ARPN’s Year in Review —
a Last Look Back at the United States’ Critical Mineral Resource Challenge in 2021
Well, two words, for the sticklers. Merriam Webster may have gone with “vaccine,” but for ARPN, there was really no doubt. As one article put it, “2021 is the year ‘supply chain’ went from jargon to meme.”
As we noted more than once in 2021, the first word in supply chain is supply – a broad hint that we should wonder, and in many cases worry, about where we get the constituent parts and essential materials that make our EVs, our laptops, computers and CT scanners, smart phones, and smart bombs.
Even cookies – not the website kind, more the chocolate-chip variety. As Sesame Street’s Cookie Monster put it in a 2021 New Yorker Cartoon: “What me wants to know: What are the implications of the supply-chain crisis for cookie?”
For ARPN, it all added up to a teachable moment: A reason to step back from the magic of modern life and ask, where does the stuff that makes our stuff come from?
And what better time to take that step back than mid-December, which is customarily the time for ARPN to take stock and assess what has happened on the critical mineral resources front in the past twelve months — where we are, and, filled with hope for a new year, where we are headed.
COVID-19 and Push Towards Net Carbon Zero as Catalysts
With the U.S. presidential elections behind us, one of the two key issues dominating the news cycle in 2020 has faded into the background, but of course the ongoing coronavirus pandemic has not. Vaccines have brought hope and have helped save lives, but the arrival of new virus variants have made clear that the issue is here to stay.
In 2021, two major themes — the ongoing coronavirus pandemic and the accelerating global push towards net carbon zero dominated headlines.
Both themes served as catalysts for the rise of one key issue in the mineral resource realm and beyond: Securing the Supply Chain.
After all, the supply chain is what everything hinges on these days — our success in the fight against the coronavirus pandemic, the global push towards net carbon zero, buying a new car, putting presents under the Christmas tree, or (if you’re trying to find cream cheese for that traditional holiday dessert) just minding our day-to-day business in our personal lives.
In 2020, we were given a first glimpse into the 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.
In 2021, the extent of our supply chain vulnerabilities has reached crisis levels.
Where We Began – Amidst Big Policy Shifts, Signs for Continuity in Mineral Resource Realm
Observers of the critical mineral resource realm saw early indications that, unlike some other policy areas, critical mineral resource policy would display a certain level of continuity. In December of 2020, then-Assistant Secretary of State (Energy Resources) Frank Fannon declared that he expected the Energy Resource Governance Initiative (ERGI) — an initiative aimed at securing supply chains for metals critical for the clean energy transition — would continue in 2021, and policy statements made by the transition team suggested that, while emphases were certainly going to shift, efforts to secure critical mineral supply chains was going to continue taking a central role under an incoming Biden Administration.
Remarks made by the incoming Secretary of Energy Jennifer Granholm, before the Senate Committee on Energy and Natural Resources in January signaled that the Biden Administration acknowledged the urgency of our nation’s critical minerals challenge, and the importance of securing supply chains:
“If we are to build the supply chain for batteries, as one example, if we allow for China to corner the market on lithium or for the Democratic Republic of Congo to be the place where everyone gets cobalt when there may be child labor or human rights violations associated with that supply, then we are missing a massive opportunity for our own security but also for a market for own our trading partners that also may want to have access to minerals that are produced in a responsible way.”
She added, “the responsible way is an important thing to mention — we know we can mine in a responsible way.”
The Push towards “Building Back Better”
One of the key priorities of the Biden Administration would dominate the domestic policy agenda for much of 2021. President Biden’s “Build Back Better” agenda: an economic recovery package seeking to “make historic investments in infrastructure, along with manufacturing, research and development and clean energy.”
The increased focus on clean energy brought the critical minerals challenge to the forefront of the political discourse. As followers of ARPN well know, the road to a lower-carbon future is paved with critical metals and minerals – not least evidenced by the instructive World Bank report entitled “The Mineral Intensity of the Clean Energy Transition,” which estimated that production of metals and minerals underpinning the shift, such as the battery tech metals graphite, lithium and cobalt, would 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.
The growing emphasis on clean energy on the part of the Biden Administration, embedded into a global push towards net zero carbon emissions that began to accelerate in 2020 and has continued into 2021, culminated in the 2021 Climate Change Conference (COP26) commitments by various countries, territories, and automakers to sell only zero-emission vehicles by 2040. Against the backdrop of these commitments, and the growing awareness of the mineral intensity of sustainably greening the future, supply chains took center stage.
Supply Chains Take Center Stage – the White House’s 100 Day Supply Chain Report
On June 8, 2021, the White House released its 100 Day Supply Chain Report — key findings from reviews directed under Executive Order 14017 “America’s Supply Chains” (E.O.14017). Signed on February 24, 2021, the Executive Order instructed President Biden’s economic and national security teams to conduct a 100-day review of four key U.S. supply chains across federal agencies to assess the nation’s “resiliency and capacity of the American manufacturing supply chains and defense industrial base to support national security [and] emergency preparedness.”
The report assessed the risks and vulnerabilities for several key industry sectors — semiconductors, high- capacity batteries, medical supplies and critical and strategic metals and minerals, and offered recommendations on how to address the challenges. Not only did the report endorse an all-of-the-above approach to critical mineral resource policy, by looking to invest in “sustainable production, refining, and recycling capacity domestically,” while at the same time looking to “diversify supply chains away from adversarial nations and sources with unacceptable environmental and labor standards” by working closely with allies and partners. The Department of Defense-led chapter also specifically acknowledged the importance of the inter-relationship between what we at ARPN have been calling “gateway metals” and their “co-products.”
On July 22, 2021 the House Armed Services Committee’s bipartisan Defense Critical Supply Chain Task Force, chartered in March of 2021 to “review the industrial base supply chain to identify and analyze threats and vulnerabilities,” released its final report, which includes key findings and policy recommendations, many of which mirror the Administration’s 100-Day Supply Chain report in the context of an all-of-the-above approach.
Against mounting pressures, hope was building that both reports would create sufficient momentum to translate recommendations into actual policy, programs, and projects to address the nation’s deep shortfalls in Critical Mineral supply.
Shoring Up Supply Chains in the Wake of the 100 Day Supply Chain Report
Only weeks after the release of the 100 Day Supply Chain Report, several deals struck in the critical mineral resource realm suggested that the “all of the above” approach was off to a good start.
Efforts to promote closer collaboration with allied nations to secure stable supply of critical minerals had already been underway in 2020, and continued in 2021, in line with the all-of-the above approach endorsed by the 100 Day Supply Chain Report. In this context, relations with long-standing trading partners Canada and Australia remained the focal point, but stakeholders also called for increased leveraging of the National Technology and Industrial Base (NTIB), which, originally established to strengthen technology links between the U.S. and Canada in 1993, was expanded in 2016 to include the United Kingdom and Australia.
Industry Efforts to Sustainably Green Our Future
Acknowledging their role and responsibility in supporting and building out “sustainable production, refining, and recycling capacity domestically,” the mining sector and associated industries have made significant capital investments and – long before 2021 – began harnessing the materials science revolution to meet increased expectations of consumers, society, and governments to support the green energy transition. ARPN has, over the course of 2021, featured many of the industry initiatives to that effect, and will continue to do so going forward.
Legislation and the New Draft Critical Minerals List
While several pieces of critical minerals legislation never made it out of Congress, the bipartisan infrastructure package passed by Congress and signed by President Biden contains key provisions ranging from mine permitting reforms, to investments in carbon capture and critical mineral mapping initiatives aimed at strengthening critical mineral supply chains.
Meanwhile, the fact that a new draft Whole-of-Government Critical Minerals List released by USGS in November with a request for public comment has grown from 35 to 50 metals and minerals deemed critical for U.S. economic and national security (– essentially half of the naturally-occurring elements on the Periodic Table –), is proof of the critical role these materials play in our Tech Metal Era.
Once finalized, the updated list, additions and omissions to which we featured in a series of blog posts, may provide fresh impetus for policy reform in 2022.
The NIMBY Challenge
While much is being done to shore up U.S. supply chain security, efforts continue to face a significant hurdle:
For all of the verbal affirmations of an “all-of-the-above” approach to mineral resource policy on the part of the Biden Administration, the overall plan thus far appears more geared towards “rely[ing] on ally countries to supply the bulk of the metals needed to build electric vehicles and focus[ing] on processing them domestically into battery parts, [as] part of a strategy designed to placate environmentalists.”
The latest manifestation of this challenge became apparent at a November 2021 congressional hearing, during which U.S. Representative Scott Peters (D-Calif.) suggested that rather than onshoring minerals production, the U.S. should try “friend-shoring,” adding that “it seems like we should be working with our allies to develop new mines and factories for clean energy technologies in more favorable locations.”
While the “friend-shoring” concept is an important pillar of the “all-of-the-above” concept and highly appealing especially to those policy makers with “not in my backyard (NIMBY)” constituencies, it is insufficient to alleviate our overall problem.
As Thom Carter, energy adviser to Utah Gov. Spencer Cox and executive director of the Governor’s Office of Energy Development, argued in a piece for the Deseret News, the “keep it all in the ground” push by “Washington, D.C. and the East and West Coasts” provides little more than a “talking point. (…) Anyone who says that you can get power through a ‘keep it in the ground’ policy isn’t telling you the truth. (…) All power, whether traditional or renewable, is impacted by what comes out of the ground. Advocating for renewable energy sources also means maintaining, if not expanding, our mining infrastructure.”
The good news is that courtesy of the materials science revolution, industry can harness new technologies to do expand our mining infrastructure responsibly and sustainably – as we outlined above, and as even Energy Secretary Jennifer Granholm acknowledged this summer during a U.S. Senate hearing:
“This is the United States. We can mine in a responsible way. And many places are doing it. And there are some places where there are more challenges, but we can do this.”
A Sense of Urgency: On China, Winning the Battery Arms Race, and the Overall Critical Minerals Challenge
While not making as many headlines this year, the tech war between China and the United States, the extent of which was exposed in 2020 as the coronavirus pandemic placed a magnifying glass on our mineral resource dependencies, continued in 2021. 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 tech war has a number of battlefronts, ranging from aviation to space technology, from biotech and quantum sciences to robotics, and from military technology to artificial intelligence.
From an ARPN perspective, critical mineral resources are – in the military sense of the term — the materiel from which modern weapons of war are fashioned, and within that context, aside from the rare earths challenge, perhaps the biggest theater of U.S.-Chinese confrontation is the battery arms race, which in 2021 not only continued, but punched into overdrive.
As National Mining Association president and CEO Rich Nolan argued in a November 2021 op-ed, while the United States still has a shot at winning the EV revolution, it is currently not only not in the lead, but is “being lapped” by China, which jockeyed for pole position in the EV race a long time ago and has since attained a startling level of “control of the EV supply chain, particularly the production and processing of minerals that make lithium-ion batteries possible.”
As Benchmark Mineral Intelligence data shows, the battery arms race trend was set in motion in 2015 – but today the megafactories are mainstream, with 225 plants in the pipeline as of August 2021. While the U.S. is no longer a bystander in this race, only very few megafactories are currently located in the United States.
To succeed in this environment, Benchmark Mineral Intelligence’s Simon Moores says stakeholders will need to understand the lithium-ion-to-EV supply chain, its individual sections, and the linkage between them:
“Automakers who quickly understand the importance of these linked steps in the battery supply chain to the quality and cost of their EVs will be the most successful at navigating the next decade.
For governments, the shifts in the economics of the supply chain […] provide opportunities to create jobs, garner influence over a strategic industry, and establish new trading relationships, particularly relevant as Europe and the United States, under a Biden presidency, will seek to reduce reliance on China as a single point in the supply chain.”
And in stern message for us as we look to the new beginnings of a new year:
“Those who do not see the importance of the lithium-ion battery will have no meaningful future.”
All-of-the-Above and Supply Chains in 2022 – Beyond Verbal Commitments
2020 was a watershed year to expose the extent of our nation’s over-reliance on foreign mineral resources. Meanwhile, considering the aftershocks of pandemic-related policy measures such as lockdowns, and a new global resolve to pursue a low carbon energy future we feel confident to say that 2021 could go down in history as the Year of the Supply Chain.
While several steps were taken to address associated challenges, pressures will only continue to mount – particularly when it comes to the sought-after global green energy transition. Stakeholders increasingly realize the urgency of the situation, as the mineral resource-focused passages the freshly codified infrastructure bill underscore.
However, many have yet to fully embrace a comprehensive “all-of-the-above” strategy to secure our supply chains.
Consequently, current efforts “might pale in comparison to the scale and pace of mineral demand growth,” as Reed Blakemore of the Atlantic Council lamented in a recently released study on the role of minerals in realizing US transportation electrification goals.
The challenge is too large to address piecemeal.
While recycling, substitution, and partnering with allies should be part of any overall comprehensive strategy, strengthening domestic mineral resource development across the entire value chain must be a key focal point of our efforts if we want to ensure reliable access to the critical minerals we need to meet our current and future needs.
New Years are an invitation to take stock – a phrase with multiple meanings now that our just-in-time economy has rudely reminded us that stocks can be rapidly depleted, and dependencies exposed. Here’s hoping that as we survey our prospects for 2022, it will be the year we take critical minerals and metals as seriously as Cookie Monster takes the things that make his cookies…. cookies.
If “supply chain” could move from jargon to meme in 2021, maybe 2022 can be the year that strengthening supply chains can move from rhetoric to reality.