Foreign Adversaries Threaten Critical U.S. Manufacturing Sectors

Client Alert

Foreign adversaries are increasingly threatening vital domestic industries through current and potential future restrictions on critical mineral exports.

Since 2023, China has increasingly placed export controls on key raw materials like gallium, germanium, and antimony, culminating in its recent December 2024 ban on exports to the U.S. of these materials. Gallium, germanium, and antimony are all key inputs into various critical products with defense applications, like microelectronics and fiber optics. Exiger has previously analyzed China’s regulatory moves to restrict these minerals’ trade flows, highlighting the need to identify alternative sources of supply.

Another concerning development is Russia joining China in considering similar export controls for other key raw materials. Following the U.S. May 2024 ban on imports of low-enriched uranium produced in Russia or by a Russian entity, and Russia’s subsequent ban on enriched U-235 exports to the U.S., Russian President Vladimir Putin is reportedly considering a ban on nickel and titanium. This alert identifies some of the potential impacts of these proposed restrictions on the aerospace industry and U.S. government procurement of critical components.

Background

Nickel and titanium are critical to the aerospace manufacturing sector. In an effort to decrease Russia’s ability to fund the war in Ukraine, the U.S. began restricting imports of Russian nickel in April 2024. While the U.S. restriction of nickel is not expected to significantly impact global nickel prices or availability, retaliatory restrictions of titanium exports by Russia could have larger consequences. Titanium prices have already risen about 160% since the beginning of the war in Ukraine, and Western companies have had difficulty finding alternative, non-Russian titanium suppliers.

VSMPO-AVISMA, the major Russian titanium producer, is owned by Mikhail Shelkov, an oligarch considered to be in Putin’s “inner circle,” and state-owned defense corporation Rostec State Corp. VSMPO-AVISMA is the world’s single largest producer of titanium and titanium sponge, the primary form of titanium used in manufacturing. Therefore, despite connections to the Russian military and government, VSMPO-AVISMA has avoided sanctions due to U.S. reliance on titanium sponge imports.

Impact on U.S. Companies

The U.S. currently has no domestic production of titanium sponge and imports almost 80% of its titanium sponge from Japan, followed by Saudi Arabia (13%) and Kazakhstan (9%). At least one major U.S. defense contractor, however, is reportedly still reliant on Russian titanium at lower tiers of its supply chain. Furthermore, Japanese titanium sponge producers are reportedly struggling to meet growing demand. Recent disruptions to demand from a major U.S. aerospace customer have caused at least one Japanese company to revise sales estimates, which could have knock-on effects on production expansion plans. While China is a potential alternative as the world’s largest producer of titanium sponge, its titanium sponge is not all aerospace-grade, and there has been at least one case of deficient, counterfeit Chinese titanium being sold to Western aerospace companies.

Exiger’s Supply Chain Explorer (“SCE”) identified 18,828 exports of Russian titanium or nickel since 2023, including 467 shipments that went directly to the U.S. At least two aerospace companies in the U.S. were identified as direct recipients of Russian titanium or nickel. In addition, U.S. companies may also have indirect exposure to Russian titanium and nickel through the import of products from companies that directly purchase Russian titanium and nickel. For instance, major Indian and French aerospace contractors that are known to supply major U.S. defense contractors received direct shipments of Russian titanium or nickel in 2023.

U.S. Government and Military Exposure

Using SCE’s Contracts Management Module, Exiger found that companies with direct and indirect exposure to Russian titanium and nickel have received over 21,000 federal contracts worth almost $236 billion since 2023, including over 9,000 (~$60 billion) to major U.S. contractors in the aerospace manufacturing sector.

While not all contracts may be for parts containing titanium or nickel, Exiger identified 1,315 parts that contain titanium or nickel and are reportedly manufactured by companies with direct or indirect exposure to Russian titanium or nickel. Nickel and various nickel alloys are particularly common, appearing in 1,281 of those parts. These parts have wide-ranging applications, including aircraft and missiles, as well as other weapons systems like ground vehicles.

The importance of titanium and nickel to aerospace manufacturing — and the specific use of these materials by companies identified to have possible exposure to Russian titanium and nickel — demonstrates the potential for restriction of these products from Russia to affect U.S. national security and the sustainment and procurement related to critical U.S. weapons systems.

How Exiger Can Help

Understanding and navigating geopolitical risk is now a fact of life for most businesses. Companies should build supply chain resilience into their day-to-day operations by geographically diversifying their vendor base — especially companies that source key goods from China, Russia, or other U.S. adversaries.

Exiger’s government and commercial clients use Supply Chain Explorer and Illuminations to map international supply chains, uncovering vendor concentration risk and identifying alternative sources of critical goods. Vendor diversification encourages supply chain resilience, allowing an organization to better withstand unpredictable disruptions from geopolitical tension.

Clients also take advantage of Exiger’s capabilities to create a digital supply chain twin of vendors’ products, helping to reveal exposure to raw materials, critical minerals, and manufacturing processes vulnerable to adversarial influence and global disruptions.