ARPN’s Year in Review — a Cursory Review of the United States’ Critical Mineral Resource Challenge in 2020
It feels like just a few weeks ago many of us quipped that April 2020 seemed like the longest month in history, yet here we are: It’s mid-December, and we have almost made it through 2020. It’s been a challenging year, and the holidays certainly look very different for many of us. One thing, however has not changed: The end of the year is the time to take stock and assess what has happened in the past twelve months, where we are, and where we are headed.
While two major issues — the ongoing coronavirus pandemic and the U.S. presidential elections — sucked up most of the oxygen in the public discourse and garnered most of the media’s attention, it has been an incredibly busy year on the mineral resource policy front. So, without further ado, we’re offering ARPN’s take on 2020 from a critical mineral resource perspective:
Where We Began — Incremental Progress in 2019 in the Wake of E.O. 13817
For the most part, the U.S. mineral resource policy realm had seen slow but steady incremental progress in 2019. Faced with mounting supply chain pressures and growing trade tensions with China, stakeholders had continued to push for comprehensive resource policy reforms in the wake of Presidential Executive Order 13817 of December 20, 2017, “A Federal Strategy to Ensure Secure and Reliable Supplies of Critical Minerals.”
Against the backdrop of a previously-signed memorandum of understanding (MOU) for critical materials between the United States and Canada to reduce U.S. reliance on Chinese rare earth supplies, and the FY2020 National Defense Authorization Act (NDAA) which furthered a 2019 mandate for the U.S. military to not only buy non-Chinese rare earth permanent magnets but rather develop and implement a strategy to establish a “total domestic American rare earth supply chain” for all rare earth-enabled products utilized by the U.S. military, 2020 was shaping up to be a “pivotal year for rare earths.”
Meanwhile, with the battery arms race intensifying and Chinese-American trade tensions continuing to escalate, interest in a national policy conversation on critical minerals had increased. That notwithstanding, partisan pressures on Capitol Hill remained a key obstacle for reform because, as one observer noted as late as December 2019, the prevailing sentiment was that “neither [political] party’s base sees critical minerals as such a dire threat.”
The First Few Weeks of 2020 – Staying the Course towards an “All-of-the-Above”Approach on Critical Minerals
Efforts to strengthen mineral resource cooperation between the United States and our Canadian and Australian allies, which had hit a stride in 2019 with the signing of several cooperative agreements and the formation of the U.S.-Canada Critical Minerals Working Group, were off to a good start: On January 9th of this year, the U.S. and Canada announced the finalization of its Joint Action Plan on Critical Minerals Collaboration, and in February, U.S. and Australian officials met in Washington, D.C. to further flesh out a joint U.S.-Australia Action Plan on Critical Minerals.
On Capitol Hill, Sen. Lisa Murkowski (R-Alaska) and Joe Manchin, (D-W.Virginia)., released the text of their energy innovation package in late February, which contained provisions to streamline the federal permitting system for mining projects, calling for research and development on recycling and developing alternatives to critical minerals, the development of analytical and forecasting tools to evaluate critical minerals markets, and the strengthening of the critical minerals workforce. With regards to rare earths, specifically, the package called for the enactment of a program to “develop advanced separation technologies for the extraction and recovery of rare earth elements (REEs) and minerals from coal and coal byproducts,” and respective reporting to Congress.”
Coronavirus as Watershed Moment – Pandemic Exposes Vulnerabilities, Serves as Catalyst
Already, however, the global spread of the coronavirus began to overshadow all developments. In the weeks and months that followed, COVID-19 pandemic not only took over headlines all over the world, it also slowed down economic activity, drastically scaled back public life, turned parents into homeschool teachers, and sent financial markets into turmoil.
It also, perhaps more than any other event in recent memory, began to expose the depth of our supply chain challenges associated with an over-reliance on foreign, and especially Chinese, raw materials, the effects of which were being felt across broad segments of manufacturing.
While early on in the pandemic, the focus was on critical medicine —from basic drugs to treat COVID-19 to N95 surgical masks to guard against its spread —it quickly became apparent that, as ARPN’s Dan McGroarty observed in March of this year, “just as critical medicines from China are integrated across the U.S. health care spectrum, so too are critical minerals imbedded into all aspects of the U.S. supply chains for energy, high-tech manufacturing – and most worryingly, national defense.”
Tech War Exposed
While arguing that China had “no intention to fight either a Cold War or a hot one with any country,” Beijing has long engaged the U.S. in a “technology war,” of which most of the American public has been unaware. In essence, this tech war is a competition “to see which country will dominate the 21st Century Technology Age, in which our ‘Achilles heel’ is our over-reliance on foreign metals and minerals underpinning 21st Century technology.”
The coronavirus pandemic has placed a magnifying glass on the fact that the U.S. “lost a major battle in a war that it didn’t even realize it was fighting when China over the past decades established monopolies on several critical rare earth elements and a few other strategic minerals.”
According to National Defense Magazine editor-in-chief Stew Magnuson, the tech war has a number of battlefronts, ranging from the control over rare earths (or, more generally speaking, critical mineral resources) over aviation, space technology, biotech, quantum sciences, robotics, and military technology to artificial intelligence. Already down 0:1 over rare earths, he argues that the U.S. runs the risk of going 0:2 when factoring in the battle for 5G dominance, an area where, according to several recent think tank reports, the U.S. is allowing “China to eat its lunch.”
Global Energy Transition Continues to Fuel Demand for Critical Minerals
Covid-19 may have temporarily put public life and global markets on hold, but, the pandemic notwithstanding, the green energy transition marches on — and with that, our skyrocketing materials supply needs for the metals and minerals that underpin renewable technology.
In May of 2020, the World Bank released a landmark report, entitled “The Mineral Intensity of the Clean Energy Transition,” in the context of the global lender’s “Climate-Smart Mining” initiative. The global lender estimates that production of metals and minerals like graphite, lithium and cobalt will have to increase by nearly 500 percent by 2050 to meet global demand for renewable energy technology. To achieve the transition to a below 2°C pathway as outlined by the Paris Agreement, the deployment of wind, solar and geothermal power, as well as energy storage will require more than three billion tons of minerals and metals. Several other institutions, including the International Energy Agency echoed the sentiment of a mineral- intensive green energy future.
As such, reports that the pandemic was disrupting clean energy supply chains only added fuel to the fire, prompting Francis R. Fannon, Assistant Secretary, Bureau of Energy Resources at the U.S. Department of State, to observe that “the world must dramatically increase the extraction, refining and processing of critical energy minerals to meet the world’s ambitious clean technology demand.”
Unprecedented Attention for Supply Chains
The pandemic has drastically increased attention for supply chains. Dictionary publishers have just announced that their choices for “word of the year” in 2020 have fallen on “pandemic” and “quarantine,” but the frequency with which we have heard “supply chain” referenced in the public discourse would make the term a worthy runner-up.
And while, of course, as Dan McGroarty noted in an op-Ed for The Economic Standard earlier this year, “the first word in supply chain is ‘supply’” — underscoring the need to focus on where we source critical materials — COVID has also shed a light on the fact that supply chain vulnerabilities loom along virtually every point of the chain. The make-up of the supply chain for critical minerals may vary from material to material, but the key “link” (it’s a “chain” after all) between supply and manufacturing is refining — or, more bluntly, it’s the processing, stupid.
Unfortunately, but not unsurprisingly, this is another area where China has a leg up on us.
Over the course of the past few decades, by shutting down one smelter and refining facility after another the U.S. has effectively allowed the “hollowing out of its industrial base.”
Meanwhile, pursuing a strategic vision of controlling the entire supply chain, China has invested aggressively in metals and minerals processing, even — and especially — if the country does not develop the material domestically. For many metals and minerals, China has successfully ensured that “that all the trade flow arrows go into China before they make a product.”
As ARPN expert panel member and Benchmark Mineral Intelligence managing director Simon Moores has pointed out, “you don’t need the mass volume of raw materials mined in the U.S. — you can build other links in the supply chain to ensure those arrows point towards your country. To me, that’s the biggest challenge the U.S. has.”
Resource Policy in the Wake of COVID
The Great (Bipartisan) Reshoring
Grappling with these realities, which really are not new, but have been brought to the forefront in recent months, the “Great Reshoring” of critical materials supply chains has begun. After long period of inaction, the U.S. Government seems to be viewing strategic materials and critical minerals issues with a new seriousness — a seriousness that, while emphases will differ, stretches across party lines. During the often bitter and heated presidential campaign season of 2020, both U.S. President Donald Trump and his then-challenger and now-President-elect Joe Biden stressed the importance of “bring[ing] home our critical supply chains and permanently end[ing] our reliance on China,” (Donald Trump) and “bring[ing] Back Critical Supply Chains to America so we aren’t dependent on China or any other country for the production of critical goods in a crisis.” (Joe Biden).
The high stakes and particularly the national security implications of critical mineral resource policy have begun to resonate not just in Washington, DC., and the push for an “all-of-the-above” approach to critical minerals has received new impetus – resulting not only in multiple congressional hearings on the issue, but rather specific policy initiatives.
Specifically, we have seen progress in the following areas:
Aside from long-standing proponents of comprehensive mineral resource policy reform like Sen. Lisa Murkowski (R-Alaska), Sen. Joe Manchin (D, W-Virginia) and Rep. Mark Amodei (R-Nevada), other lawmakers on Capitol Hill took on the issue:
- Sen. Ted Cruz’s (R-Texas) “The Onshoring Rare Earths Act of 2020,” or ORE Act, seeks to reduce U.S. reliance on China for critical minerals. Defined as the 17 rare earths, plus four key minerals underpinning battery technology (lithium, cobalt, graphite and manganese), the ‘Cruz Criticals’ are key to establishing a domestic supply chain. The bill proposes a series of measures aimed at encouraging domestic mineral production, and strengthens existing federal statutes prohibiting rare earth magnet sourcing from China, Russia, Iran and North Korea. Recognizing that mineral production can take many forms, from traditional mining to recycling, reclamation from legacy mines, coal waste and even fracking water, it also sets up a federally-funded pilot program for traditional mining of critical minerals as well as what Cruz terms ‘secondary recovery projects.’ (…)
- House Reps. Lance Gooden (R-Texas) and Vincente Gonzalez (D-Texas) introduced the “Reclaiming American Rare Earths Act or RARE Act,” which is modeled after Sen. Cruz’s ORE Act.
- Reps. Paul A. Gosar (R-Arizona) and Michael Waltz (R-Florida) introduced the “American Critical Mineral Exploration and Innovation Act of 2020” intended to facilitate the availability, development and environmentally responsible production of domestic resources to meet national material or critical mineral needs.
- Sen. Dan Sullivan (R-Alaska) offered two key amendments to the Fiscal Year 2021 National Defense Authorization Act (NDAA) setting forth U.S. policies to achieve ambitious 10-year critical mineral goals and would requiring the Department of Defense (DOD) to produce a study on U.S. defense critical mineral needs.
- Sen. Mark Rubio (R-Florida) introduced the “RE-Coop 21st Century Manufacturing Act,” which would establish “a privately funded, operated, and managed Rare Earth Refinery Cooperative responsible for coordinating the establishment of a fully integrated domestic rare earth value chain to serve U.S. national security interests and restore American competitiveness of critical advanced manufacturing industries.”
Critical Materials Caucus:
In June of this year, U.S. Reps. Eric Swalwell (D- Calif.) and Guy Reschenthaler (R-Penn.) joined forces to launch a bipartisan caucus to “focus on ways to increase domestic production of specialized minerals used to make missiles, cell phones and other high-tech equipment.”
Administration Efforts and New Critical Minerals Executive Order:
- Over the summer of 2020, the Department of Energy (DOE) overhauled its target critical minerals list to include several rare earths and materials considered building blocks of battery tech. DOE has asked for project proposals to develop, in cooperation with its technology hubs, next generation technologies to extract, separate and process ‘key critical materials’: five rare earths — neodymium, praesodymium, dysprosium, terbium, and samarium — as well as cobalt, lithium, manganese, and natural graphite.
- After an initial pause during the onset of the pandemic, efforts to foster cooperative agreements with friendly nations have been re-kindled. The State Department in June announced its hopes to expand the Energy Resource Governance Initiative (ERGI) – an initiative launched last year by the United States and joined by ten other countries, including Canada, Australia and Brazil – aimed at improving supply chain security for the metals and minerals underpinning green energy technology.
- In line with cooperative agreements entered into in 2019, Geoscience Australia, the Geological Survey of Canada, and the United States Geological Survey (USGS) are coordinating their critical mineral mapping and research efforts to create a shared foundation of mineral information to help ensure a safe and secure supply of the materials needed for each country’s economy and security.
- At the White House, three new Executive Orders take aim at strategic materials and critical mineral development:
- - One order, directing an executive branch review to reduce the regulatory burdens under NEPA — the longstanding National Environmental Policy Act — in order to speed infrastructure, energy and mining projects, has triggered threats of legal action that, if successful, could stop the regulatory review even before it begins.
- - While receiving far less media attention, the second Executive Order, delegating Defense Production Act (DPA) Title III emergency authorities to the U.S. Development Finance Corporation, including the authority to underwrite loans to support strategic material production.
- - The third and perhaps most important executive order of the three, E.O. 13953, declared a critical minerals national emergency and instructs the Department of the Interior to explore the application of the Defense Production Act — used earlier in the year to accelerate production of medical supplies in the context of the ongoing coronavirus pandemic — to promote domestic resource production and development.
After an initial hard lockdown, China quickly revved up its engine to move past the coronavirus pandemic. Observers worrying that China would look to exploit the global shutdowns in response to the first wave of COVID-19 were proven right. Beijing was already stretching its “tentacles” across the globe even as the country was shut down and has since looked to solidify its geopolitical position as its relations with the West deteriorated.
The battery arms race is a case in point. Here, Beijing has actively and aggressively built out its EV battery megafactories since the onset of the pandemic —only recently Benchmark Mineral Intelligence listed the following numbers for “planned EV battery plants in 2020”: EU – 2, USA – 3, and China: 38.
On the rare earths front, China’s legislature passed export control legislation to “take countermeasures against any country or region that abuses export-control measures and poses a threat to China’s national security interests,” and effectively allow the “government to ban exports of strategic materials and advanced technology to specific foreign companies” – raising the specter of yet another rare earths ban.
And while China’s ambitious Belt and Road Initiative in the context of which China has been investing hundreds of billions of dollars in Africa and beyond to gain access to mineral riches has suffered a setback, one must assume it will double down on the strategy particularly as relations with the West have been deteriorating.
Harnessing the Materials Science Revolution
If there is a silver lining to be found in the coronavirus pandemic, it’s that it has been unleashing the powers of innovation. The materials science revolution has not only not been slowed — it has delivered amazing promise.
Whether it’s the development of vaccines, rapid tests, new treatment methods or novel materials for personal protective equipment (PPE) at neck-breaking speeds – we’re seeing innovation unfold in front of our very eyes as materials science provides “platform technologies and tools for virus research.”
Courtesy of the materials science revolution, old school mainstay metal Copper recently has garnered a lot of attention due to its antimicrobial properties. We featured several new ideas on how to harness copper’s properties in the fight against coronavirus ranging from the development of copper-infused fabrics to copper-alloyed cell phone cases, and using copper-alloys in high-touch areas in transit, hospital settings and schools, as well as the development of copper-infused paints and coatings.
Critical minerals R&D certainly showed its promise in 2020, and we can expect the materials science revolution to continue to deliver more breakthroughs in the coming months and years.
A Look Beyond 2020
2020 has brought many changes, in our personal lives, in the way we travel or conduct business. It has also brought about political change — which will certainly impact policy making going forward.
We will explore our expectations in this regard and policy recommendations for 2021 in a more comprehensive manner in a forthcoming post.
For now, suffice it to say that regardless of who occupies the White House, the critical minerals challenge is here to stay.
While the Biden/Harris ticket proclaimed its intentions to bring home supply chains during the presidential campaign, priorities will undoubtedly shift come January 2021. Whereas the Trump administration, among other things, placed an emphasis on strengthening and increasing domestic mining, it is reasonable that expect the incoming Biden/Harris administration to greater emphasize leveraging partnerships with allied nations, as well as recycling, and reclamation of new minerals from old mine tailings.
The concept of a circular economy — a system which thrives on sustainability and focuses mainly on refining design production and recycling to ensure that little to no waste results — is not new, but has gained traction in recent years, and — with technological advances and shifting resource supply scenarios — will likely continue to do so under President-elect Joe Biden.
What will not change, is the urgency with which we need to treat the United States’ critical minerals challenge, because, as the coronavirus pandemic has made crystal clear, neither China, nor the rest of the world will wait for us.