The United States is grappling with a significant weakness in rare earths and critical minerals, including cobalt and nickel. In response, the Inflation Reduction Act (IRA) has been enacted to limit trade and supply to only friendly nations, addressing this vulnerability. A report published by the US Government Select Committee in December 2023 underscored the country’s dependency on these essential resources. Meanwhile, China continues to hold a stronghold in the market, particularly in processing these minerals—a crucial stage that separates minerals from other rock elements. China’s strategic investments in Africa and South America have further secured its supply of critical minerals.
US Dependency and China’s Dominance
The US fears being at a competitive disadvantage due to China’s dominance. In a bid to counteract this, the Trump administration is contemplating a “Critical Minerals Executive Order.” This order aims to channel more investment into accelerating mining operations within the US, potentially including measures such as fast-tracking permits and funding the construction of processing plants. The US has identified a list of critical minerals, which typically comprises rare earths and metals like lithium, while other nations have their own lists.
The International Energy Agency projects that within two decades, critical minerals will account for nearly 90% of the demand for lithium, 70% for cobalt, and 40% for rare earths. Companies like Space X and Tesla heavily depend on these minerals for their operations, particularly graphite, lithium, and nickel. Elon Musk expressed concerns over rising costs:
“Price of lithium has gone to insane levels! Tesla might actually have to get into the mining & refining directly at scale, unless costs improve.” – Elon Musk
The IRA has ushered in a substantial investment of $493 billion (£382 billion) into the US green industry, as reported by the think tank Clean Investment Monitor. This legislative support has spurred a boom in battery production, with states like Georgia becoming part of the burgeoning “battery belt.”
Challenges in Building Mineral Supply Chains
However, some experts believe that the US administration lacks a comprehensive understanding of the technical complexities involved in establishing robust mineral supply chains. Professor Willy Shih of Harvard Business School remarked:
“If you want to build a new mine and processing facility it might take you 10 years.” – Prof Willy Shih
China’s strategic foresight has positioned it as a dominant player in the market for both renewables and electric vehicles over the past decade. Bob Ward highlighted this point:
“China made a decision about 10 years ago about where the trend was going and has strategically pursued the development of not just renewables but also electric vehicles and now dominates the market,” – Bob Ward
The potential executive order by the Trump administration is seen as an effort to secure agreements that benefit the US’s interests. Ms. Gray commented on this shift in strategy:
“Trump is changing tact and looking at securing critical minerals agreements that owes something to the US,” – Ms Gray
China’s control over the processing stage is particularly concerning for the US, as this step generates high margins, contributing significantly to China’s economic gain. Christopher Knittel emphasized this aspect:
“It is that processing stage, which is the high margin stage of the business, so China is making a lot of money.” – Christopher Knittel
The IRA’s legislative efforts have not only aimed at limiting trade with non-friendly nations but also stimulated domestic activity in related fields. Carl Fleming noted an increase in business activity following these changes:
“In the last month my practice has been busier than ever, and this is since quadrupling last year following the IRA.” – Carl Fleming
Despite these legislative advances, experts warn that not every country can guarantee economically recoverable reserves. Daisy Jennings-Gray pointed out:
“You cannot guarantee you will have economically recoverable reserves in every country.” – Daisy Jennings-Gray
What The Author Thinks
The US’s growing dependence on critical minerals, especially in light of China’s dominance in processing, highlights the urgency for a comprehensive domestic strategy to secure these resources. While the Inflation Reduction Act has bolstered investments in green industries, the complexity of building effective supply chains means progress could be slow. The proposed executive orders and efforts to fast-track mining operations are essential but may not be sufficient without a long-term, well-rounded approach to the global mineral market.
Featured image credit: fdecomite via Flickr
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