The "Boring" Industrial Shortage That's About to Break Everything

The first gears to jam are usually not the ones people are watching.

I was having dinner with my uncle last week, and he asked me a question I’ve been thinking about ever since.

“Jay, why is this Iran war such a big deal?”

He wasn’t being dismissive. He was asking the question many North Americans are quietly asking at their own dinner tables.

But the better question — the one that gets you closer to the real answer — is this:

Why is the Strait of Hormuz such a big deal?

The answer is simple, but still badly underestimated.

Close the Strait, and you put the entire global economy on a diet.

Most people know the headline by now:

The Strait of Hormuz is a narrow stretch of water between Iran and Oman through which roughly a fifth of the world’s oil, a third of its seaborne natural gas, and the refined fuels, fertilizers, and industrial chemicals that power factories and farms on four continents flow every single day.

What they might miss, is the cascade.

How a fuel tanker that can’t leave the Persian Gulf becomes a factory that can’t run in Korea.

How a factory that can’t run in Korea becomes a product that doesn’t land on a shelf in Seattle.

How your iPhone alone pulls materials and components from five different continents.

He nodded.

And then he said the sentence I want to write about today.

“We’ll be fine in the U.S. We have lots of energy.”

Stay with me. Because he is right. And it doesn’t matter.

The comforting half-truth

America does have lots of energy. The U.S. is the largest oil producer on earth. It sits on more recoverable natural gas than it knows what to do with. It exports LNG to three continents. On paper, energy self-sufficiency is one of the few genuine industrial advantages the United States still holds.

Now, let me separate two things here because they are not the same.

The war itself is a human tragedy unfolding in real time. Missiles are hitting civilian buildings. Cities are without power. Casualties are mounting.

Nobody with a heart looks at that and shrugs.

The war is also a trade-routes story. A shipping-lane story. A global supply chain story. And this second story is the one that most North Americans are quietly dismissing - even as the consequences start arriving on our doorstep.

The logic that says a war in the Persian Gulf won’t affect America is the same logic that said, in 1914, that a squabble in the Balkans would not spread to London. It is the same logic that said a 1973 Arab oil embargo would not reach Cleveland.

Both were wrong for the same reason.

The Initial Ripples are Here

The modern economy is not a collection of countries. It is a single machine. Every country is a gear inside it. And the first gears to jam are usually not the ones people are watching.

In this case, everyone is watching oil.

No one is watching sulphur.

Most people have no reason to think about sulphur. It does not show up in presidential speeches. It does not trend on Twitter. Nobody builds an investment thesis around yellow rocks sitting in a port warehouse.

But sulphur is one of those boring industrial inputs that quietly hold the world together.

You do not need sulphur because it is rare. You need it because modern industry runs on it. Sulphur is used to make sulphuric acid, one of the most important industrial chemicals on earth. Think of sulphuric acid as the solvent, cleaner, and processing agent that helps turn raw materials into usable products.

Farmers use it to make fertilizer. Miners use it to separate metals from rock. Manufacturers use it in everything from batteries to chemicals to refined fuels.

Every economy needs sulphur and the industrial chemicals it helps create. And China manufactures roughly 45 percent of the world’s industrial chemical supply.

China imports much of the sulphur it needs from the Persian Gulf, turns it into the industrial chemicals used in mining, agriculture, and manufacturing, and then sells them to the rest of the world.

That means when the Strait of Hormuz is threatened or closed, China’s access to a raw material it needs to produce the chemicals that the rest of the world depends on becomes compromised.

And when a country runs short of a critical industrial input, it does not behave like a polite global supplier. It acts in self-interest.

First, it protects its own farmers, because fertilizer is food security.

Then it protects its own factories, because factories are employment, exports, tax revenue, and national power.

Then it protects its own strategic industries - batteries, electronics, defence, infrastructure, and energy.

Whatever is left can be sold to the rest of the world.

That is where the cascade begins:

The war in Iran disrupts shipping through the Strait of Hormuz.

China runs short on sulphur.

Chinese chemical production falls.

Foreign buyers are pushed to the back of the line, as Beijing has less to share with the global economy.

Mining companies in Africa, South America, and Southeast Asia lose access to the chemicals they need to produce metals. And then the price of everything that depends on those metals starts to rise.

Let’s use this lens to look at the Democratic Republic of the Congo.

Because the DRC is not just a poor country far, far away. It is an important gear inside the machine. And if China stops supplying the chemicals that gear needs, the consequences do not stay in Africa.

The DRC is the world’s second-largest producer of copper - accounting for roughly fifteen percent of global supply - and, by a wide margin, the world’s largest producer of cobalt, responsible for roughly seventy percent of the planet’s output.

Those numbers matter because copper is the lifeblood of electrification. Look around you: if it needs electricity, it needs copper. A lot of it. Losing production capacity from a major regional copper producer, right now, during an already supply-constrained decade, is not a minor problem. It is a structural one.

Cobalt is in the battery of every smartphone, laptop, and electric car on the planet. It is also in jet engines, military superalloys, and the medical isotopes used to treat cancer patients. None of those uses has working substitutes at scale. If the DRC slows down, these dominoes fall too.

To get copper and cobalt out of the ground in the DRC, miners do not just dig up rock. They have to dissolve the metal out of the rock using industrial chemicals - mostly sulphuric acid and something called sodium metabisulfite. Think of those chemicals as the soap that washes metal out of dirt. Without the soap, the rock stays rock.

So when China starts cancelling exports or repricing whatever supply remains, the impact is immediate.

Consultants are now advising Congolese mining companies to ration what they have left and prepare to slow production.

And it’s not just the DRC going dry…

Chile, the world’s largest copper producer...

Indonesia, the world’s largest nickel producer…

Peru, the third-largest copper producer…

Zambia, Africa’s second-largest copper producer…

Every one of them runs on Chinese chemicals - and every one of them is seeing orders slowed, cancelled, or repriced.

That is what “one nation’s shortage is everybody’s problem” looks like in practice.

A war in the Persian Gulf becomes a sulphur shortage in China. A sulphur shortage in China becomes a chemical shortage in the Congo. A chemical shortage in the Congo becomes a copper and cobalt shortage everywhere. And a metals shortage everywhere means higher prices for the battery in your phone, the copper wiring behind the drywall in your house, and the data centers running your favourite AI tool.

That is the cascade.

And we are barely into it.

What’s the point, Jay?

The point is that my uncle’s sentence - “we have lots of energy” - rests on an assumption that does not hold up to reality.

The assumption is that energy is the input that matters. That if you have oil and gas, you have an industrial civilization.

That was true in 1955.

It is not true in 2026.

A modern industrial economy needs energy, yes. But it also needs copper, cobalt, lithium, nickel, rare earths, fertilizer, specialty chemicals, precision machinery, semiconductors, glass, steel, cement, pharmaceuticals, and about ten thousand intermediate goods that do not make the evening news.

Oil keeps the engine running. But it does not build the engine.

And that is America’s problem.

The United States still has enormous advantages. Energy. Capital. Universities. Software. Deep markets. A culture of invention. But it no longer makes enough of the physical inputs required to run a modern industrial economy at scale.

Not enough metals.

Not enough chemicals.

Not enough machine tools.

Not enough semiconductors.

Not enough pharmaceutical ingredients.

Not enough of the invisible industrial plumbing that sits between raw materials and finished products.

For thirty years, America made a civilizational choice to offshore much of its industrial base to Asia because it was cheaper. And on the narrow question of per-unit profit, that choice was correct at the time.

It is not correct anymore.

Because the inputs the U.S. still needs are now produced in places that are either cut off, rationing exports, or sitting directly inside geopolitical fault lines.

Having a lot of oil when you do not have a factory is like having a lot of flour when you do not have an oven.

You have an ingredient.

You do not have dinner.

The Three Almost Truths

Whenever I make this argument, three responses come back.

I hear them from readers. I hear them on television. I heard all three from my uncle over dinner.

Each one sounds plausible. Each one makes for a great Facebook post. None of them survives five minutes of honest math.

Let’s run through them one by one.

1. “America can restart our old factories.”

The U.S. does have idle industrial capacity. Mothballed plants. Rusting assembly lines. Empty warehouses in the Rust Belt.

The argument is that we can simply switch them back on.

Here is the problem.

Those factories were not shut down because the owners got bored. They were shut down because they could not compete in the global marketplace. Thirty or forty years ago, cheaper and more efficient options appeared overseas, and American management - not unreasonably - took them.

Those factories lost the competition thirty years ago.

Now we are being told that the factories that lost in 1995 are going to win in 2026? Against an Asian manufacturing base that has spent three decades automating, upgrading, and innovating, while ours sat rusting?

I wish.

Going back in time is not an industrial strategy.

It is a press release.

2. “We should be making this stuff in America anyway.”

It is a beautiful slogan. I support it. Every nation should aspire to produce what it consumes.

But here is the brutal arithmetic.

The majority of American households live paycheck to paycheck. A huge number of them are supplementing their income with consumer credit just to cover groceries, rent, and utilities. And they are doing this while buying goods manufactured by workers in countries with dramatically lower wage bases.

Now imagine telling that same household that its television, appliances, clothing, phone, and car will now be manufactured by Americans earning American wages - and that the price tag will reflect that.

Who is buying that television?

Who is buying that car?

The unfortunate truth is that most Americans cannot afford to buy products made in America, by Americans, at American wages.

It feels good on a bumper sticker.

It does not match reality.

3. “We’ll rebuild our manufacturing base.”

This is the one that sounds most responsible.

Big industrial policy. Bring the factories home. Whatever it costs.

The problem is what it actually costs.

I have written before about the arithmetic of reindustrialization. China’s industrial build-out over the last three decades cost somewhere in the neighbourhood of forty-one trillion dollars. And that was in older, cheaper money, with a workforce willing to work for wages no American would accept.

Replicating that in the United States - in today’s dollars?

Two times the cost?

Four times?

Call it a hundred to a hundred and fifty trillion dollars, conservatively.

The United States is already $39 trillion in debt and adding roughly $4 trillion to that pile every single year. It cannot finance a hundred-trillion-dollar industrial renaissance through taxation. The only mechanism available is money printing.

So let’s run that thought experiment.

Print a hundred trillion new dollars over a decade.

What happens to the purchasing power of the dollars already in circulation?

What happens to the paycheck of the American household we were just talking about - the one already stretched thin?

The inflation that reindustrialization would trigger would dwarf the shortages we are trying to fix.

The cure kills the patient.

The Innovation Gap

There is one version of the reindustrialization argument I am sympathetic to: American entrepreneurship.

Not nostalgia. Not “bring back the old factories.” Not pretending the Rust Belt can simply be switched back on.

Real entrepreneurship.

Take Weyerhaeuser as an example.

Weyerhaeuser is one of the largest timber companies in North America. It makes money by owning and managing timberland, growing trees, harvesting them, and selling wood products into housing, construction, packaging, and industrial markets.

In other words, this is not an app. It is not a software company pretending to be industrial. It is a 125-year-old business built on land, trees, mills, trucks, and lumber.

And now it is using artificial intelligence to become more productive.

Weyerhaeuser is building a digital map of its forests using satellite imagery, drones, and lidar - the same laser-based sensor technology used in self-driving cars. Instead of sending foresters into difficult terrain to count trees by hand, AI models can now estimate tree health, growth rates, and seedling survival from the air.

The same logic is moving into harvesting. AI can help operators decide which trees to cut, which trees to leave standing, and how to manage the forest for the highest long-term value.

That is the point.

This is what globally competitive reindustrialization actually looks like. Not reopening a factory that lost the competition thirty years ago. Not standing at a podium making false promises and claims of victory.

It looks like taking a hard-asset business - timber, mining, fertilizer, energy, manufacturing - and making it radically more productive with technology.

That is the version of American industrial revival worth betting on.

The American Shenzhen

And it is not just Weyerhaeuser.

Weyerhaeuser is what happens when old industrial America starts using new technology.

Proto-Town is what happens when young founders decide to build the industrial base from scratch.

Forty-five minutes south of Austin, a group of hard-tech founders is building what they openly call an “American Shenzhen” - a physical cluster for companies making drones, robots, construction technology, nuclear technology, and advanced manufacturing systems.

They are not building apps.

They are building machines.

Proto-Town is now home to a dozen hard-tech companies. Dynamo is developing autonomous drones capable of carrying 10,000-pound payloads. Terran is testing a machine that 3D-prints houses out of dirt and clay. Bedrock Robotics is building autonomous excavators that dig ditches without human operators.

And in March, nuclear-technology company Oklo announced plans to construct a test reactor to produce medical isotopes - the same isotopes used in cancer therapy and advanced manufacturing, almost all of which the United States currently imports.

That is the point.

These founders are not pretending China is a problem that can be sanctioned away. They are studying China. They are copying what works. They are trying to build the kind of dense, physical manufacturing ecosystem that the West has spent 30 years neglecting.

That is the right instinct. Because the future will not belong to the countries that write the best slogans about independence.

It will belong to the companies that can actually make things.

So, What Can We do?

We can start operating inside the world that is actually arriving.

Stop treating real, physical, essential things as boring.

Because the boring stuff is about to become the most important stuff on the planet.

Energy. Metals. Fertilizer. Food. Timber.

For the last decade, investors have been trained to chase abstraction. Software. Platforms. Apps. Digital networks.

And those things matter.

But they all sit on top of the physical world.

AI needs data centers. Data centers need copper, steel, cement, electricity, cooling systems, transformers, land, and water. Electric vehicles need lithium, nickel, cobalt, copper, graphite, and power. Food needs fertilizer, fuel, machinery, chemicals, and logistics.

The digital economy is not floating in the cloud.

It is bolted to the ground.

Weyerhaeuser is not going to solve the West’s industrial problem on its own. Neither is Proto-Town. No single company is.

But they point to the bigger picture.

For seventy years, the West has lived inside an era of abundance. Cheap energy. Cheap labour. Cheap raw materials. Cheap freight. Cheap money.

We built our portfolios, our budgets, and our entire economic expectations around that world.

That world is ending.

What comes next is a transition period from what was, to what will be.

And in every previous transition between eras, the lesson has been the same: hard assets - the physical things the world needs but cannot make enough of - are how you protect yourself.

Companies making real, meaningful contributions in mining, fertilizer, energy, infrastructure, and industrial technology, while trading at valuations that assume the world no longer needs them.

That is where my money is going.

My uncle is a smart man. His instinct that America is better positioned than most is correct. The U.S. will weather this better than Europe, better than Asia, better than the DRC.

But “better than most” is not “fine.” Relative advantage is not immunity.

The shortages are already baked in the cake. You cannot wish them out. You cannot slogan them out. You cannot print them out.

You can only prepare for what comes out of the oven.

Every great economic transition in history has had casualties. The casualties were the people who refused to see the transition coming. The survivors were the ones who looked the change in the eye and adjusted.

Honest question - what am I missing? Let me know in the comments.

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That’s it for today,

Jay Martin

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