Energy Security Matters | August 20, 2024
In this issue:?SAFE convenes roundtable on mineral pricing support mechanisms; webinar on legacy mining assets; SAFE responds to China’s new bans on critical materials; ReMo applauds DOT’s FLOW Initiative expansion.
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Upcoming Events
Yesterday’s Mines, Tomorrow’s Minerals Revitalizing Legacy Mining Assets for the 21st Century? Thursday, September 5 from 11 a.m.-12 p.m. ET on Zoom
According to the International Energy Agency, global demand for critical minerals could more than double by 2030, and triple by 2050.?The U.S. Geological Survey estimates that the U.S. is between 50%?and 100%?reliant?on foreign sources, namely China and Chinese companies operating abroad,?for these raw and processed critical minerals, creating major energy, economic, and security vulnerabilities
There are some?half a million abandoned mines across the country. With reinvestment, these assets could significantly reduce our dependence on foreign adversaries for these building blocks of modern society, bolstering our economic competitiveness,?adding billions of dollars to our?economy annually, creating?numerous regional jobs, and?revitalize?communities affected by mine closures.
Join us for a discussion with?mining experts, private sector leaders, and policymakers designed to inform lawmakers on how to transform these languishing reservoirs into productive assets, establishing the U.S. as a player in global markets and breaking China's monopoly over mineral supply chains critical to our national, economic, and energy security.
Featuring (additional speakers to be confirmed):
Subscribe to?our YouTube channel?for other informative webinars and clips from SAFE Summit.
Questions about this newsletter? Reach us at?[email protected]?with questions or comments.
Convening the Experts to Tackle Critical Mineral Market Volatility
Last week, SAFE's Center for Critical Minerals Strategy brought together critical minerals?traders, producers, miners, academics,??purchasers, and other?expert stakeholders?to discuss how—if at all—government should intervene in critical minerals market in the face of falling prices that threaten to jeopardize supply chain security.
There have been growing calls?for price supports to counter a sustained low-price environment that has undermined U.S. and allied efforts to tap domestic resources. The challenging market dynamics have forced some operations to shut down, halted others under development, and made it increasingly difficult to finance new mining and processing ventures.
Different agencies are evaluating existing and potential authorities to provide price transparency or price support.
While there is consensus on the problem, commodity markets are cyclical and complex, and setting a role for government as market manager is a dangerous game.
In May, we submitted comments to the Department of Energy's (DOE) request for information on critical minerals market dynamics, specifically?challenging the idea price supports could be a realistic solution to market volatility except in very specific circumstances.
That sentiment was echoed by several participants at our roundtable last week. We heard support for?enhancing?existing policy programs?to increase competitiveness of U.S. producers. Others argued the focus should?be on streamlining permitting processes and strengthening Foreign Entity of Concern (FEOC) provisions in the 30D clean vehicle tax credit.?
There was plenty of agreement on continuing to offer financial incentives like grants, low-interest loans, and tax credits to boost capacity outside of dominant markets like China.
No Silver Bullet for Price Volatility
Participants shared observations that China’s overcapacity in?battery?mineral processing and manufacturing for certain minerals is to the point that even fully state-owned Chinese companies are losing money.?
Overcapacity is not unique to battery minerals, nor is it a bug in the system. Last year’s report from SAFE's Center for Strategic Industrial Materials, “Political Tailwinds: Examining Trade Policy for the U.S. Aluminum Industry," pointed out how three consecutive administrations have tried to counteract Beijing’s non-market behavior in overcapacity of aluminum. SAFE recommended government confront the overproducing elephant in the room to counter unfair practices in smelting.
Furthermore, each mineral and metal is subject to its own unique market dynamics. For example, rare earth elements (REEs), essential to almost every facet of modern manufacturing, fetch prices on the market far below the costs associated with extracting and refining them, in large part due to Beijing’s price manipulation.
Unlike lithium and nickel, which are typically mined as primary products, 98% of the world's cobalt is produced as a by-product, mainly of copper and nickel mining. By-product cobalt producers often have a competitive advantage over primary producers due to their ability to allocate shared expenses but variations in cost allocation methods between different by-product producers complicate industry-wide cost comparisons and the creation of accurate supply curves.
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What About Tariffs?
As the saying goes, if all you have is a hammer, everything starts to look like a nail. Tariffs and trade policy are seeing heightened focus, but while they may protect existing mineral extraction projects, their effectiveness in changing global market dynamics is limited by the United States’ relatively small share of global critical mineral imports and lack of domestic midstream processing capacity, nor do they solve the problems,?like permitting challenges,?that create underlying competitive disadvantages for new projects.??
In the absence of ex-China supply, tariffs on midstream Chinese battery materials are essentially punitive for downstream industries, like auto manufacturers, further undermining their competitive advantage.
And zooming out further,?these critical minerals and materials are not only essential for driving America's economic competitiveness, but?also for our national defense. Robust commercial demand upstream is vital for driving investment in domestic production downstream.
From?testifying before the U.S. International Trade Commission?to?hosting multiple roundtables, SAFE’s Minerals Center has spent much of the year evaluating the potential and limits of trade policy to secure electric vehicle minerals.
Keep an eye out for the culmination of this work in the official release of our report, “Trading Tensions: Navigating Policy Tools for a Diverse Critical Minerals Supply Chain,” later this fall.
Beijing Escalates Restrictions on?Defense-Critical Metal Exports
The Chinese Communist Party announced Thursday that starting next month?it will require licenses for exports?on antimony products, which are essential to ammunition production.
This is the latest restriction imposed by the CCP on strategic minerals and materials, including gallium and germanium, both critical to production of microchips, fiber optic cables, solar cells, and other foundational components of everyday life.
Abigail Hunter, Executive Director of SAFE's Center for Critical Minerals Strategy, said in a statement that "this is only the most recent move in a frightening trend" of China leveraging its "chokehold over materials essential for defense and commercial production to further its geopolitical aims."
She said, “Washington must stop getting caught flat footed and commit to a true industrial policy, coordinated with allies, to secure mineral supply chains for defense and critical infrastructure. We must pivot from a reactive footing to developing proactive policy.”?
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ICYMI: LPO's Groundbreaking Commitment to Reshore Advanced Manufacturing
Earlier this month, DOE's Loan Programs Office (LPO) announced a groundbreaking $1.45 billion loan to Qcells for a state-of-the-art solar manufacturing facility in Georgia, a significant step toward breaking China’s chokehold on the solar panel supply industry by onshoring advanced manufacturing jobs.
LPO Director Jigar Shah highlighted the important role this investment plays in "bringing a lot more of the supply chain into the United States.”
SAFE applauds this move to re-shore advanced energy manufacturing and reduce reliance on foreign adversaries for critical energy equipment.
DOT Expands Public-Private FLOW Initiative to All Major U.S. West Coast Ports
SAFE's Coalition for Reimagined Mobility (ReMo) celebrated the U.S. Department of Transportation’s announcement?announcement last week that it is?expanding its Freight Logistics Optimization Works (FLOW) Initiative to include the Port of Oakland and the Northwest Seaport Alliance, bringing all major West Coast ports into this unique public-private partnership to improve data sharing, reduce congestion and pollution at ports, and strengthen the resilience of America’s supply chains.
ReMo’s policy research on freight digitalization has demonstrated the role that data sharing and establishing data exchange standards across the freight sector can:
Achieving this will require coordination and cooperation between the private and public sectors, as well as across logistics companies.
That’s why we’re excited to see this important U.S. DOT initiative expand to cover 95% of all inbound container traffic on the West Coast.