rivers and oceans. China’s demand for sand increased by five times over just 25 years, and almost all that new demand was met by production of artificial sand, and 25 years from now, recycled concrete will be about half the market, and the demand for natural sand will drop to about 10%, in China.

These changes were driven by top-down regulation and policy. Beginning in 2010, Beijing enacted new restrictions on riverbed dredging, and heavily promoted the industries for artificial sand. Again, CDW – recycled -- will meet half of China’s demand for concrete by 2050:

So this can all serve as a valuable lesson for other countries who are urbanizing at the same high rates that China has been over the past decades. And Chinese factories in Henan and Shandong manufacture most of that equipment used in artificial aggregates, so this is a major export opportunity for those companies, and for Chinese quarries who can just manufacture sand for export.

There may be more good news on another front. Chinese researchers developed a process that turns coal gangue into construction-grade aggregates, and recover rare-earth and heavy metals. China has a massive coal industry, and today has stockpiles of about 7 billion tons of coal gangue.

That, then, is also a massive environmental problem. Coal waste eventually makes its way into water tables, and particulates that are in the air. Were they to transform that gangue into commercially viable product, they would create a circular economy that would also help solve the gangue problem. Replacing natural sand with coal waste solves two major environmental problems at the same time, not just in China, but everywhere coal is burned, or ever was. Datong is in Shanxi, which is the base for China’s coal industry, and they’ve begun a 10-million-ton project.

It’s early, and they have a long way to go to make much of a dent on demand, and they need to be make certain first that they’re not just moving the heavy metals problem from old tailings piles in Shanxi to new apartment buildings in Sichuan.

We were reminded of this story. China had the world’s biggest trash problem, and built an industry to turn their waste dumps into electricity. Those processes and that technology are now in high demand across the world, anywhere people are producing garbage, and use electricity, which is everywhere.

If they get the Shanxi project to work, and turn their hazardous coal gangue into usable construction materials, the demand for that technology will be parabolic, immediately. Everyone will want it.

Be Good.

Resources and links:

We’re Running Out Of Sand… And Cities Are To Blame
https://www.lauriewinkless.com/journal/were-running-out-of-sand-cities

The Effect of Aggregate Properties on Concrete
https://www.engr.psu.edu/ce/courses/ce584/concrete/library/materials/aggregate/aggregatesmain.htm

The effect of coarse to fine aggregate ratio on the fresh and hardened properties of roller-compacted concrete pavement
https://www.sciencedirect.com/science/article/abs/pii/S095006181830477X

Declining demand and circular transition possibilities of sand, gravel and crushed stone in China
https://pmc.ncbi.nlm.nih.gov/articles/PMC12541054/

China builds with manufactured sand, easing worry about overmining and environmental cost
https://www.scmp.com/news/china/science/article/3273891/china-builds-manufactured-sand-easing-worry-about-overmining-and-environmental-cost

China Now Uses 80% Artificial Sand. Here’s Why That’s A Bigger Deal Than It Sounds
https://www.zmescience.com/science/news-science/china-80-percent-artificial-sand/

Half of China’s raw building materials could be recycled by mid-century: study
https://www.scmp.com/news/china/science/article/3331705/half-chinas-raw-building-materials-could-be-recycled-mid-century-study

The waste-to-sand plant that could pave the way for China’s zero waste coal goal
https://www.scmp.com/news/china/science/article/3357067/waste-sand-plant-could-pave-way-chinas-zero-waste-coal-goal

China turns to recycled coal waste to meet surging demand for construction sand
https://interestingengineering.com/innovation/china-turns-to-recycled-coal-waste-to-meet-surging-demand-for-construction-sand

Statista, Urbanization in China
https://www.statista.com/statistics/270162/urbanization-in-china

The Urban World
https://storymaps.arcgis.com/stories/ce3c9b908a8e458e8ce12b7da35dea04

The world moves to cities
https://www.voronoiapp.com/demographics/The-World-Moves-to-Cities-7493

IMF, Moving on up
https://www.imf.org/external/pubs/ft/fandd/2014/12/picture.htm

Industrial Colossus: China vs 1950s America

Cogitations

Industrial Colossus: China vs 1950s America

Chinese industrial maximalist Lu Feng argues that China today resembles the United States on the eve of World War I. But the analogy is faulty. China’s industrial strength—and its broader economic trajectory—is much closer to the United States of the 1950s…

Read more

a year ago · 69 likes · 6 comments · Jonathon P Sine

China’s Factory Floor Is Moving—But Not to India or Mexico
https://www.wsj.com/world/china/chinas-factory-floor-is-movingbut-not-to-india-or-mexico-dbd9fd69

China Provincial Growth Map 2025: Central and Western Momentum, Coastal Underperformance
https://andamanpartners.com/2026/02/china-provincial-growth-map-2025-central-and-western-momentum-coastal-underperformance/

Sand dredging encroaches on marine protected areas, scientists find
https://oceansolutions.stanford.edu/news/sand-dredging-encroaches-marine-protected-areas-scientists-find

Scientists and researchers in China are developing cutting-edge tools for the deployment of 6G telecom networks.

6G is thousands of times faster than 5G, with near-zero latency, and will completely transform almost all industries.

China has monopolies on the key raw materials inputs for 6G systems, including gallium compounds.

The same rare earth materials and components that are in high demand by the Pentagon and NATO militaries, also have profound uses in civilian applications.

Report:

Good morning.

The supply chains for the most important technologies run through China. The materials for the key industries, which today make modern life possible, as well as the hardware and systems that will power the rest of the century.

It’s already a crisis at the Pentagon. It doesn’t matter how much the United States plans to spend on defense; they need Chinese companies to mine and refine the raw materials that go into all their strategic weapons platforms, and even to build the semiconductors for them.

And China is cutting off exports of those materials and components to Pentagon contractors, and to weapons makers outside China.

Over 300 new F-35 jets have been delivered without radars, because of China’s export bans on gallium. Gallium nitride is used for the radars on advanced aircraft, and in those giant radar systems that Iran blew up in the Persian Gulf. Gallium nitride makes smaller and lighter systems possible. That has profound implications for militaries, but gallium is also critical, for that same reason, in civilian telecom systems.

The United States doesn’t make any gallium at all, and China makes 99 times more than the rest of the world, combined. The Pentagon needs gallium for over 11,000 components, while 85% of the Pentagon’s supply chains are dependent on Chinese suppliers to get weapons built.

This is from the US Geological Survey, with the most painful parts highlighted: no domestic production of gallium in the United States for forty years. That’s the top line. Bottom line: net import reliance, 100%. China is 99% of global production:

China has gallium, so their most advanced jets have the most advanced radars. Pentagon suppliers, in the meantime, are shipping planes out with ballast where the radars are supposed to go. Lockheed Martin hopes one day to find some gallium and build some radars, but until then they need to put barbells on the planes, so they don’t somersault in-flight.

At the time of China’s export ban on gallium, the US National Defense Stockpile didn’t have any gallium, which makes us wonder what those guys are doing, exactly. Do they understand what their job is?

No reason to be pessimistic, though: the United States needs a “hard pivot” and develop and a full gallium supply chain that includes gallium extraction and wafer fab and packaging, with production lines for military and civilian customers. Simple enough. Except that the gallium industry is a by-product of the aluminum mining and smelting industries, and the United States needs to build one of those, first:

Let’s assume that not much is likely to happen in NATO countries anytime soon, to dislodge China and its total monopolies on gallium. Obviously, that’s a problem for the Pentagon, and those Air Force pilots who are flying planes with no radars on them.

But those monopolies also mean that Chinese researchers can get busy on 6G telecom, before anyone else. The Number 55 Research Institute is under US sanction. They just developed a revolutionary gallium semiconductor for 6G, and is producing 5 million of them to build smart terminals for a space-air-ground integrated network.

These chips are for industrial applications: 6G communications, commercial space launches and satellites, emergency response. The low-altitude economy is heavy drones, used for everything—air cargo, mining, construction, passenger transport. The chips will also be used in high-end phones, especially in areas where land-based cellular signals haven’t yet been built, and now there is no hurry to be. Users can simply be direct to 6G satellite.

The commercial and industrial applications are the most important difference, between 5G and 6G. 5G is adequate for household and personal users. 6G presents a quantum leap in speed and latency over 5G, which is a boon to industry, especially the industries that China also has major advantages in.

Chinese companies are way ahead in local, industrial-level deployment of private 5G systems. This is a huge industry here: private telecom networks for warehouses, logistics nodes, mines, and factories. The differences in speed are at orders of magnitude higher for 6G, thousands of times faster, and 6G allows for rollouts to areas that are not being served at all, currently.

This is very important: 6G networks have not been standardized. Global protocols have not yet been established, because the systems have not yet been built. But China is building them, and so China will define those standards:

This research asks and answers some important questions: 5G seems to be just fine for doing what users need, so why bother building 6G? And here again, it is in business and industry where the demand will be. Breakthroughs in sensing, imaging, and precision positioning, which is an industry China recently took over. Precision in robots and advanced manufacturing. 6G operates in the terahertz frequency bands, and so 6G data centers will run faster and cost less.

This is to say that 6G are technologies where the demand will be heavily weighted on the industrial side, and far less so for individual users. To download a 21 terabyte-sized file will take 5 hours on a 5G network, and just 18 seconds on a 6G. Going back to this, 6G systems allow for downloading 200 films a second, and there is little demand for that speed, today at least, from individual consumers. The demand is from industry, where money is no object to building data centers, for example.

Capital Expenditures for 6G are already ramping up, but Ericsson is going to hit the same ceiling they’re already at for 5G: they need gallium from China, and the commercial success of 6G will depend on “tangible use cases” on the industrial side. And those run through China too.

Boston Consulting Group estimates that 5G has generated over $1 trillion in new economic output, which will grow to $18 trillion by 2035. But 6G will create completely new enterprise models and large-scale AI. 6G will transform manufacturing, smart cities, healthcare, and public safety. BCG urges that governments and industry come together and establish standards for radio frequency spectra and infrastructure planning and buildouts.

The Trump Administration acknowledges that 6G is “foundational to the national security” of the United States, foreign policy, and economic prosperity, and it is the policy of the United States to lead the world in 6G. President Trump ordered consultations and research to figure out the radio spectrum problem and get busy on commercial applications. Also, to get the State Department working with friendly countries that support the US position, that the United States should be in charge of 6G.

The problem is that the United States cannot do any of that, because it cannot build anything for 6G until the mining and refining problems are solved to get the raw materials, and then thousands of scientists and engineers are trained to apply the technology to build out 6G.

Chinese scientists and engineers are doing exactly that already. This is from Matter, a Cell Press Journal, and we’ll turn to Interesting Engineering for more help understanding it: It’s a photonic engine that uses white light to transmit data, which can power intelligent 6G networks. Conventional light communications can operate only in small areas, but this new technology works over 1 kilometer:

Here’s another one, and once again we needed IE to translate it for us. This Chinese group built the world’s first all-frequency 6G chip. The entire radio spectrum from 0.5 to 115 Gigahertz is now on a single chip; previously they needed nine different radio systems:

This chip then can be used in systems everywhere, and establishes a foundation for AI networks and used in phones, base stations, drones, and IoT devices. Phones, drones, and Internet of Things devices.

And suddenly here are applications that WILL have high consumer demand, from non-commercial users.

And that’s the point for all these technologies; all these advances. Supply chains are everything, and so are hundreds of thousands of top STEM researchers and engineers who are busy building applications for them, and new markets for them.

Right now, the Pentagon can’t put radars on their hundred-million-dollar planes or replace billion-dollar radar systems, because the Chinese won’t sell to them. And those chips, and those gallium semiconductors—mass-produced--mean that ten years from now anyone who wants the best phones or the best drones or the best robots will need China to sell to them.

Be Good.

Resources and links:

Reports Suggest F-35s Are Being Delivered Without Radar Amid APG-85 Delays
https://theaviationist.com/2026/02/12/reports-suggest-f-35s-delivered-without-radar/

Ballast Instead of Radar: Lockheed Martin Delivers F-35 Without AN/APG-85 Due to Delays
https://militarnyi.com/en/news/lockheed-martin-delivers-f-35-without-an-apg-85-due-to-delays/

China's newest air force jets have next-generation radars. New USAF F-35's have no radars at all.

China begins large-scale delivery of gallium chips for space-ground 6G network
https://www.scmp.com/news/china/science/article/3356321/china-begins-large-scale-delivery-gallium-chips-space-ground-6g-network

Why America’s best fighter jets are being made with deadweight
https://www.washingtonpost.com/opinions/2026/04/27/pentagon-fighter-jets-are-being-delivered-without-radar/

US Geological Survey, Gallium
https://pubs.usgs.gov/periodicals/mcs2026/mcs2026-gallium.pdf

The United States Is Repeating Its Silicon Mistake with Gallium Nitride
https://warontherocks.com/cogs-of-war/the-united-states-is-repeating-its-silicon-mistake-with-gallium-nitride/

What are the key differences between 5G and 6G?
https://www.raconteur.net/technology/key-differences-5g-6g

Why Do We Need 6G and What Are the Challenges?
https://www.idtechex.com/en/research-article/why-do-we-need-6g-and-what-are-the-challenges/28805

What is 6G? How is it different from 5G?
https://www.rantcell.com/how-is-6g-mobile-network-different-from-5g.html

5G vs 6G spectrum comparison
https://electronics360.globalspec.com/article/18760/5g-vs-6g-spectrum-comparison

6G: The Network for the Future of AI and Immersive Connectivity
https://web-assets.bcg.com/9c/73/4ac7634848a0b0bb31cf8dae40cb/6g-the-network-for-the-future-of-ai-and-immersive-connectivity-report-feb-2026-edit-03-web.pdf

Tailoring quasi-transparent ceramic as a laser-driven photonic engine for kilometer-level white light communication
https://www.cell.com/matter/abstract/S2590-2385(26)00185-2

Numbers Matter: Defense Acquisition, U.S. Production Capacity, and Deterring China
https://www.govini.com/blog/numbers-matter-defense-acquisition-u-s-production-capacity-and-deterring-china

Ultrabroadband on-chip photonics for full-spectrum wireless communications
https://www.nature.com/articles/s41586-025-09451-8

How Much Control China Has Over the World’s Critical Minerals
https://elements.visualcapitalist.com/how-much-control-china-has-over-the-worlds-critical-minerals/

Charted: China’s Grip on Critical Mineral Refining
https://www.visualcapitalist.com/charted-chinas-grip-on-critical-mineral-refining/

China’s New Rare Earth and Magnet Restrictions Threaten U.S. Defense Supply Chains
https://www.csis.org/analysis/chinas-new-rare-earth-and-magnet-restrictions-threaten-us-defense-supply-chains

De-risking Gallium Supply Chains: The National Security Case for Eroding China’s Critical Mineral Dominance
https://www.csis.org/analysis/de-risking-gallium-supply-chains-national-security-case-eroding-chinas-critical-mineral

China Leads the Way With Private 5G Networks at Industrial Facilities
https://www.wsj.com/business/telecom/china-leads-the-way-with-private-5g-networks-at-industrial-facilities-11647163802

Chinese exports of the highest-value products are rocketing higher.

Semiconductors, power equipment, cars, and ADP gear are hitting all-time records, despite over a decade of trade policies designed to protect domestic companies in North America and Europe.

The trade surpluses from China are at the highest absolute levels in history, and are over 2x previous records set by Germany and Japan, at their industrial peaks.

Report:

Good morning.

This is a chart of China’s balance of trade, over the past three years. Orange is exports, the percent change from the previous year. Blue is imports.

Can you please point out where the trade war happened? The objective of the new Trump Administration tariffs on China, was to push that orange line, below zero. The EU enacted policies to do the same in European markets: to contain China’s export growth, and thereby protect domestic industry.

But these data through April—two months ago, demonstrate pretty forcefully that the tariffs didn’t work, against China at least, and the CHIPS Act didn’t work, to slow down China in semiconductors, and whatever strategy there was in Venezuela or Iran to damage China’s energy supply chains—that blew up too.

China’s exports of high-tech products rose 51%, ADP equipment up by two thirds, and car exports up 39. The AI boom needs semiconductors, and China builds most of the legacy chips used in electronics.

This obviously wasn’t supposed to happen either. From the Federal Reserve: China’s trade surplus was $1.2 trillion in 2025. A “new milestone in China’s integration into, and dominance of, the global trading system.” That was over 1% of world GDP, which is two times the previous record highs, set by Japan and Germany.

So in April it worked out to $500 million per hour to Chinese manufacturers. Every hour, $500 million move from banks across the world, to banks in Hong Kong and on the Mainland. And that is driven by the high-end, the most expensive products. Integrated circuits, more than doubling since a year ago. Tariffs were zigzagging all over the place, and reached a high at one point of 145%. But the tariffs are irrelevant. In the US, an unhealthy amount of economic growth comes from the investment into new data centers, and they need China to build the equipment for them.

Just those four companies – Amazon, Google, Facebook, and Microsoft – have budgeted over $700 billion in Capital Expenditure for 2026; most of that is for data centers. Chinese companies build the hardware and power systems. And China also makes semiconductors that are in high demand.

Chips exports more than doubled. Computer equipment parts up 47%. China is also importing a lot of that gear, up 42%.

So Silicon Valley wants to build a lot of data centers, and they’re already falling behind schedule, and need Chinese equipment to bring the few data centers online in the first place.

In 2022, Congress and President Biden signed the CHIPS Act into law. The objective of the CHIPS Act was to prevent China from building semiconductors that can be used even in Chinese AI, let alone for data centers in the US. And it also provided $53 billion in subsidies and incentives to impel manufacturing of semiconductors in the United States.

This is a 14-page PDF from the Congressional Research Service, chronicling the efforts of policymakers in the United States with respect to Chinese semiconductors. For almost a decade, the US government sought to tighten exports of advanced chips; the express purpose is to restrict Chinese access to the technology, and the ability to manufacture it here. And curtailing access to computing and AI applications. Policymakers in both parties have “concerns about China’s efforts to build a home grown and self-sufficient semiconductor” industry.

Here is how that is going:

GPU’s are Graphics Processing Units. The most sophisticated semiconductors, powering large language models. When the CHIPS Act was signed, China’s self-reliance in that industry was 20%. Now it’s 41%; more than doubling, and Morgan Stanley projects that will double, again, by 2030.

China is the world’s top supplier of AI products—this report runs 457 pages, and breaks down the artificial intelligence industry into subsectors. Chinese firms are highly competitive in every industry segment, or have already taken it over completely.

Summing up: the objective of all those acts was to prevent China from building an AI industry, at all. The thinking was that China was dependent on Silicon Valley’s top hardware in order to turn their computers on, and they were so far behind on chip design they could never catch up. Even the top people from Silicon Valley were saying that, just two years ago.

But now it’s all the other way around: Silicon Valley can’t build their new data centers without Chinese gear, and it’s Chinese large-language models that are taking over, not just here, but across the world.

Also in April: China is importing less oil, and exporting a lot more cars.

Then we got the numbers from May. Export growth is accelerating; faster than April. Semiconductors more than doubled again; fastest growth in 13 years.

Exports to the US rose 36%, the most since 2021. Makes us wonder what all the trouble was about: 2021 was Joe Biden’s first year in the White House. All the tariffs and trade restrictions from Biden and Trump II, and nothing mattered. Chinese integrated circuits exports were $36 billion. That is three times higher than in 2021 in dollar value terms, and by percentage growth up 36%, also the highest since 2021.

Here is another strange wrinkle. China is importing less oil than anyone predicted. And this is ironically keeping energy prices LOWER everywhere else, than anyone predicted. That’s to say that were China’s oil imports maintained at regular levels, oil prices would be much higher today.

So Venezuela didn’t matter. The war on Iran didn’t matter. Chinese planners knew all along that fossil fuel dependency was a national security issue for them; that reliance was a true vulnerability for them, and that informed their diplomatic efforts with Russia, and their building out of an energy mix that was powered by domestic sources, and renewables. What’s more, they encouraged the electrification of their transportation fleets, and the manufacturing of electric vehicles.

Now the entire world is waking up to those same vulnerabilities. Just a small handful of countries are self-sufficient in energy; ironically the United States is NOT one of the countries. But that means the push now, is global, to do what China did for their energy supply chains, and that means everyone is buying renewable power equipment from China, and electric vehicles from China:

Be Good.

Resources and links:

China rides AI wave as exports surge past forecast
https://www.reuters.com/world/china/chinas-may-trade-data-beat-forecasts-exporters-rush-orders-ride-ai-wave-2026-06-09

AI Supercycle Propels China’s Trade With 111% Boom in Chip Sales
https://www.bloomberg.com/news/articles/2026-06-09/china-s-exports-imports-extend-rapid-growth-as-ai-propels-trade

China Earns $500 Million an Hour From Exports Supercharged by AI
https://www.bloomberg.com/news/articles/2026-05-12/china-earns-500-million-per-hour-from-export-supercharged-by-ai

Artificial Intelligence Index Report 2025
https://hai-production.s3.amazonaws.com/files/hai_ai_index_report_2025.pdf

China’s Trade Dominance and the Role of Industrial Policies
https://www.federalreserve.gov/econres/notes/feds-notes/chinas-trade-dominance-and-the-role-of-industrial-policies-20260323.html

Congressional Research Services, U.S. Export Controls and China: Advanced Semiconductors
file:///C:/Users/dell/Downloads/R48642.6.pdf

FACT SHEET: President Biden Signs Executive Order to Implement the CHIPS and Science Act of 2022
https://www.presidency.ucsb.edu/documents/fact-sheet-president-biden-signs-executive-order-implement-the-chips-and-science-act-2022

The CHIPS and Sciences ACT of 2022 - The Impact on China
https://www.dorsey.com/newsresources/publications/client-alerts/2022/09/the-chips-and-sciences-act-of-2022

Biden signs order on $52 billion chips law implementation
https://www.reuters.com/markets/us/biden-sign-order-52-billion-chips-law-implementation-2022-08-25/

U.S. Export Controls and China: Advanced Semiconductors
https://www.congress.gov/crs-product/R48642

Chinese EV exports surge as carmakers look offshore
https://www.commbank.com.au/articles/newsroom/2026/06/chinese-ev-exports-surge-as-carmakers-look-offshore.html

Higher Tariffs Here to Stay Despite Trade War De-Escalation?
https://www.statista.com/chart/34447/additional-tariffs-by-the-us-on-china-and-vice-versa-2025

America’s Data-Center Build-Out Is Falling Way Behind Schedule
https://www.wsj.com/tech/ai/americas-data-center-build-out-is-falling-way-behind-schedule-e408a9a8

Eric Schmidt says China can't catch up to US in AI for 4 reasons
https://www.businessinsider.com/eric-schmidt-comments-china-behind-united-states-ai-2024-5

Silicon Valley is quietly running on Chinese open source models and almost nobody is talking about it
https://www.reddit.com/r/Futurology/comments/1siea6z/silicon_valley_is_quietly_running_on_chinese_open/

Ten Reasons Oil Is Still Below $100 a Barrel
https://www.bloomberg.com/opinion/articles/2026-06-11/oil-prices-10-reasons-why-oil-is-still-below-100-a-barrel

Western drug companies are pouring tens of billions of dollars into China, to develop medicines that can be resold at premium prices in Europe and the United States.

China dominates all phases of the pharmaceutical industry, from new drug development, testing, and mass production.

Report:

Good morning.

Last week the Pentagon blacklisted a group of Chinese companies, including a biotech firm, Wuxi AppTec. That means that US government contracts with Wuxi AppTec are restricted going forward. The Untied States wants to reduce its dependence on China’s pharmaceutical industry, and the Pentagon’s move is a warning to Chinese companies who want access to the $500 billion drug market in the US.

The thinking is that Beijing’s dominance in biotech research and drug development will put the United States in the same spot as in for most of the world’s raw materials supply chains, and in rare earth metals and magnets. China’s restrictions on the exports of rare earths means that the Pentagon can’t build advanced weapons platforms, or even replace the missiles and radars that Iran is blowing up in the Persian Gulf, until they can get new mines and refineries online, and then learn how to make the magnets.

That’s the background there. In 2025, Wuxi revenues in the American market were 32 billion RMB, which is about $4.7 billion USD. So the US is a major market for Wuxi AppTec; about two thirds of their total sales. But here is the problem on the Americans side: Wuxi helps make a fourth of the drugs and medicines used in the United States, including for the most expensive drugs.

Members of Congress are drafting laws, which also target Chinese biotech firms. American drug companies like Pfizer and Bristol Myers are outsourcing research and development work and manufacturing to the Chinese companies, and the Biotech Investment National Security Act would subject those deals to the same high scrutiny they use on Nvidia, for example. Investments in biotechnology will be reviewed by the Treasury Department, and the War Department will assess whether they affect national security.

These investments now are enormous, and suddenly so. Pfizer and BMY were two of dozens of companies, which combined for $136 billion worth of licensing deals with Chinese drugmakers. That is a 27 times increase in just five years.

Drug companies in the United States and Europe pay Chinese labs to develop the medicines, which are then sold in Western markets with big markups. Naturally that also attracts venture capital money, and VC firms are worried that Congress may harm China’s biotech industry, which will in turn blow up the money-printing machine they’ve got going.

They shouldn’t worry about that first part though: It’s already too late to stop Chinese biotech firms. Whether or not they are allowed to license drugs in the US is irrelevant, when they are building drugs for the entire world. The United States is the most lucrative pharmaceutical market, but it’s American and European drug companies who grab most of those profits, along with VC and Private Equity firms who buy up shares in the early-stage drugs.

And there are lots of headlines now like this one: drugs developed in China perform better than blockbuster, high-profit drugs on the market in the US.

Industry insiders know all that, and the Pentagon blacklisting won’t move the needle at all, on the partnerships between Chinese drug development companies, and the big pharma companies who put their logo on the side of the box and jack up the price a hundred times. China has no peer in building quality compounds at low cost.

One issue is keeping all the executives at Western pharma companies awake at night: it’s the patent expirations problem. Morgan Stanley crunched the numbers, and Big Pharma had sales last year of $171 billion from drugs that will go off-patent over the next five years. At Pfizer, it’s an $18 billion problem by 2028, and $20 billion by 2030:

(These charts are in billions, not trillions.)

Pfizer is PFE, and that $20 billion is about 30% of its total sales, which will be dramatically reduced when those particular drugs go off-patent. At Bristol Myers, BMY, it’s $26 billion in sales that go away, and nearly 60% of its sales. Amgen needs to build new drugs to replace over 60% of their sales.

At the moment a drug loses its patent protections, the market opens up to generics from several companies, and the price collapses, along with profit margins. Drug prices fall from 30 to over 80% on average, and the steepest declines are in the American market, because that’s where the prices are set the highest. So Keytruda is a $30 billion drug for Merck, and goes off-patent in 2028 both here and in the United States.

And this is why it’s a much bigger problem for them, in the United States: In, Keytruda treatments cost $1,500 to $3,000 dollars each, with a full year cost of $20,000, at the most. In the United States, that’s the cost of a single dose. And a full year of Keytruda treatment costs $150,000 in the United States. Over seven times as much, for the same drug.

And your first thought is probably something like, why don’t patients in the United States just fly to China, check into a luxury hotel right next to the hospital, get the treatment there, and fly home and save a hundred thousand dollars? If it’s obvious to us, it’s obvious to Chinese too, and we’ll come back to that. Plus, we’ve just learned that Akeso developed a drug that works better than Keytruda, anyway.

Eliquis is a blood-thinner drug used to prevent clots. It comes from Bristol Myers Squibb, and last year threw off over $13 billion in sales. It loses patent protection in 2028 in the United States. In China, Eliquis costs $60 for a 30-day supply. In the US it’s anywhere from 5 to 10 times that depending on the pharmacy the patient is using.

Those “patent cliffs” are a major crisis for Big Pharma, but a major opportunity for firms here. China’s biotech companies work faster, with lower costs, and so companies are paying up-front for research to be done here, as soon as possible, to get new drugs ready to sell.

Neil Roberts is one of our channel’s compadres, and he’s always sniffing around the internet for stories and angles that are flying under everyone else’s radars. He doesn’t like these deals any more than our Congress does, but for a different reason. His concern is that the Chinese companies may be compromised, by spending their valuable time to develop high-profit-margin drugs for Pfizer and other companies operating in the US market, instead of doing what’s best for everyone else, everywhere else. And that’s valid.

We also find it curious that Pfizer donated thousands of dollars to help those two members of Congress get elected, who are now drafting laws to prevent Pfizer from developing new drug pipelines in China. And that Pfizer donated millions of dollars to help President Trump celebrate his election party. And that Pfizer is at the same time sending Chinese labs billions of dollars to make sure they have drugs to sell after 2028.

Wuxi Apptec does it all: the R&D, the drug discovery, scientist recruitment and training, and the mass-production. And so there are two points we want to emphasize here, with respect to the Chinese system: the government negotiates hard with drug companies, no matter where from, on fair pricing in exchange for access to China’s population of over a billion patients. But those low prices are even more a function of these Chinese companies’ capability to build and test the drugs, and the capacity to quickly scale up production after approval.

Marco Rubio was a Senator in 2024, and reported that the US once enjoyed a comfortable lead in the highest-value research, and China’s biotech industry is now an instrument of “soft power”. The Chinese are selling low-cost drugs to the developing world, and Mr. Rubio—now Secretary of State Rubio—is alarmed.

Going back to those math problems we did earlier, the cost differences between China and the United States, for the exact same treatments. Likang is a Chinese company that developed a personalized cancer vaccine. It’s in clinical trials for the FDA; it’s going through the approval process here in China. But the drug is already being offered to patients in Hainan.

Very important section, right there. The cost of the treatment will run around $21,000. A similar drug from Merck or Moderna would be multiples of that. This drug may not ever be approved in the US at all, and if so, only at a very high price. So if you’re an American reading that, and maybe your doc has just told you there’s not much they can do for you, what are your options? And it’s on that question that American venture capital and drug companies should be really worried. There is a market for that drug, right now, but China is the only place anyone can get it.

Hainan is the world’s largest free-trade zone and is also a giant zone for medical treatments. Over 30 hospitals, offering treatments and therapies that have not yet been approved even here on Mainland China.

This will be a multi-trillion dollar industry, for Hainan Island, and for hospitals on the mainland who can offer treatments at a fraction of what hospitals in Europe, or especially in America will charge. Chinese firms developing treatments, and American patients unable to buy them, in the United States; for those patients, those Chinese hospitals are the only ones who can help.

Chinese drugmakers will win, either way. Wuxi builds therapies that are in turn sold by American companies, at high profit margins, for the treatment of conditions that are money-no-object from the perspective of patients. These are terminal illnesses, and Wuxi is the only company making the treatments for some of them. Replacing Wuxi in the supply chains means there’s no more coming for years, and remember, American drug companies don’t have “years”. A third of their revenues are going away, starting next year.

So the money is pouring in to China to develop new drugs, and soon enough the money will be pouring into China by patients who need treatments that are not even approved in their home countries, or who do the math and figure that it’s like being paid a hundred thousand dollars to take a vacation in Hainan and receive treatment there. This is another company, Hengrui, who is now the top clinical sponsor in the world, with over 400 ongoing clinical trials, and multi-billion-dollar deals with Merck and Glaxo Smith Kline.

This did all happen very fast. Just like in everything else, no matter how much our political leadership likes to pretend otherwise. True experts and industry insiders know it. “There is no sense that these are areas the US can win”. Precision medicine, biotech, and medical equipment are literally national-level priorities, national security priorities, for the Chinese government.

And while that kind of emphasis would drive prices and costs way up in the American market, like we see at the Pentagon, for example, in China the cost structures go the other way. The system is more efficient, so costs fall, and timelines speed up. Since 2021—and that five-year plan—the number of drugs under development increased eight times. China is committed to excellence in service, and the US is not stepping up and competing, and cannot.

Morgan Stanley again, and drugs coming from China will grow to $34 billion in five years, and $220 billion in fifteen years, and a major driver of that increase is that the treatments are for the high-profit-margin drugs.

China is investing in the R&D, and in the people and facilities. Zhangjiang Gaoke is in Shanghai, and home to over 1700 medical companies in a single zone. Seed capital investment in US biotech is at the lowest level in over 20 years, so it’s only the Chinese companies now who are doing the hard work of drug research and discovery. Much of that work is very labor-intensive, by highly skilled chemists. So, it’s cost-prohibitive to even try it in San Francisco or Boston. Pudong, Shanghai isn’t cheap, either, but China is where the people are, and those Chinese PhD’s are building the highest-value drugs.

China built a new system, while the industry in the United States headed the opposite way. China approved 20,000 new drugs in just two years; in the same time it takes the FDA to look at three hundred or so.

And so Chinese companies, and some American ones, are indifferent as to what the Pentagon or Congress does. China is that blue parabola that now is the world leader in new drug discovery and development for the most valuable drugs:

China is also that blue line, for Clinical Trial Activity:

China is doing more trials than the United States and the EU combined, and there’s a big reason why: Phase I trials take two years in the US but get done in about a third that time in China. In other words, China is doing more trials, and finishing them faster.

Here’s another blue line: license-out deals, which tripled from 2024 to 2025. Last year worth $135 billion:

And this year, 2026, it’s growing even faster. In the first three months, $60 billion, which is two times the rate of 2025, and 2025 was 10 times bigger than 2021.

So that’s the concern on the US side: Western companies are addicted to the low-cost drugs coming out of China, which they can mark up to American patients for hundreds of billions of dollars.

But it’s also causing some problems here, for Chinese policymakers, who are concerned in the same way Neil Roberts was in his email to us. The first priority for Chinese drugmakers, should be to care for Chinese patients.

Regulators understand that some of these most novel and revolutionary treatments fall far outside the traditional processes for testing and approval. Personalized medicine – precision medicine -- is completely different, and millions of patients are suffering, right now. Those patients need faster approvals for those therapies, and they also need companies who will build them.

Anew regulatory pathway for treatments for rare and terminal-stage diseases is being established. The objective, specifically, is improved access to the most advanced therapies for Chinese patients. Those new protocols will offer vast new revenue opportunities for Chinese biotech firms, while reducing their need to partner with the Pfizer’s and the Merck’s of the world just to keep the lights on and their people paid.

There is massive demand, right now: patients who need new drugs, and need Chinese companies specifically to build them. That new industry will be all-China: all the drug development, and all the treatment, first to Chinese patients, and then to anyone else who buys a plane ticket to Hainan.

Be Good.

Resources and links:

Pentagon casts dark cloud over China biotech
https://www.reuters.com/commentary/breakingviews/pentagon-casts-dark-cloud-over-china-biotech-2026-06-09/

Moolenaar, Dingell Introduce Legislation to Prevent Offshoring Biotech Industry to China
https://chinaselectcommittee.house.gov/media/press-releases/moolenaar-dingell-introduce-legislation-to-prevent-offshoring-biotech-industry-to-china

House bill aims to crack down on China biotech deals
https://www.biopharmadive.com/news/binsa-china-biotech-deals-house-moolenaar-dingell/821841/

China’s Biotech Is Cheaper and Faster
https://www.nytimes.com/2025/08/17/opinion/china-biotech.html

Chinese Company Under Congressional Scrutiny Makes Key U.S. Drugs
https://www.nytimes.com/2024/04/15/health/wuxi-us-drugs-congress.html

China’s biotech industry sees global expansion as unstoppable, despite US pressure
https://www.scmp.com/business/china-business/article/3356778/chinas-biotech-industry-sees-global-expansion-unstoppable-despite-us-pressure

Chinese drugmaker becomes top trial sponsor — and other clinical trends
https://www.pharmavoice.com/news/chinese-china-drug-clinical-trial-pharma-jiangsu-hengrui/804665/

US drug pricing policies are ‘red lights’ for investors, and China beckons
https://www.pharmavoice.com/news/drug-pricing-red-lights-biopharma-china-venture-capital/810167

China turns the tables in biotech
https://www.science.org/doi/10.1126/science.aef7757

Patent cliffhanger: will China biotech throw Big Pharma a lifeline?
https://www.scmp.com/business/china-business/article/3337038/patent-cliffhanger-will-china-biotech-throw-big-pharma-lifeline

Chinese pharmaceutical firms’ cost advantages trump Pentagon blacklist: analysts
https://www.scmp.com/business/china-business/article/3356564/chinese-pharmaceutical-firms-cost-advantages-trump-pentagon-blacklist-analysts

The paradox of biotech protectionism: Why walling off China biotech weakens America
https://rapport.racap.com/all-stories/the-paradox-of-biotech-protectionism-why-walling-off-china-biotech-weakens-america

The Innovation Boom in China Biotech
https://www.morganstanley.com/insights/articles/china-biotech-boom-generics-to-innovators

How China Became the Biotech Industry’s Back-Office
https://www.forbes.com/sites/shimiteobialo/2026/01/21/how-china-became-the-biotech-industrys-back-office/

As China biotech crackdown calls reverberate in Washington, the pushback gets louder, too
https://www.fiercebiotech.com/biotech/divisive-bill-seeks-add-biotech-industry-law-limiting-investment-chinese-industry

The Year China Surpassed the USA in Biotech Innovation, Deal Value, and Clinical Output
https://www.synbiobeta.com/read/the-year-china-surpassed-the-usa-in-biotech-innovation-deal-value-and-clinical-output

The China question is tearing biotech apart
https://www.statnews.com/2026/05/18/biotech-industry-split-chinese-drugs-opportunity-versus-existential-threat/

Amid a flurry of biotech deals, China looks to keep innovation at home
https://www.pharmavoice.com/news/licensing-pharma-deal-china-regulation-policy/822443/

Political contributions data from OpenSecrets.org

US says BYD, Baidu, Alibaba and other tech giants are aiding China's military
https://www.reuters.com/world/asia-pacific/pentagon-lists-entities-designated-chinese-military-company-2026-06-08/

On this Chinese island, patients are trying latest experimental drugs for cancer
https://www.scmp.com/news/china/science/article/3310623/chinese-island-patients-are-trying-latest-experimental-drugs-cancer

Order backlogs for new jets will take over a decade to clear, as Airbus and Boeing cannot build or deliver planes on time.

As a result, airlines are flying older planes for far longer than they had planned.

Older planes are more expensive to maintain, and are less fuel efficient than new aircraft.

Jet price prices are soaring higher, doubling in major markets from a year ago, while the industry had forecast a drop in oil and fuel prices for 2026.

COMAC is a Chinese aircraft manufacturer and is quickly scaling up production, but not yet fast enough to meaningfully close the gap between new plane demand, and production from the duopoly of Boeing and Airbus.

Report:

Good morning.

COMAC is a Chinese airplane manufacturer, which builds the C919. And Chinese airlines have a major problem, which is shared by all airlines, everywhere in the world: their planes are getting older, faster than they can be replaced.

Aircraft replacements are still below the levels of the previous decade: current deliveries are behind the rates of 2019. And since 2020, the number of planes over 20 years old is growing faster than new aircraft rolling off the lines.

Older planes means that airlines spend more money to keep them flying. All the costs go up. They need to be more closely inspected, maintenance and repairs go up, which means higher costs for replacement parts, and the technicians. And older planes are less fuel efficient. It’s especially a problem for the most expensive parts, like engines and landing gear assemblies.

So COMAC sees an opportunity, especially in China, to grab market share from Boeing and Airbus. And China overall represents the fastest-growing aviation market in the world. It will be the biggest market. India and Indonesia will also be major markets here in East Asia:

And the problem with aircraft availability is global, and urgent. It’s the most significant constraint to the growth across all the markets: airlines are ordering planes, but airline manufacturers cannot build and deliver them.

This is the industry update and forecast from last December, from the International Air Transport Association. Severe supply chain problems constrain the ability of airlines to grow new markets, and even to meet their demand for replacement jets. The backlog in aircraft orders is growing, and accelerating, and those same supply chain issues are impacting existing fleets and are a “drag on airline profitability.”

That’s to say that the same supply chain problems that preclude Boeing and Airbus from building new planes, also mean that replacement parts are hard to come by. Production is picking up some, compared to before, but new orders are coming in even faster, so the backlogs grow.

The IATA has a breakdown of the industry’s cost structures. Remember, this is from December, 2025. But things are already much worse than they thought. The industry forecast for 2026 called for a decline in fuel costs, with a consensus view for crude oil to be $62 a barrel, and jet fuel costs to drop to $88 a barrel. Fuel will be 25.7% of airlines’ operating expenses in 2026, a percent below the previous year.

We all know that didn’t work out, but here’s how much they were off: the cost for jet fuel is $146.25 a barrel, and higher in the North American and European markets:

We’ll return later to the fuel problem. The demand for new aircraft, compared to new production, is only worsening, and the mismatch isn’t going to go away until the 2030’s. There is a record-high order backlog of over 17,000 planes:

That is 60% of the active fleet, right now. Historically, the ratio was half that. This industry wants to grow, and has placed orders, but manufacturers cannot keep up. They need 12 years of current production capacity just to meet the backlog they had, last December. There are over 5,000 planes in storage, but those need new parts and new certifications, and those are harder to get.

So old planes are flying for longer, and airlines are flying the wrong kinds of planes in many markets.

Most of the delays are supply-chain related. Engine manufacturers, for example, cannot keep up with production of the airframes, which are being parked until the engines get finished and installed.

Tariffs blew up supply chains last year. Tariffs on China, Canada, and the EU slowed everything down and drove costs up. Add up all the new costs that were hitting airlines—before the war on Iran—and it’s over $10 billion a year. These all result from that order backlog of 17,000 planes, and airlines flying older jets for longer.

A key problem for the airline industry is this duopoly; Boeing and Airbus have 90% of the market share. This chart is for narrowbody jets, which include the C919. COMAC and Embraer combine for only 9% of this market.

Russia also builds narrowbody jets, but their companies are under sanction, and that is another big part of the problem. Russia is the primary source for titanium to Airbus and Boeing and the engine makers, and those companies now need special waivers to buy Russian titanium. The price is shooting higher. There are also shortages in aluminum and steel.

And civilian airlines are trying to buy new planes at the same time the Pentagon and other governments are racing to build new military aircraft. “Military programs compete aggressively with commercial aviation for an acutely limited labor pool”.

So everything is tight—supply chain constraints are everywhere, and costs are going up. Back to the fuel cost efficiency problems, when flying older planes. This table shows the impact on profitability at different price points for jet fuel. Remember, the industry experts believed that fuel prices would drop to 2024 levels, in 2026, and that would be a $32 billion dollar hit to industry profitability.

That was based on a jet fuel price of $2.30 a gallon. Top line. But today it’s over twice that. In the US, jet fuel is over $7 per gallon at major airports.

The cost of flying all those older planes drives airlines’ fuel costs up, even in peacetime. Then come the higher maintenance costs on the older aircraft. The average plane today is two years older than the ones flying in 2019. Maintenance has to be performed more often, and become more complex. More inspections for issues such as metal fatigue and stress fractures in the airframes, for example. More planes need to be overhauled and retrofit completely, which further strains the supply chains for parts, and on skilled labor.

And Airbus and Boeing cannot keep up with deliveries for new planes. Airbus had previously been meeting their delivery schedules better than Boeing, but now Airbus can’t get engines fast enough to meet their delivery schedules.

Boeing, Airbus, and Pratt & Whitney all use a just-in-time inventory management system, which is failing in practice as well as in theory—JIT means that production happens as new orders come in: that is when parts are ordered and work begins, to meet demand. But the demand is there, and the production is not. So Pratt can’t build engines, so Airbus can’t deliver planes.

And making it all worse is that the airlines need to keep their old planes flying with old engines, which in turn need replacement parts to make that go. Everyone is blaming everyone else, and we’re back to the duopoly and monopolies: there are too few manufacturers, and a tiny group of companies are happy with the way things are right now. Backlogs are a big problem for airlines, but an opportunity for Pratt & Whitney to make money selling new engines to Airbus, as well as old ones to the airlines—at high prices, and there’s nothing that the airlines or Airbus can do about it.

So this is where we are. This is as of 30 April, so 4 months in to 2026. Airbus production—not deliveries, but production—was 226 planes. At Boeing it was 190. A smaller number actually were delivered, so let’s just look at best case. 226 plus 190 is 416. Divided by 4 months is 104 planes. At 104 planes per month, it will take 159 months, or over 13 years, to clear that backlog of 17,000 planes. Back in December the was “nearly 12 years” to clear, and just a few months later the backlog jumped to over 13 years.

Some airlines are responding by ordering many more planes than they need. Alaska Airlines just ordered 110 new Boeing narrowbodies and bought an option for 35 more, and when you read the language of the announcement carefully, a large part of the order was simply to hold more space in line, and “secure critical delivery slots” and thereby pay up front for some flexibility later. Their forecast is for 189 new aircraft to build new routes and replace older planes, but placed options for another 71.

So this all represents a big opportunity for COMAC, but also a serious challenge. The C919 is in active service in China, with high utilization rates in the markets where it is used. It’s now at 29 airports and flown by the three largest domestic carriers. But the challenge now is scaling up.

Next year COMAC hopes to produce 150 aircraft, and 200 per year starting in 2029. But that’s still not going to move the needle, much, on that global deficit right now of 17,000 planes.

Eventually we should expect that the commercial aviation industry will go the same way all the others have, and China will eventually take it over.

China has no problem buying titanium from Russia, for example. And there are no supply chain issues in China for aluminum, or in steel; no shortages of skilled labor. COMAC will sell all the planes they can build, and by 2050 will have blown up the duopoly that Airbus and Boeing have now.

But that’s a long way off, and things will be a lot worse for this industry until things are much better.

Be Good.

Resources and links:

China’s C919 jet poised to tackle ageing domestic fleet: industry official
https://www.scmp.com/economy/china-economy/article/3356365/chinas-c919-jet-poised-tackle-ageing-domestic-fleet-industry-official

The Countries With the Most Airline Passengers
https://www.statista.com/chart/34633/biggest-aviation-markets/

Airbus has warned of the risk of falling behind its delivery target. So far, it is ahead of Boeing
https://en.oninvest.com/article/airbus-has-warned-of-the-risk-of-falling-behind-its-delivery-target-so-far-it-is-ahead-of-boeing

Airbus’ Growing Inventory: Why the 2026 Delivery Target is at Risk Despite Growing Production
https://flightplan.forecastinternational.com/2026/04/30/airbus-growing-inventory-why-the-2026-delivery-target-is-at-risk-despite-growing-production/

Here's The Real Reason Airlines Keep Ordering Aircraft They Don't Need Yet
https://simpleflying.com/real-reason-airlines-keep-ordering-aircaft-dont-need-yet/

Reviving the Commercial Aircraft Supply Chain
https://www.iata.org/contentassets/85b59d951fc04c1c83fa2aab47824300/reviving-the-commercial-aircraft-supply-chain.pdf

Aerospace Supply Chain Bottlenecks Continue to Constrain Airlines
https://www.iata.org/en/pressroom/2025-releases/2025-12-09-02/

China’s C919 Jet Maker Get USD6.2 Billion Capital Injection From State-Owned Backers
https://www.yicaiglobal.com/news/comac-receives-usd62-billion-capital-injection-from-eight-state-owned-shareholders

Airbus Unsure of Reaching A320 Target Due to Pratt Problems
https://www.bloomberg.com/news/articles/2026-06-09/airbus-unsure-of-reaching-a320-target-because-of-pratt-problems

Airline Profitability Stabilizes with 3.9% Net Margin Expected in 2026
https://www.iata.org/en/pressroom/2025-releases/2025-12-09-01/

IATA, Jet Fuel Price Monitor
https://www.iata.org/en/publications/economics/fuel-monitor/

Alaska Airlines announces largest fleet order in airline’s history
https://www.sec.gov/Archives/edgar/data/766421/000076642126000004/ex991172026pressrelease.htm

Boeing captures 33% of single-aisle sector, maintains big lead for wide-bodies
https://leehamnews.com/2026/01/02/boeing-captures-33-of-single-aisle-sector-maintains-big-lead-for-wide-bodies/

COMAC C919
https://english.comac.cc/products/ca/

China's COMAC will be bigger than Boeing and Airbus, combined, by 2040.

China supplies over half the global market of offshore oil drilling equipment.

Vast new offshore fields are under development in South America and Asia, particularly in countries with close diplomatic and economic ties with China.

The Chinese are better insulated against energy supply chain shocks than other major economies, and surprised experts who issued forecasts to the contrary after American strikes on Venezuela and Iran.

In North America, offshore oilfield development is a slow-growth industry, with a CAGR of barely 2%. But in the rest of the world, it is growing at double-digit annual rates.

Report:

Good morning.

This is a recurring theme for us, by now. We get poking around an industry we believe is poised to take off, for some reason, looking for good investments in that theme, only to learn that Chinese companies already control it.

The world is scrambling to find new energy sources, and whether it’s in renewables, or in nuclear. But China is already there, with structural monopolies on the manufacturing of the equipment, and everything in the upstream supply chains.

Same thing happened somehow in the offshore oil and gas equipment industry. Chinese firms build most of the machinery used, and those companies are booming:

That number—50% of the global market for offshore engineering gear—means that Chinese companies are more than the rest of the world, combined. And this industry is growing fast—doubling over the previous five years--and as we’ll see it’s only going higher.

China has very strong diplomatic and economic ties with South America, and Brazil is a fellow BRICS member. South America’s oil exports are rocketing higher, especially since just one year ago.

Over the past 10 years, Persian Gulf countries were 43% of all seaborn oil trade. This chart is the difference between the first five months of 2026, compared to the first five months of 2025. 675 million barrels that used to be floated out of the Middle East are gone, because of the closure of the Strait of Hormuz. That’s the red bar. The gray bar at the bottom is the sum total of all deltas of oil exports, and that is still a huge gap. But exports from South America have risen by 155 million barrels. That’s more than the increases from all the other regions combined.

Most of those South American crude exports come from Brazil, which have increased by 150 million barrels per year, since 2021.

And most of Brazil’s exports come here, to China. Oil shipments from Brazil to China more than doubled, year over year—up 122%, to 16 million tons. That’s by volume. Crude oil trade was up 94% in USD terms, even though prices are higher, which suggests that Chinese buyers are getting a discount.

Brazil enjoys immense advantages, especially with the Hormuz closed, and massive new buy orders are pouring in, which has prompted their own oil executives to caution, that Brazil is hitting a ceiling and cannot scale much more new production, at least not quickly.

But Brazil is in a great position and will likely stay there. The country is branding itself as a “safe haven” for oil, targeting importers in China and India:

China’s imports of Brazil crude were 10% to start the year, and that also nearly doubled: now it’s 18%. India is Brazil’s second largest customer. Last year India imported less than 100,000 barrels per day from Brazil. Now the number is 290,000 bpd.

Petrobras is Brazil’s state-owned energy company, and by far the biggest in-country. And most of Brazil’s new oilfield discoveries are offshore, clustered near the mouth of the Amazon river. That means a boom in jobs, now at a 16-year high, along with tens of billions of dollars in new investment.

There are lots of headlines about Brazil’s soybean industry putting the American farmers out of business, but oil an even bigger export market for Brazil, and China is an even bigger buyer of crude than soybeans. And China builds more of that equipment for the oil industry than the rest of the world, combined.

Referring again to that map, “offshore” is obviously everything in the Atlantic and Pacific Oceans, but offshore oil drilling equipment is also necessary for most of those fields in the Amazon basin upriver. But it is the deepwater sources specifically which are high production at low cost, after that equipment is deployed and pumping.

China has a large industry for oilfield equipment, because it is one of the world top oil and energy producers. In 2024 China ranked #6 in the world for crude oil production, just ahead of Iran, and Brazil. Brazil and Guyana are major sources of the new growth in crude oil supplies.

And when we add in petroleum liquids, China ranks fifth in the world. Energy independence is a strategic priority, set at the highest levels, and production hits records every year.

In the most recent five-year plan that concluded last year, annual investment was 48% higher than during the previous five years, and now that new production is coming online.

Today, domestic crude production is 4.3 million barrels per day, and the Bohai Gulf and South China Sea offshore production accounted for more than half of the new production since 2020. There are plans for new fields off the mouth of the Pearl River. What’s more, foreign oil companies have been “quietly” denied access to all the new Chinese energy fields.

Many political analysts, and some energy industry insiders, made some forecasts during the first few months of the year, which have not panned out, at all. Many believed that China would be crippled by the loss of their Venezuelan suppliers, then wiped out by the war on Iran. But some tankers outbound Iran are still making it this way, anyhow, and China is far better insulated from energy supply shocks than anyone thought.

China previously imported more oil from the Persian Gulf than India, Japan, and South Korea combined, but policymakers in those countries have enacted rationing and austerity measures. China is telling people that the “energy rice bowl” is in their own hands: so handle with care; don’t waste it, but don’t worry about it.

China has as many electric vehicles as the rest of the world combined, they have a diversified energy mix, and vast coal reserves plus renewables mean that China’s electric grid is powered mostly by domestic sources.

The situation is almost exactly what their central planners had in mind, over many years, to “reduce their reliance on imported and seaborne fossil fuels.” Six years ago, Beijing set a goal for 20% electric vehicle sales by 2025. But the final 2025 sales result was over half. That unexpected boom means a far larger, and far earlier than expected impact on Chinese oil imports:

The oil demand that was displaced by EV sales canceled out what China used to buy from Saudi Arabia. Going out to 2030, EV sales will displace oil demand from Saudi, and Russia. So, oil demand in China is peaking and in decline, and the situation is unlikely to get worse, no matter what happens in the Persian Gulf, or in Venezuela, or in Russia. The electric grid is less dependent on oil than ever: now flatlining, at barely above zero:

And China also has a deeper diversification of crude oil suppliers, compared to other Asian countries. Less than 20% of China’s imports come from a single source, and their number one supplier is Russia, who is also better insulated than anyone to disruptions in seaborne oil transport:

Gas is a higher share of China’s electricity mix than oil, and that percentage is growing, though it’s harder to tell given the boom in renewables. Electricity production is booming, along with consumption, but domestic supplies of gas are keeping pace with the rise in demand, and they are also hauling in record volumes through Russian pipelines:

There are American companies that also build offshore oil equipment. But they’ve got a bunch of problems. The offshore equipment market is a low-growth industry, for US firms. The compound annual growth rate in North America is barely over 2%. Investors can make more than twice that buying US Treasury bonds.

Chinese companies are now over half the world’s market share for this equipment, and we should assume that the Chinese are building high-quality gear at competitive prices, and doing so in countries that are more friendly with China, than with the United States. And doing so in countries who strongly prefer NOT to use US dollars or US banks to finance the purchases. And, in countries who hope to be one of China’s energy suppliers after production comes online.

Be good.

Resources and links:

Brazil, Guyana, Venezuela Fuel South America’s Oil Export Boom
https://finance.yahoo.com/sectors/energy/articles/brazil-guyana-venezuela-fuel-south-230000460.html

Brazil's offshore oil and gas plans contradict COP30 climate ambitions
https://globalwitness.org/en/campaigns/fossil-fuels/brazils-offshore-oil-and-gas-plans-contradict-cop30-climate-ambitions

Brazilian Oil Jobs Are at 16-Year High on Offshore Drilling Boom
https://www.bloomberg.com/news/articles/2026-05-14/brazilian-oil-jobs-are-at-16-year-high-on-offshore-drilling-boom

How China is cashing in on a global scramble for offshore oil and gas
https://www.scmp.com/economy/china-economy/article/3356113/how-china-cashing-global-scramble-offshore-oil-and-gas

China's largest offshore oil production base, Bohai Oilfield, sees 2025 output exceed 40 million tons
https://www.globaltimes.cn/page/202512/1351112.shtml

China’s Oil Pumping Power Breaks All Records
https://oilprice.com/Energy/Energy-General/Chinas-Oil-Pumping-Power-Breaks-All-Records.html

China's CNOOC commences new offshore oil project in the South China Sea
https://www.reuters.com/sustainability/boards-policy-regulation/chinas-cnooc-commences-new-offshore-oil-project-south-china-sea-2025-12-22/

China's record oil output reaches limits of what's possible
https://www.reuters.com/business/energy/chinas-record-oil-output-reaches-limits-whats-possible-2026-03-20/

X, Arnaud Bertrand

China added more crude to its massive stockpile in March, but outlook shifts
https://www.reuters.com/markets/commodities/china-added-more-crude-its-massive-stockpile-march-outlook-shifts-2026-04-16/

How China can survive without the Strait of Hormuz
https://www.reuters.com/graphics/IRAN-CRISIS/CHINA-OIL/egpbeormkvq/

Watch China Overtake The US As The World’s Major Trading Partner
https://merchantmachine.co.uk/china-vs-us/

REPORT China EV market situation in first half of 2025
https://carnewschina.com/2025/07/21/report-china-ev-market-situation-in-first-half-of-2025/

Electricity per person, nearly entire global growth coming from China
https://www.reddit.com/r/EconomyCharts/comments/1pm63md/electricity_per_person_nearly_entire_global/

The BRICS Map: Who's In? Who's Engaged?
https://bricslab.mit.edu/bricsresearch/brics-map/

China dominates all stages of solar panel production
https://www.statista.com/chart/24687/solar-panel-global-market-shares-by-production-steps

China is world leader in wind energy
https://www.voronoiapp.com/energy/China-Is-The-World-Leader-in-Wind-Energy--1825

Nuclear plants under construction, by country
https://www.globaltimes.cn/page/202601/1352332.shtml

Offshore Drilling Equipment Market
https://www.marketresearchfuture.com/reports/offshore-drilling-equipment-market-41587

Ranked: The Top Crude Oil Producers in 2025
https://www.visualcapitalist.com/ranked-worlds-biggest-producers-of-crude-oil/

The World's Largest Oil Producers
https://www.statista.com

South America's stealthy ascent to key crude oil swing supplier
https://www.hydrocarbonprocessing.com/news/2026/06/south-americas-stealthy-ascent-to-key-crude-oil-swing-supplier/

SpaceX will soon go public, in an offering that will value the company at over a trillion dollars.

Anthropic and OpenAI are Artificial Intelligence companies, who also plan IPO's for later in the year.

Recent changes to indexing rules will compel massive share buys into these companies by retirement and pension plans, and by passive ETF's and mutual funds.

In the past, new companies were required to wait until insiders sold most of the shares after the lockup periods before being added to investment indices. Companies also needed to show a strong history of growth and sound financial practices.

Report:

Good morning.

The heads-up on this story comes from one of our favorite Substacks, Gold and Geopolitics. Our concern is that the public, normal people, are at least unaware, and maybe even indifferent, to how really screwed they are at the highest level, and by people at the highest level. It’s not the kind of story that is felt tangibly, at least not at first, like a big spike in gas or food prices. And it’s also difficult to follow, and that’s exactly what the architects of our financial and political system are counting on.

It involves the qualification requirements for a new company to be included in the NASDAQ-100. The regulators changed those rules, so that new public companies can be part of the index. In the past, companies had to wait, and have a track record of revenues and profits. Because trillions of dollars’ worth of pension investments—which is money invested on behalf of workers, millions of private retirement plans, plus exchange-traded funds and other mutual funds, are invested in those indices. And they do so, assuming that the top 100 tech companies, in this case, are well-managed and profitable businesses.

But that rule is gone. Now, a newly public company can qualify, simply based on size—how big it is. And they changed the definition of “public”. Companies can qualify as a megacap public company simply by being large at the time of its IPO, then limiting how many shares they sell to the public. The index now accepts a weighting multiplier. That is what “small float” means—insiders of the company still own almost all of shares, and so completely control the company, even though it’s “public”.

They also threw out the rule for four consecutive quarters—one full year—of profits.

With these rule changes, the guardrails are down and regular Americans will be forced to buy shares of bad companies, that don’t make money.

The NASDAQ, in this case, gets big fees from the Initial Public Offerings of companies that want to avoid the rules that used to govern the industry, and protect small investors, somewhat, and SpaceX, in this case, will have tens of millions of passive investors buying their shares. That massive, passive buying will put a floor under the stock price no matter what happens, at the same time that insiders are allowed to dump their stock. Insiders and early investors are restricted from selling their shares during the IPO; they must wait to do so, until later.

That was previously a major risk to company insiders, and early investors: if the IPO price is set too high, or if the company does poorly after the IPO, their shares will be worth far less than they had hoped, just as they and all the other insiders are selling. But with these rule changes, passive investors will be buying shares, every single month, because they’re buying the index.

This is the source document. Paragraph 2 explains the new “fast entry” rules for new companies that list on the NASDAQ exchange. If the company’s market cap is in the top 40 of companies already there, it’s a Fast Entry addition, and will be put into the index after 15 trading days. So 15 days after the IPO, SpaceX will go into the index. The company will be exempt from “seasoning and liquidity requirements”—seasoning is how much experience the company has, earning money, and liquidity is how much money it has in the bank. Exempt.

Paragraph 3. These changes will go through, “without regard to free float considerations”. They changed the definition of “public company” and replaced it with a formula. So a public company is now one where just a tiny handful of shares actually are made available for sale to the public. A low-float company will just multiply the percentage of shares by five to meet the 10% float requirement, which goes away anyway for the new megacap companies.

SpaceX insisted on these specific rule changes in order for NASDAQ to get the listing, instead of the New York Stock Exchange. SpaceX wants early inclusion on the Nasdaq 100, which is the gold standard for large institutional investors, like pension and retirement plan managers investing in tech companies.

And there again—for executives and early investors, like private equity funds and venture capital firms—inclusion in the index now protects them from downward price moves. SpaceX goes into the index after 15 trading days, whereas insiders are required to wait 90 to 180 days to sell during their lockup period.

This is all every bit as bad as it sounds, and the head of the New York Stock Exchange is being as diplomatic as possible, considering that these rule changes mean that every giant new company will list on the NASDAQ from now on. New York has no chance now to get Anthropic or OpenAI, which are the next big IPO’s on the way. She says the Fast Entry rules—expedited index inclusion—artificially inflates valuations. And that’s the point. That’s just what insiders want, and just what the public should not want.

Substack writers are less cordial. Gold and Geopolitics calls it Graft, the active extraction of capital from passive, long-term investors to guys who just rewrote the rule book.

This one says the index is being rigged to appease a billionaire, who will be a trillionaire soon enough. It’s now a template for the forcible “transfer of wealth from the retirement accounts” of everyday Americans directly into the pockets of billionaire founders and billionaire VC funds.

George Noble is another Stack we like: “a shameless structural manipulation.”

The NASDAQ blew up the prestige of their own index just to get a stock listing. Every other public company up to now was required to meet minimum standards, at the very highest level, to qualify even for a public offering in the first place, let alone a designation as a top 100. All gone.

He explains the math here about what the 5x float multiplier means, and for companies qualifying for the index. But what makes that part much worse is that the small number of shares available to the public means that every single passive tech fund is chasing a small number of shares. The stock price is almost guaranteed to go up, starting on the 15^th day, and insiders still get to own the other 95% of the company’s stock. The insiders who do sell have a guaranteed buyer: you. Your 401k plan, your pension.

The richest and most powerful people in the world can take a company public and never worry about the stock price, or ever losing control of the company. At least ten top officials in the Trump Administration stand to make millions on the SpaceX IPO. And let’s remember too that those same government officials can guide federal contracts to SpaceX already. Steve Witkoff isn’t in the administration, officially, but also has large holdings in SpaceX.

The new rules mean that fundamentals don’t matter. Valuations don’t even matter. Investment advisories do deep research into companies and prepare reports and estimates that are used by their clients and subscribers. Morningstar crunched the numbers on SpaceX and concludes that SpaceX is worth less than half what the IPO target raise is. The “company has been significantly overvalued”.

SpaceX will offer only 3% of the company’s shares to the public, which implies a more than $1.5 trillion valuation given the previous funding rounds.

Morningstar figures the company is worth $780 billion. This is a very good business; that is a huge number. Starlink is great technology, and SpaceX has an 80% market share in space launches. The other businesses—X, Twitter, and their AI investments don’t add up to very much, and even after modeling possibilities with Grok and Twitter, there’s no scenario that gets the company to $1.5 trillion.

But it doesn’t matter. The rules were changed, and not even Bloomberg can quite understand what it means, yet. But it doesn’t sound good. The SpaceX IPO is just the first of a bunch more megacap offerings and the integrity of the whole market is threatened:

Passive fund custodians are already modeling how to invest their trillions of dollars under management, because they have to. Their prospectus requires them to buy the index, no matter what companies are in, or how they got there. New exchange-traded funds and derivatives are also being created. The entire SpaceX float is just $75 billion, so all these funds have to fight over those shares which are a tiny—relatively tiny—share of the $1.8 trillion, or whatever the final number is. That’s to say that they have to weight their buys of the 3% of shares that are available, as if all the shares of the company were available to the public, which isn’t true.

This is Bloomberg, and they don’t know the rules anymore, or how anyone can follow them. But the balance of power on Wall Street is now unambiguously on the side of billionaire founders and private equity insiders; the institutions that at least claim to protect public investors aren’t even bothering to even pretend anymore:

The SpaceX IPO is coming in a few days. Next up is OpenAI and Anthropic, and they’re going to enjoy the same treatment. SpaceX would have been a blockbuster IPO, anyway. It is a good business; they have revenues and real products, but that is not something that’s true of AI companies. There are a handful of money managers who have come forward to say that SpaceX is uninvestable, fundamentally. They have ethical concerns too.

But none of that matters. Valuation doesn’t matter. Passive demand is what matters, and that will be almost unlimited, given the tiny number of shares they can buy, and the rules that say they must buy.

The NASDAQ 100 itself is $1.4 trillion in notional market value, including mutual funds at 75 billion, ETF’s like QQQ making up $587 billion more. Derivatives are 650 billion. All these market players are required to shift assets to SpaceX, whether Twitter or Grok makes money or not. Nothing matters.

And it’s all just in time for the new IPO’s for AI. We’ve covered the Artificial Intelligence industry a good bit on our channel, and the severe problems that Chinese AI companies pose the American hyperscalers, and AI companies like Anthropic and OpenAI.

Anthropic has filed for their IPO, and it would already qualify for inclusion into the NASDAQ 100 and the S&P, which means that their insiders will get the same guarantees that SpaceX just got. Hundreds of Anthropic employees will become millionaires, with huge paydays on the way for the seed companies, and none of them need to worry about the stock price going down before their lockout period ends.

And once again, doesn’t matter if the company makes money or not. Annualized non-GAAP revenue for the most recent month, times 12, gets a number is $47 billion. Not earnings—revenues. So the company IPO is 25 times annualized sales, or so.

Michael Burry is world famous for taking apart companies and systems and finding there’s nothing really there. SpaceX and Anthropic aren’t in the same league as collateralized mortgage obligations during the housing bubble, where loans to people who could not and would not ever pay them back were bundled together and sold off to institutional investors.

But he says there’s no way these companies are worth what the Wall Street underwriters claim, but the rules were just changed and it doesn’t matter anymore. The institutionals are the suckers again, and have to buy the shares anyway. Anthropic’s models cost too much, and costs are going up, while its users are leaving and services revenues are going down, and Anthropic insiders are rushing to cash out.

The SpaceX IPO and the rules changes will make Elon Musk a trillionaire, on paper, thanks to all the passive investors who will buy Space X in their ETF’s and retirement accounts. But the economics of AI companies posing a different set of problems for insiders, and for investors.

SpaceX has a wide moat in rocket launches, for example. Chinese companies launch rockets too, but the US government isn’t going to ask China for help putting up weather or spy satellites. But China is coming for AI, and the AI industry in the US has a lot of problems that are home-grown. Data center construction is slowing down, due to serious bottlenecks in the equipment to plug into the electric grids, which are under strain already. There is strong local opposition to new centers, almost everywhere. And without new data centers, the training of the large language models hits a hard ceiling:

All this CAPEX spend by the hyperscalers is contingent on data centers coming online, and they’re not. Half of projects that were supposed to be finished this year, aren’t even close, and looking out a few years, the construction of new centers has hit a wall:

Companies like Morningstar and Dow Jones used to matter, and if they said that a company was going public at more than twice what they thought it was worth, it would cause problems for underwriters. But those days are gone, and even Bloomberg knows none of this is good.

And we’re left to wonder just what, exactly, the Securities and Exchange Commission is supposed to be doing. And why it is that the only ones who have been screaming about these problems are in independent media, like Substack. The SEC is supposed to protect investors. Financial media is supposed to tell us what’s going on in industry, and in the most important companies.

But nobody is minding the store, anywhere. Ed Zitron is one the very best writers in the AI space, and is one of the Stacks we pay for. He is curious here, for example, what OpenAI’s numbers really are. OpenAI is ChatGPT, and generated $5.7 billion in revenue in Q1 of this year. Remember this is a company that underwriters think is worth over a trillion dollars. But the company has negative margins of 122%. ChatGPT is starting to charge users money for the service, and user growth suddenly stopped. It just costs a lot more to run AI programs than these companies are getting paid.

What’s worse, “large line items” were excluded. Stock-based compensation wasn’t counted, and if they had to report under GAAP rules, the losses could be a lot higher. But who knows? The company aims to make $30 billion in revenue, but earnings don’t matter anymore anyway. Fifteen days after the IPO, OpenAI is index-worthy and billions of dollars will pour in from investors.

More funny math over at Anthropic. This is the headline from the Wall Street Journal. “Mind Blowing Growth” will propel Anthropic to its first profitable quarter. The startup expects a 130% revenue surge, its first operating profit, defying skeptics. Sounds amazing.

And here’s an amazing chart, with a black bar there, “adjusted operating income”, finally drifting over zero for the first time, in quarter 2. Which we are still in, by the way. But this is a forecast. What made that possible was a reduction in its costs for computing power, going from 71% of sales to 56%.

It’s unclear what accounting methods the company used, or what is the legal basis of some of the revenue. Don’t know if this is “mind blowing” but it does sound promising.

Not to Ed Zitron, though, who got busy and found it convenient that they figured out how to cut operating costs at just the exact same time they were looking for new funding, and learned from SpaceX’s S-1 that it’s a very temporary cost reduction, which can be canceled:

$15 billion a year in compute costs were discounted for two months in Q2—and only in the second quarter.

This is work the Wall Street Journal is supposed to be doing. That’s what the Securities and Exchange Commission is supposed to be asking questions about. Instead it’s left to “Where’s your Ed at?” and a handful of podcasts who are showing the world that the investment thesis for the entire American AI industry is blowing up. Costs are rising, not falling. AI data centers today are budgeted to cost $50 billion per gigawatt to build—and they’re not getting built anyway. Soon they’ll cost $80 to $100 billion per.

And the costs are rising just as companies who use the AI are realizing they’re not getting their money’s worth. Uber is a client of Anthropic, and has already spent its entire 2026 budget. Will they load up on some more tokens, to get through the rest of the year? Doubt it—it was a “head exploding moment” to learn how much Uber spent on tokens, which did NOT result in useful consumer features.

Alibaba is a Chinese company, and their Qwen large language model is the world’s most popular AI tool for business owners outside the United States. Airbnb tried to use ChatGPT to design a new reservation feature on their app, and even though the CEO of Airbnb is good friends with Sam Altman at OpenAI, his company switched over to Qwen instead. It works faster and costs less.

And that is catching on. Other companies are quietly making the switch to Chinese large-language models because they cost far less, and they’re open source and easier for their teams to use in their companies. The performance of Chinese models is similar to Silicon Valley’s best products, and are easier to use, cost less, and are more efficient. Companies are enterprise users—they pay for tokens, and executives lose their jobs if other executives heads blow up when they see their AI bill and ask what they’re getting for it. Companies are looking for alternatives to OpenAI and Anthropic, and signing up for DeepSeek instead. That also means that data is not going through US data centers, it’s coming to China instead, where electricity also happens to cost a lot less.

That could be the biggest challenge of all. For active investors – not the passive ones --- business models matter. Revenues and profits – they matter. And the cost of compute is what is driving these corporate users of AI. They pay for the AI. Their engineering teams use it, every day, to develop new tools and applications, and they’re switching over to Chinese LLM’s.

Anthropic and OpenAI are fundamentally bad companies, with bad valuations, and produce financial reports that not even their own top executives trust. Their customers are moving away. And that used to mean that the insiders cannot cash out and make billions of dollars. They might even go to jail. But that was before they changed the rules, and so they’ll make you buy them instead.

Be Good.

Resources and links:

Gold and Geopolitics, Honest graft

Gold and Geopolitics

Honest graft

As a thanks to my paid subscribers they received this article yesterday. After a day, it opens up for everybody else…

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a month ago · 111 likes · 33 comments · No1

NYSE President Criticizes Nasdaq’s Rule Changes Amid SpaceX IPO

https://phemex.com/news/article/nyse-president-criticizes-nasdaqs-rule-changes-amid-spacex-ipo-84650

Nasdaq’s Shame

How to rig an index to appease a billionaire

Keubiko’s Musings

Nasdaq's Shame

Disclaimer: The following article is for informational purposes only and represents the opinion of the author. It should not be construed as investment or any other kind of advice. All information is based on publicly available data believed to be accurate as of the date of publication, but the author makes no representations or warranties as to its com…

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4 months ago · 524 likes · 48 comments · Keubiko

Reuters, SpaceX weighs NASDAQ listing after seeking early index entry

https://www.reuters.com/business/finance/elon-musks-spacex-weighs-nasdaq-listing-after-seeking-early-index-entry-sources-2026-03-10/

George Noble, The Noble Update

Trump Officials Held Millions of Dollars of SpaceX Ahead of IPO

https://www.bloomberg.com/news/articles/2026-06-03/spacex-ipo-poised-to-enrich-trump-officials-who-hold-millions-in-stock

SpaceX: What Investors Need to Know About Its Enormous Upcoming IPO

https://www.morningstar.com/stocks/spacex-what-investors-need-know-about-its-enormous-upcoming-ipo

Morningstar values SpaceX at $780 billion, half its IPO target

https://www.reuters.com/business/media-telecom/morningstar-values-spacex-780-billion-half-its-ipo-target-2026-06-02/

SpaceX is worth less than half of its $1.75 trillion IPO target, Morningstar says

https://www.cnbc.com/2026/06/03/morningstar-spacex-ipo-target-price-nasdaq.html

SpaceX’s IPO Forces Wall Street to Reorganize Around It

https://www.bloomberg.com/news/features/2026-05-31/spacex-s-ipo-led-by-elon-musk-forces-index-funds-and-retail-to-change-the-rules

America’s Data-Center Build-Out Is Falling Way Behind Schedule

https://www.wsj.com/tech/ai/americas-data-center-build-out-is-falling-way-behind-schedule-e408a9a8

‘Big Short’ investor Michael Burry says neither SpaceX nor Anthropic is worth $1 trillion

https://www.businessinsider.com/big-short-michael-burry-spacex-anthropic-ipo-ai-bubble-claude-2026-6

The U.S. and China Lead The Space Race 2.0

https://www.statista.com/chart/28667/countries-are-leading-the-space-race-20

OpenAI’s OWN CFO just admitted they cannot pay their bills.

Alibaba’s Qwen family captures over 50% of global open-source downloads, report finds

https://www.scmp.com/tech/big-tech/article/3349552/alibabas-qwen-family-captures-over-50-global-open-source-downloads-report-finds

$64 billion of data center projects have been blocked or delayed amid local opposition

https://www.datacenterwatch.org/report

Investor alert: Chinese AI is booming in global markets, and Huawei’s chips beat Nvidia’s

The AI industry in the US is doomed. Now China owns it all.

Initial Public Offerings: Lockup Agreements

https://www.investor.gov/introduction-investing/investing-basics/glossary/initial-public-offerings-lockup-agreements

Uber’s COO says it’s getting harder to justify the money spent on AI tokenmaxxing

https://www.businessinsider.com/uber-coo-andrew-macdonald-ai-token-spending-harder-justify-2026-5?ref=wheresyoured.at

AI Doesn’t Have ROI

https://www.wheresyoured.at/author/edward/

Amazon and Google have billions riding on Anthropic. The IPO will finally reveal how much.

https://fortune.com/2026/06/04/amazon-google-billions-anthropic-ipo/

TechCrunch, Ahead of its IPO, Anthropic’s Amodei shrugs off doubts about AI returns

https://techcrunch.com/2026/06/04/ahead-of-its-ipo-anthropics-daniela-amodei-shrugs-off-doubts-about-ais-returns/

Nasdaq-100 Index® Consultation – February 2026

https://indexes.nasdaqomx.com/docs/NDX_Consultation-February_2026.pdf

Exclusive: Elon Musk’s SpaceX weighs Nasdaq listing after seeking early index entry, sources say

https://www.reuters.com/business/finance/elon-musks-spacex-weighs-nasdaq-listing-after-seeking-early-index-entry-sources-2026-03-10/

Danish Pension Blacklists SpaceX Over ‘Catastrophic Governance’

https://www.bloomberg.com/news/articles/2026-05-29/danish-pension-fund-blacklists-spacex-citing-governance-issues

Mind-Blowing Growth Is About to Propel Anthropic Into Its First Profitable Quarter

https://www.wsj.com/tech/ai/mind-blowing-growth-is-about-to-propel-anthropic-into-its-first-profitable-quarter-7edbf2f4

Where’s Your Ed At?

https://www.wheresyoured.at/author/edward/

https://www.wheresyoured.at/where-are-all-the-data-centers/

Why Airbnb switched from OpenAI to Chinese AI (and what it means for your budget)

https://www.techfornontechies.co/blog/290-why-airbnb-switched-from-openai-to-chinese-ai-and-what-it-means-for-your-budget

Airbnb ‘relies heavily’ on Alibaba’s Qwen models to power its AI customer service agent, CEO Brian Chesky says

https://www.scmp.com/tech/tech-trends/article/3329921/airbnb-picks-alibabas-qwen-over-chatgpt-win-chinese-open-source-ai

Cheap and Open Source, Chinese AI Models Are Taking Off

https://www.thewirechina.com/2025/11/09/cheap-and-open-source-chinese-ai-models-are-taking-off/

More US firms turn to China’s DeepSeek over pricey Silicon Valley AI

https://www.scmp.com/tech/tech-trends/article/3355927/more-us-firms-turn-chinas-deepseek-over-pricey-silicon-valley-ai

China imports 85% of their natural rubber consumption, and enjoys strong trading relationships with the top rubber producers.

But the war in the Persian Gulf is driving oil prices higher, which in turn is making natural rubber substitutes far more expensive.

China is limited in its capacity to expand natural rubber production. Domestic sources are mostly from Hainan Island, and Southern Yunnan, which are two areas slated for massive expansions in high-end tourism and industry.

Scientists are now growing natural rubber in the Gobi Desert, and are quickly scaling up production.

Report:

Good morning.

This headline was mystifying to us; it made no sense at all. Rubber prices are shooting higher because of the war on Iran, which is “boosting Asian suppliers.”

This is a map of rubber-producing countries, and there’s no supply coming out of the Persian Gulf in the first place. By volume, almost all the rubber in the world comes from here, in Southeast Asia.

These 10 countries are 90% of total rubber exports—and there is only one country in the top 7—the Ivory Coast—that isn’t in this part of the world:

But the war in the Persian Gulf is blowing up oil prices, which in turn is pushing up the cost to make synthetic rubber. Tire manufacturers are also building inventories, in case they can’t get supplied at all.

And since natural rubber can replace synthetic rubber, prices are going up. The natural rubber industry is very labor- and land-intensive, and we can tell from the long-term price chart that there is little motivation to clear hundreds of thousands of new hectares of land to build out new natural rubber capacity, considering oil-based synthetics are widely available:

But now the prices are rising, and China in particular is exposed here. China accounts for 45% of global natural rubber demand, and is the world’s largest buyer, because China is now the world’s largest automobile market, and largest car manufacturer. Foreign tire manufacturers have set up here, and the industry is growing fast.

The boom in China’s electric vehicle industry is also putting pressure on natural rubber supplies. Battery packs are heavy, and EV’s accelerate faster, so the tires for these cars need to be stronger, with a higher proportion of top-grade natural rubber.

So on first glance, this chart doesn’t seem like a big problem. China, India, Thailand, Indonesia, and Vietnam are about 80% of global natural rubber demand, and most of the world’s natural rubber does actually come from these countries, who happen to be generally friendly.

But the strikes on Iran, and the closure of the Strait of Hormuz has pushed oil prices sharply higher, which means higher costs for synthetic rubber, and thus higher demand for natural rubber. The Singapore exchange is the benchmark for rubber in Asian markets, and prices are up over 37% since the start of the year. In China, the price has not moved as much—up about 14% year to date—but even here that is the highest level in over two years.

China does have a strong recycling industry for tires; in terms of volume, China recycles more than any other country. But demand for new rubber in China is outstripping what is coming off the roads. And here is another challenge for China, in developing new domestic sources of supply: most of its production comes from Hainan, and from an area just south of here in Yunnan province.

The Chinese have other, major development plans for those areas. Hainan is being transformed right now into the world’s largest free-trade zone, and will also be the world’s largest center for medical tourism:

It already attracts hundreds of thousands of patients a year, who receive medical care, with treatments and therapies that are not yet approved even in Mainland China, let alone in North America or in Europe.

Xishuangbanna is in the Mekong River Delta. Natural rubber farming is an important industry there, especially at the small-village level. Again, the natural rubber industry is labor- and land-intensive. And the areas that are developed for rubber plantations aren’t good for much else. Over two decades, forest cover in Xishuangbanna dropped from over 70% to about half, which corresponded with the growth in rubber and tea plantations.

And that’s the tension: Authorities in Yunnan, and in Beijing, understand that the growth of natural rubber plantations is at odds with their plans for the tourism industries.

Here is a famous local example which illustrates the problem: Yunnan is a wildlife sanctuary for Asian elephants, who migrate between Xishuangbanna and Pu’er, which is the center of Yunnan’s tea industry. 70% of the protected animals in all of China are here in Yunnan, and the elephants in particular are being squeezed by the rubber plantations. Elephant populations in China are recovering, but only in the areas that are off-limits to the rubber industries. By the way, if you want to see them, best time is November-February.

All of this puts China in a strange spot. Their demands for natural rubber are higher than for any other country, and the only places they’ve got available to scale up production are slated for development of other industries that are far more lucrative. Eco-tourists fly in from all over the world to see the elephants and the other wildlife in Yunnan.

Medical tourism in Hainan will be a multi-trillion-dollar industry, which will boom long after the war ends and oil prices stabilize, at which time tire manufacturers will be comfortable with their raw materials inventories, and natural rubber prices revert to the norm.

Beijing is probably somewhat relaxed about sourcing their rubber imports from friendly countries next door, and in the Ivory Coast, which is a strong trade partner. And so there’s yet another headline, that is also mystifying. These Chinese researchers are building plantations for natural rubber in the Gobi, and again we’re left to wonder right away if this is something they did on purpose, or just discovered by accident.

China consumes seven million tons per year of rubber, and imports over six million tons. Duzhong is a plant, used in Traditional Chinese Medicine. It is also a key source of natural rubber, and is China’s only source of natural rubber. Rubber derived from Duzhong has applications in the defense sector.

China strongly prefers to not rely on supply chains running through foreign countries—friendly or not. And given that China’s import dependency in rubber is 85%, rubber is a poster child for a raw material that they’ve got their scientists nationwide hard at work on.

The Northwest Agricultural and Forestry University is one of the top unis in the world. It’s in Shaanxi, and this group headed out to Xinjiang to see if Duzhong could grow in the desert. First, they had to solve the genetics problem, then had to figure out how to scale up production in the desert, and to do so economically.

They discovered a new extraction process for the rubber that dramatically improves the yield, while doing so more cleanly than before. Fast-forward ten years to now, and today there is a Dezhong forest of 300,000 hectares, in the Gobi Desert, which will grow eleven times larger in the next five years.

At 3.3 million hectares, China by 2030 will be the world’s top producer of natural rubber.

Be Good.

Resources and links:

China's Hainan free trade port: what the world's largest FTZ means for global trade
https://www.mic-cust.com/mic-blog/posts/detail/ad/chinas-hainan-free-trade-port-what-the-worlds-largest-ftz-means-for-global-trade/

China grows military-grade rubber in Gobi Desert as war reshapes supply chains
https://interestingengineering.com/military/china-gobi-desert-military-grade-rubber

Mapping China’s rubber metabolism: tires and beyond
https://www.tsinghua.edu.cn/en/info/1245/14737.htm

It is ‘flourishing’: China’s man-made forest in Gobi produces good rubber for military use
https://www.scmp.com/news/china/science/article/3341641/it-flourishing-chinas-man-made-forest-gobi-produces-good-rubber-military-use

10 Countries Control 90% of Natural Rubber Export Value
https://www.kontango.com/blog/10-countries-control-90-of-natural-rubber-export-value

Tire Recycling Industry Statistics: Global Market Data
https://gradeall.com/tire-recycling-industry-statistics-global-market/

After the rubber boom: good news and bad news for biodiversity in Xishuangbanna, Yunnan, China
https://link.springer.com/article/10.1007/s10113-019-01509-4

Improving sustainable livelihoods for smallholder rubber farmers in Xishuangbanna
https://www.preferredbynature.org/projects/improving-sustainable-livelihoods-smallholder-rubber-farmers-xishuangbanna

Rubber Boom, Land Use Change and the Implications for Carbon Balances in Xishuangbanna, Southwest China
https://www.sciencedirect.com/science/article/abs/pii/S0921800918301289

Navigating between Tea and Rubber in Xishuangbanna, China: When New Crops Fail and Old Ones Work
https://www.mdpi.com/2073-445X/9/1/22

SunSirs: Natural Rubber Prices Continue to Rise; Supply-Demand Gap Sustains High-Level Performance
https://www.anrpc.org/news/sunsirs%3A-natural-rubber-prices-continue-to-rise%3B-supply-demand-gap-sustains-high-level-performance

Natural rubber prices soar on Iran tensions, boosting Asian suppliers
https://asia.nikkei.com/business/markets/trading-asia/natural-rubber-prices-soar-on-iran-tensions-boosting-asian-suppliers

25-year natural rubber prices
https://jmkintl.com/rubber-price-trend

Which Country Produces the Most Natural Rubber?
https://www.helgilibrary.com/charts/which-country-produces-the-most-natural-rubber/

In Search of Giants: Tracking Rare Wild Elephants in China
https://www.fabionodariphoto.com/en/where-see-elephants-china-yunnan/

The War on Iran has left hundreds of thousands of tons of fertilizers stranded in the Persian Gulf, and destroyed years of forward natural gas production.

Fertilizer supplies are collapsing, with billions of dollars' worth of contracts to farmers voided.

China enacted export curbs on fertilizers and upstream products in the opening days of the war, to ensure domestic farm production was not impacted.

Report:

Good morning.

Inflation in the United States is hitting multi-year highs again, with particularly big jumps in energy and food prices. The Consumer Price Index rose 3.8% since the same time last year. Gas prices are up sharply, along with food, coming either from restaurants or supermarkets.

There won’t be any relief on household spending for food anytime soon, and farmers – almost everywhere – are making painful decisions about how much to plant this Spring, based on those rising prices for fuel, and now for fertilizers. Both of those problems come from the War on Iran, and the closure of the Strait of Hormuz.

Fertilizer prices for American farms are ripping higher. Urea costs are up 47%, with DAP and other fertilizers up double-digits. In the United States, over three-fourths of the total cropland is treated with synthetic fertilizers, and most of that fertilizer is used in the Spring months, or right now.

Farmers signed supply contracts last year and earlier this year, but those contracts are not being honored by global suppliers. We covered that problem before; Middle East suppliers declared Force Majeure on billions of dollars of natural gas contracts, and there isn’t nearly enough coming from anywhere else, at any price.

In the United States, the situation is more severe in the South and Northeast, but farmers everywhere have a problem. 70% of farmers can’t afford all the fertilizer they need to plant their crops for this year.

Diesel fuel prices are also much higher, which means higher operating costs for farm tractors and transport, as well as for the heavy equipment used in irrigation. And fuel and fertilizer costs won’t come down, much, for later this Fall, or in time for next year’s planting season. Small- and medium-sized farms are under a lot of pressure, and bankruptcies are likely to also rise because crop prices aren’t going up nearly fast enough to cover the increases in cost.

This crisis was obvious, even in the early days of the war, when 21 ships carrying about a million tons of fertilizers were stuck in the Persian Gulf. About half of that was urea, and another eight ships with over 300,000 tons of sulfur. Sulfur sourced from the Middle East is primarily used as fertilizer. Half of those ships were intended for Asia, and urea heading to the United States was also stuck.

China, however, is getting some of their ships through the Strait. And China’s position in the fertilizer industry has ironically become much stronger, at least relative to other markets. Chinese farmers are planting their Spring crops, same as normal. The supply of fertilizer in China is sufficient, and prices are far lower than anywhere else.

Governments across the world are focused on finding energy and petrochemicals from wherever they can get them, while China is largely unaffected by those problems. It’s the same here, for fertilizers. The war on Iran has scrambled all these markets, and China enjoys supply-chain advantages on everything that goes into making chemical fertilizers.

China produces a third of all the fertilizer in the world, while also producing 70% of the raw materials used in the industry worldwide. That math, right there, makes China a major exporter of those upstream chemicals used to manufacture synthetic fertilizers, which we’ll come back to. All that production means that China has more latitude and flexibility, as they are far less reliant on the trade through the Strait of Hormuz.

Traffic through the Strait has collapsed, to just a handful of vessels per day, from over 50 before the war, and we’ve already seen that a bunch of those ships are coming to China anyway. There is some good news on this chart: fertilizers are usually shipped via dry bulk carrier; 85% of fertilizers go that way. Bulk transport are the pink bars on that chart, and some of those are getting through. Two caveats though—we don’t know how much of that is fertilizer, compared to other dry bulk, and those levels are still far, far below historical averages for this time of year.

China, though, is well supplied with fertilizers and is making them available to farmers. Beijing also put export restrictions on key raw materials for fertilizers, in the opening days of the war. That helped ensure domestic farmers would have uninterrupted access, and at lower prices than anyone else is paying. And price caps were put in place for urea.

Exports of sulfur were sharply restricted, with the exception of some sulfuric acid volumes for industrial users. That is pushing up prices across the world; up 44% in Chile, for example. 54% of sulfuric acid demand is for phosphate fertilizers; prices are shooting up for farmers.

A major reason for China’s “expanding dominance” over the fertilizer and petrochemical markets is low-cost energy. The Chinese energy mix is diversified, with costs that are the lowest in the world for a large economy.

China also has a lot of coal, and plants that produce Chinese fertilizers are mostly powered by coal, which doesn’t cost much. So in 2024, China led the world in the production of fertilizers, and ranked #2 in exports.

China and Russia together produce over half the world’s supply of phosphates, and add Morocco and Saudi and it’s over four fifths of the world supply. 82% of global phosphates are vulnerable to adversarial use or manipulation—that’s the conclusion there from the Department of the Interior, because such high levels of these fertilizers need to be imported to the United States from potentially unfriendly sources.

Farmers in North America, however, are saying their problems come from our own companies. Nutrien makes potash fertilizers, and their profits went up over 16 times in just three years. Mosaic’s profits jumped more than five times, and CF Industries increased by over 10 times:

This is yet another story of industry consolidation that deliberately reduces competition, and supply. The number of fertilizer companies went from 46 to 13, and by 2019 just four companies made up 75% of total production in the United States. That allows them to exploit crises and jack up prices for farmers. Dominant fertilizer corporations can use wars, or other supply disruptions to increase prices much faster than their increases in cost.

Farm advocates are calling for the government to do something about it. But they pretended to care about the problem last year. This is the Senate Judiciary Committee---not the farm committee, but they’re looking here for crimes—and the hearing is on competition in the seed and fertilizer industries. Lawmakers are asking here, why fertilizer and seed prices keep rising, while competition keeps shrinking.

Democrats and Republicans, from Blue States and Red ones, are hearing complaints from farmers that their prices are shooting up, while the number of vendors in the market is going the other way.

This didn’t help much either, at the time. The Trump Administration proposed big tariffs on fertilizers imported into the United States, with new rates that would apply beginning last August on 84% of the American ammonium phosphate supply chain. Most of those eventually were exempted, except for the tariffs on ammonia, sulfur, and sulfuric acid—those tariff schedules stay, and now that the Hormuz is closed and China has shut off export, that’s not making it over to American farmers anyway.

And here’s another twist. Farm Action, remember, pointed out that fertilizer suppliers in the US take advantage of global crises to gouge farmers by raising prices. But when Mosaic’s costs went up, they responded by just shutting down production. From 12 May: Mosaic is reducing phosphate fertilizer production, cutting it in half from their plants in Louisiana and Florida.

In April—just the month before—Mosaic publicly supported high tariffs on imports from Morocco and Russia to remain in place. Those tariffs were enacted in 2021, and are up for the five-year review. Mosaic is insisting here that if those tariffs on Morocco and Russia go away, it would threaten American suppliers like Mosaic who cannot compete on price. But they shut down production anyway, despite record prices. And that was because Mosaic cannot get sulfur either.

So the Fertilizer Institute was prophetic, in ways they surely didn’t intend, at all. What that industry group was doing there was asking for Congress to classify their products as critical minerals, and get a lot of federal money heading their way in the same way rare earth metals miners are getting big contracts now from the Pentagon.

Mosaic was even one of the panelists for the group who was warning that “fertilizer markets were vulnerable to manipulation”, whether deliberate or unintentional. That was last May, just one year ago.

Fast forward to now, the War on Iran has blown up energy markets in the Middle East, and so China now is the only country that can make cheap fertilizer. And China is also now the only country where its farmers will have surplus crops to sell in the fall.

Just one year.

Be good.

Resources and links:

How the Middle East crisis is expanding China’s agrochemical influence
https://www.scmp.com/economy/china-economy/article/3352366/how-middle-east-crisis-expanding-chinas-agrochemical-influence

China rushes to stabilise fertiliser market as Iran war chokes off imports
https://www.scmp.com/economy/china-economy/article/3347964/china-rushes-stabilise-fertiliser-market-iran-war-chokes-imports

Hormuz Blockade Propels China's Fertilizer Dominance, Threatening Global Food Security
https://finance.biggo.com/news/Yqmx-50BDXrLZJaAEa1v

Suezmax tanker with Iraqi crude reaches India after Hormuz transit
https://economictimes.indiatimes.com/industry/energy/oil-gas/suezmax-tanker-with-iraqi-crude-reaches-india-after-hormuz-transit/articleshow/131140680.cms

Strait of Hormuz shutdown leaves 1m tons of fertilizer stuck in Gulf
https://asia.nikkei.com/business/markets/commodities/strait-of-hormuz-shutdown-leaves-1m-tons-of-fertilizer-stuck-in-gulf

Farmers demand fertilizer ‘monopoly’ probe
https://www.aol.com/news/farmers-demand-fertilizer-monopoly-probe-125650048.html

Fertilizer Prices Under Fire: Monopoly or Markets to Blame?
https://www.agweb.com/news/policy/ag-economy/fertilizer-price-fire-monopoly-or-markets-blame

China Suspends Sulfuric Acid Exports, Global Copper and Fertilizer Supply Under Strain
https://www.echemi.com/cms/2963199.html

Fertilizer companies cash in while farmers struggle
https://projects.wuft.org/priceofplenty/profit/the-cost-of-growth-fertilizer-companies-cash-in-while-farmers-and-communities-struggle/

Fertilizers ARE Critical Minerals
https://www.tfi.org/wp-content/uploads/2025/05/DOI-CM-Briefing-briefing-5-08-25.pdf

Key suppliers of phosphate fertilizer to US face 10%-25% tariffs from Aug. 7
https://www.spglobal.com/energy/en/news-research/latest-news/fertilizers/080125-key-suppliers-of-phosphate-fertilizer-to-us-face-10-25-tariffs-from-aug-7

Beef, Most Fertilizers Exempt from New Trump Tariffs
https://farmpolicynews.illinois.edu/2026/02/beef-most-fertilizers-exempt-from-new-trump-tariffs/

Most US ferts cleared under new import policy
https://www.argusmedia.com/en/news-and-insights/latest-market-news/2791825-most-us-ferts-cleared-under-new-import-policy

Mosaic to cut US phosphate production — despite calling for import duties
https://www.michiganfarmnews.com/mosaic-to-cut-us-phosphate-production-despite-calling-for-import-duties

Mosaic Pulls Guidance, Cuts Spending as Fertilizer Costs Surge
https://www.wsj.com/business/earnings/mosaic-swings-to-loss-on-surging-sulfuric-acid-prices-fec74551

Farm Action
https://www.facebook.com/FarmActionUS/posts/the-fertilizer-price-spike-hitting-farmers-is-no-accident-a-handful-of-corporati/1325465483043964/

Chuck Grassley Leads Senate Judiciary Committee In Hearing On Fertilizer Industry Competition

Farmers Face a Fertilizer Crisis at Spring Planting Time
https://blog.ucs.org/omanjana-goswami/farmers-face-a-fertilizer-crisis-at-spring-planting-time/

Food Price Outlook - Summary Findings
https://www.ers.usda.gov/data-products/food-price-outlook/summary-findings

China’s grain production trends upward
https://www.world-grain.com/articles/22559-chinas-grain-production-trends-upward

China releases Agricultural Outlook 2026–2035
https://www.dcz-china.org/2026/04/29/china-releases-agricultural-outlook-20262035/

Iran War fallout: Russia and China quietly take over natural gas markets in Asia, with Qatar gone

Mosaic to cut US phosphate production — despite calling for import duties
https://www.michiganfarmnews.com/mosaic-to-cut-us-phosphate-production-despite-calling-for-import-duties

Mosaic Pulls Guidance, Cuts Spending as Fertilizer Costs Surge
https://www.wsj.com/business/earnings/mosaic-swings-to-loss-on-surging-sulfuric-acid-prices-fec74551

Farm Action
https://www.facebook.com/FarmActionUS/posts/the-fertilizer-price-spike-hitting-farmers-is-no-accident-a-handful-of-corporati/1325465483043964/

Chuck Grassley Leads Senate Judiciary Committee In Hearing On Fertilizer Industry Competition

Farmers Face a Fertilizer Crisis at Spring Planting Time
https://blog.ucs.org/omanjana-goswami/farmers-face-a-fertilizer-crisis-at-spring-planting-time/

Food Price Outlook - Summary Findings
https://www.ers.usda.gov/data-products/food-price-outlook/summary-findings

China’s grain production trends upward
https://www.world-grain.com/articles/22559-chinas-grain-production-trends-upward

China releases Agricultural Outlook 2026–2035
https://www.dcz-china.org/2026/04/29/china-releases-agricultural-outlook-20262035/

Iran War fallout: Russia and China quietly take over natural gas markets in Asia, with Qatar gone

The costs to replace advanced missiles and platforms used thus far in the War on Iran is at least tens of billions of dollars, and will take years.

But the missile systems require rare earth magnets and other materials which can only be sourced through China, who has strict bans on their export to Western weapons makers.

The United States expended massive missile stockpiles in just a few weeks of the war, and committed more resources to the defense of Israeli than did the Israelis themselves.

Report:

Good morning.

Military and government analysts are trying to figure out just how many missiles and bombs have used up, during the War on Iran, and during the war in Ukraine. These munitions are very expensive, they take a long time to build, and the supply chains for everything that puts them into the air and blows them up—those all go through China, and China has shut off exports of those materials and components.

We know that it will take many years, and hundreds of billions of dollars, just to rebuild the stockpiles back to pre-war levels, and even that assumes that Chinese exporters will cooperate. This report from the CSIS concludes that arsenals are sufficient to continue operations against Iran, but there are big question marks around anything that happens after.

Here is where they THINK things stand. These are the seven critical missile systems. Each Tomahawk, for example, costs $2.6 million. Before the war on Iran, estimated inventory was 3,100. Over a thousand have been used, so far. During normal times, 47 months are required to build them.

That’s four years or so, and these are not normal times. Usage running over a thousand, and fewer than 200 are expected for delivery in the rest of this year. Another 800 or so have been “requested” for next year.

The situation for the SM-3 missile stocks is even worse. About half of them were used up, and those take over five years to build:

Patriot missile stockpiles have also dropped by half, and big orders have been placed to replace those. $3.9 million each, 42 months to make a new one. Patriots are also in high demand across the world; Ukraine has already used up 600 of them.

The THAAD’s are Terminal High Altitude Area Defense. Those are ground-launched missiles to intercept incoming ballistics. In last year’s war with Iran, over 150 of those were used. The US only has eight batteries worldwide. One of those was in South Korea and missiles from those systems were hurried over to the Middle East to replace what was either blown up by the Iranians, or used up. Those missiles take 53 months to build.

This table spells out a little more clearly, the annual production rates, the lead time to first delivery, and production time for the full lot. Add those two columns together, which results in total delivery time for the production lots:

Even before the war, munitions stockpiles were inadequate for conflict with a peer adversary, like Russia or China, and let’s remind ourselves again, that Pentagon contractors need Chinese materials to make these weapons in the first place.

Just to return to pre-war inventories—this is Iran, not Iran plus Ukraine—will take five years in the case of Tomahawks, and for THAAD’s, at least four years.

The Pentagon also has existing contracts and obligations to other countries, which were facing long delays and cost overruns which pre-dated this newest war. Switzerland ordered five Patriot missile batteries in 2022. At the time, final deliveries were expected throughout this year – 2026 -- and next. Then came Ukraine, and that schedule was pushed back. Now the Iran war would mean even more delays and price hikes; delivery now is five to seven years, from now—2026.

Switzerland is looking at alternatives, including canceling the order outright. Contractors can’t build systems fast enough to replace what is being burned up in two theaters, now—Ukraine and the Persian Gulf.

Big problems with Patriot systems. THAAD stockpiles are also being drained, and are also in high demand not just by US forces, but by key allies.

This was surprising to learn, that the United States burned through more interceptor missiles over Israel than the IDF itself. “The US expended far more advanced interceptors to protect Israel, than Israeli forces did.” That analysis emphasizes the extent of Washington’s burden of protecting Israel from missiles outbound Iran, and raises doubts about other commitments across the world:

Here are the numbers: the US launched more than 200 THAAD missiles in defense of Israel—which was about half what the Pentagon went into the war with. Another 100 SM-3’s and -6’s were fired also. In comparison, the Israelis used fewer than 100 Arrow’s and 90 David’s Sling interceptor missiles.

This is a “lopsided dynamic”—the US launched 120 more interceptors at twice as many Iranian inbounds than the Israelis did. The Israeli PM pushed for the war in the first place, and spokesmen for the Pentagon and the Israeli Embassy emphasize that it’s a joint operation. The Pentagon said that Israel and the US “carried the burden equitably”, and the “Israeli government also defended the approach”, with operations “coordinated at the highest and closest levels to the benefit of both countries.”

Those explanations went over badly with analysts, because these commitments were so obviously one-way. The United States took on most of the mission of Israel’s missile defense, while Israel conserved its own stockpiles. Even assuming that the operational strategies were sensible, somehow, the US only has 200 THAAD missiles left and no way to get any more before 2029.

Last year the Pentagon said they only had a quarter of the air defense capability required to meet existing obligations. And now lots of people in lots of places who are also reliant on American systems realize that the magazines are empty, there are no more coming, and that the Israelis have first call on any new production:

Not even the Pentagon seems to know how big a hole they’re in, or how much it will cost to get out. On 1 May, Pete Hegseth, the Secretary of War, went to the Senate to answer questions as to what the new $1.5 trillion defense budget will be for.

Mark Kelly is a senator from Arizona, and by the way is a former astronaut and who spent 25 years in the Navy. He points out here that these missiles cost a lot and take a long time to build. The new Pentagon budget request is for $31 billion to expand production for those missile systems. Hegseth looks down at his notes, and says it’s $53 billion. Which is $20 billion higher. We’ll make that part bigger. Senator Kelly is asking how many years it will take to replace the Patriots, THAAD’s, and other expensive munitions. Hegseth answers he actually thinks it’s closer to $330 billion. Senator Kelly: But how long will it take?

Secretary Hegseth: Months. Years.

We’ve done a lot of work on the channel from the very beginning, documenting the China problem for the Pentagon’s supply chains. This is a new one today—samarium. China makes all the samarium in the world, and the Pentagon needs it to rebuild all the jets and missiles that are blowing up in the war on Iran, then obviously what they’re need to build new ones for the Swiss and the Koreans and the Japanese. Please note, too, that these reports were from last year. Already it was a serious problem, and the United States had no alternative to China’s supply of samarium.

China produces 100% the world’s supply, and the only customers for it are weapons makers. That is unlike the other rare earth elements—which China also has monopolies on—but which have “dual-use” applications. Both civilian manufacturers and defense contractors need rare earth magnets from neodymium, for example. But Samarium magnets are only used in advanced munitions. So the rules that China’s Commerce Ministry put out to strictly regulate dual-use materials do not apply to samarium at all.

The biggest American buyer of samarium is Lockheed Martin, who needs 50 pounds of samarium to build a single F-35. A spokesman there said that Lockheed Martin’s supply chains for rare earth elements are the government’s problem.

The Biden Administration invested money with two companies to build samarium plants in the US, and neither of them got built. It was called the Defense Department way back then, and they gave $35 million to MP, who kicked in $65 million or so of its own, to buy new equipment.

Then the Administration handed $351 million to an Australian company to build a plant in Texas. MP was hoping for a monopoly on samarium production in the US, and backed out of the deal and didn’t even bother unpacking their new equipment. Then Lynas decided to build their new production in Malaysia, instead of Texas, and also backed out.

So there is no Samarium in the United States, and none coming. This is also from last year. Pentagon contractors hit the phones, looking for samarium anywhere they could get it from a non-Chinese address. The CEO of this company in New York, Arnold Magnetic, found a big pile of it literally just sitting in a warehouse in France from five decades ago, and bought up all of it, and signed a contract to process it. The entire stash is about 200 tons, which insiders said would be enough to supply some Pentagon suppliers for a year, given that the US defense industry needs less than that.

But remember, again, this was all before the War on Iran sped everything way up. China’s export bans are still on, and this supplier to Raytheon says that China has successfully closed off all the loopholes that could be exploited before.

Navigating China’s export bans on dual-use materials was already a challenge for the neodymium magnets, for example, where importers could pretend to be a broker for electric vehicles. Samarium cobalt magnets are what the Pentagon needs, and samarium cobalt magnets are ONLY needed by weapons makers. So until new sources of samarium are found, or new substitutes for samarium are found, American manufacturers can’t build new fighters or missiles.

The Pentagon is trying to catch up to China, and Iran, and Russia, who have successfully already deployed hypersonic missile systems, but those also require samarium. Aisha Haynes was in charge of supply chain issues at the Pentagon, and says here that “you never want to give any one nation that much power” since they can shut off the source whenever they want.

Now the Trump Administration is trying the supply chain thing, and just gave MP another $150 million to get some production going for samarium, among other raw materials. That will take years to come online, if it happens at all. ReElement Technologies is out of Indiana, and got an $80 million loan. And Ucore Rare Metals, a Canadian company, was handed $22 million in grants to build facilities for samarium and gadolinium in Louisiana. Both ReElement and Ucore Rare Metals are using new technologies, and critics are pointing out that those companies have never produced magnets at all. What’s more, most of the money is NOT going to build the samarium-cobalt magnets that the Pentagon needs.

That was from last year, and part of a $1.4 billion rare earth magnet deal which included ReElement, and and which is already falling apart. The Pentagon is deciding now whether to junk it, after officials decided the company probably couldn’t scale the new technology they had developed. The Pentagon and the White House are fighting over it, and – if you can believe it --- it’s the War Department this time who is saying that it’s a waste of money and that the numbers can’t work.

Whether those investments to build samarium capacity go through or not, for now the only source of it is China, unless that guy in New York finds some more in his garage or something. And China’s export controls are written to regulate how their materials are used, even years after.

So countries are racing to build up their own reserves. China has a head start of 30 years or more, but better late than never, is the thinking here. The United States put $12 billion aside for “Project Vault”, so that American businesses are never harmed by shortages. Trump compared Project Vault to the Strategic Petroleum Reserve, which ironically is also being drained right now, because of the energy supply chains blowing up by the war on Iran.

Australia is putting in a tenth of that-- $1.2 billion. Efforts are underway to do the same in the EU. And South Korea has a plan to reduce reliance on China for its rare earth elements by diversifying their supply chains—to somewhere, doesn’t say—and increasing domestic production.

Lots of problems then. The Pentagon and its allies are out of missiles and are trying to build some more. Missiles and fighter jets need samarium, and China makes 100% of the world’s supply of it, and Pentagon contractors aren’t allowed to buy it. The handful of companies that have agreed to make the samarium magnets don’t have any experience doing so, and are years away from making it work, if ever.

But it’s not just the samarium; it’s the same story for literally everything else. Here are the critical minerals that go into just one of those systems, the Tomahawk:

Samarium is there at the top right, along with neodymium, for the magnets. There are 16 other critical minerals, besides those.

Tungsten, for the control surfaces. China controls over 80% of global tungsten production, and almost all the chemical supply chains to process it.

Gallium is used in the semiconductors, and China produces 98% of all that.

Cobalt is part of the samarium-cobalt magnet, and also used for the superalloys in the missile. Another near-monopoly there for China, who controls 60% of the mining and 90% or so of the chemicals for that.

Bismuth. For the fuses and electronics. China, over 80% of global production.

Graphite. 70% of the mining, 100% of the refining.

Molybdenum. 81% of global refining.

Neodymium. Over 90% of the world’s refining and separation.

Going back to that Senate hearing, with Senator Kelly and the Secretary of War. The conversation started at $31 billion, the bill for munitions. Ten seconds later it jumped to $53 billion. After another minute or so it was $330 billion, and “you name it, they are investing” tens of billions of dollars for it.

That $1.535 billion budget was “a highly rigorous process” at the Pentagon, involving the Secretary himself, his deputies, top commanders, top lawmakers, to “ensure the budget reflects the realities of the world we live in.”

But the reality is that no matter how much money they spend, or for how long, those missiles can’t get built without China. And China won’t let them.

Be Good.

Resources and links:

China’s Chokehold on This Obscure Mineral Threatens the West’s Militaries
https://www.nytimes.com/2025/06/09/business/china-rare-earth-samarium-fighter-jets.html

How U.S. Defense Industry Dodged a Rare-Earth Shortage After China’s Curbs
https://www.nytimes.com/2025/12/22/business/defense-industry-rare-earth-restrictions-china.html

China Rare Earth Export Controls 2026: What New Licensing Rules Mean for Manufacturers
https://www.certivo.com/blog-details/china-rare-earth-export-controls-2026-what-new-licensing-rules-mean-for-manufacturers

Pentagon doubts over rare earths deal provoke White House clash
https://www.mining.com/web/pentagon-doubts-over-rare-earths-deal-provoke-white-house-clash/

US munitions depleted by Iran war will take years to restore, analysis finds
https://www.militarytimes.com/news/pentagon-congress/2026/05/27/us-munitions-depleted-by-iran-war-will-take-years-to-restore-analysis-finds/

WATCH: In SASC Hearing, Kelly Challenges Hegseth on Munitions Burn Rate, “No Quarter” Comment, and Massive Defense Budget Proposal
https://www.kelly.senate.gov/newsroom/press-releases/watch-in-sasc-hearing-kelly-challenges-hegseth-on-munitions-burn-rate-no-quarter-comment-and-massive-defense-budget-proposal/

Severity Of America’s Depleted Advanced Weapons Stockpiles Detailed In New Report
https://www.twz.com/news-features/severity-of-americas-depleted-advanced-weapons-stockpiles-detailed-in-new-report

U.S. bears brunt of Israel’s missile defense, Pentagon assessments show
https://www.washingtonpost.com/national-security/2026/05/21/us-bears-brunt-israels-missile-defense-pentagon-assessments-show/

Rebuilding U.S. Missile Inventory: A Multiyear Project
https://www.csis.org/analysis/rebuilding-us-missile-inventory-multiyear-project

Last Rounds? Status of Key Munitions at the Iran War Ceasefire
https://www.csis.org/analysis/last-rounds-status-key-munitions-iran-war-ceasefire

Swiss considering rival air defences after Washington delays Patriots over Iran war
https://www.reuters.com/world/united-states-informs-switzerland-delays-price-hike-patriot-delivery-2026-05-13/

Critical Minerals Strategic Reserve
https://www.pmc.gov.au/domestic-policy/critical-minerals-strategic-reserve

Exclusive: Italy, France and Germany to lead EU critical materials stockpiling plan, sources say
https://www.reuters.com/sustainability/climate-energy/italy-france-germany-lead-eu-critical-materials-stockpiling-plan-sources-say-2026-02-04/

Korea Strengthens Rare Earth Supply Chain Independence
https://www.businesskorea.co.kr/news/articleView.html?idxno=262606

Hasty redeployment of US missiles from South Korea to Middle East leaves Seoul rattled
https://www.theguardian.com/world/2026/mar/11/redeployment-us-missiles-thaad-south-korea-middle-east-seoul-iran

China, Russia, and Iran have hypersonic missiles. And that changes everything.

America’s Emergency Oil Reserve Is Shrinking Fast
https://www.newsweek.com/americas-emergency-oil-reserve-is-shrinking-fast-11983476