– A Look at 2023
Through the Prism of Critical Mineral Resource Policy -
In the waning days of December 2022, ARPN and others were gearing up for a watershed year in the critical minerals realm – a year which could be a “breaking point if there is to be an EV revolution/transformation,” and one that would give us a glimpse into the new world order in the Post Petro Age in which the sands of geopolitics have shifted.
We set out to track the following themes, all of which we found to be intertwined:
- A focus on the Super Criticals (see our Year in Review post for more info);
- the growing importance of geopolitics, with China taking center stage and alliances and partnerships continuing to be forged to reduce reliance on Beijing;
- the acceleration of the green energy transition which will require vast amounts of critical minerals;
- as well as industry’s efforts to sustainably green our future by harnessing the materials science revolution.
As we close out 2023 with ARPN’s annual attempt to take stock of what has happened on the critical mineral resources front in the past 12 months — to assess where we are, and, filled with hope for a New Year, where we are headed – we believe we picked the right themes.
2023 – Enter the Post-Petro Tech Age?
Geopolitics certainly took center stage on the critical minerals front with the Russia/Ukraine war continuing to place a strain on global supply chains and resource nationalism gaining a bigger foothold in particularly the Southern hemisphere.
As Peter Schechter and Juan Cortiñas had outlined in a February 2022 piece for Marsh McLennan’s Brink News ARPN featured at the time, the shunning of laissez-faire economics, particularly in Latin America, is not new. “What’s different this time,” they say, “is that these new interventionist policies are not only focused on the traditional energy sector. Instead, the region’s attention is turning to increasingly valuable minerals that are key to the new green economy quickly gaining momentum across the world.”
In early 2023, we saw this trend play out in Chile, where President Gabriel Boric announced his plan to nationalize the country’s lithium industry to boost the Latin American nation’s industrial base and protect the environment. While his plan fell short of full nationalization, observers called Boric’s announcement a “shock move” – but it was one that tied into an overall trend in the region:
Chile’s move came on the heels of a comprehensive lithium nationalization plan enacted by Mexico which culminated in President Andres Manuel Lopez Obrador signing a decree handing over responsibility for lithium reserves to the country’s energy ministry in February of this year.
Bolivia’s ruling socialists have also favored state control over the nation’s vast untapped mineral resources but are relying on Chinese partners to harness them.
Meanwhile, some speculated at the time that had it not been for his ouster, Peru’s President Pedro Castillo, who won a narrow victory in 2021 and had initially pledged to nationalize much of the country’s mining sector, might have pursued an approach similar to Boric’s in Chile.
The moves tied into a bigger trend, as indicated by prior similar developments in Indonesia, Myanmar and Zimbabwe.
Tech War Theaters – Semiconductors and Critical Minerals
Meanwhile, the Tech Wars between China and the West continued to intensify, and Western nations began taking steps to counter Chinese dominance in the critical minerals realm.
A key theater of the Tech Wars had emerged: Semiconductors, which have become indispensable components for a broad range of electronic devices. Semiconductors have been dubbed the “DNA of technology” which has “transformed essentially all segments of the economy” and are critical to national security where they enable the “development and fielding of advanced weapons systems and control toe operation of the nation’s critical infrastructure,” as the Department of Commerce-led chapter in the Biden Administration’s 100 Day Supply Chain Review report outlines.
While the U.S. took steps to impose new export controls to China’s access to advanced computing chips, its ability to develop and maintain super computers and manufacture semiconductors in 2022, Washington’s allies in Europe, Japan, Canada, Australia also took steps to reduce Chinese influence in their critical mineral industries. The governments of the Netherlands and Japan announced their intention to emulate the U.S. export controls in March.
A late 2022 proposal to bolster the Investment Canada Act (ICA) to empower government ministers to block or unwind critical mineral investments if these are considered as a threat to national security, considered a defensive measure against China which has invested $7 billion in Canada’s base metals sector in the past two decades, was expected to be finalized in the spring.
Australia’s Treasurer Jim Chalmers in early 2022 blocked a request by a Chinese company to boost its investment in Australian REE company Northern Minerals via a prevention order, the first move of this kind since the Treasurer had expressed concerns over the “concentrated nature of the China-dominated critical minerals supply chain” elevated by the Russia-Ukraine war, and a move that some considered a “sign of what’s to come.”
West Bolsters Domestic Supply Chains
While these steps were taken to reduce Chinese influence over domestic industries, the West also stepped up efforts to strengthen its own critical mineral policies and sectors.
The European Union released its long-awaited action plan to “ensure the EU’s access to a secure, diversified, affordable and sustainable supply of critical raw materials” on March 16. The Critical Raw Materials Act (CRMA) includes a comprehensive set of actions aimed at shoring up European critical mineral supply chains by streamlining the permitting process for raw materials projects and allowing for selected “Strategic Projects” to benefit from support for access to financing and shorter permitting timelines (24 months for extraction permits and 12 months for processing and recycling permits). The Act – which was finalized later in the year, also requires EU member states to develop national programs for resource exploration.
Australia also forged ahead with its push to strengthen critical mineral supply chains for its own industries and for the benefit of its partners with the federal government in Canberra releasing guidelines for “new grants to help develop Australia’s critical minerals sector, support downstream processing, create jobs across regional Australia and support global efforts to achieve net-zero” in early 2023.
The Canadian government, which had launched the Canadian Critical Minerals Strategy in December of 2022 backed by up to $3.8 billion in funding, announced details on the implementation and a first round of funding for new critical minerals programs and initiatives.
The Minerals Security Partnership (MSP), an initiative to bolster critical mineral supply chains while ensuring that “critical minerals are produced, processed and recycled in a manner that supports the ability of countries to realize the full economic development benefit of their geological endowments” took its collaboration to the next level by formalizing and agreeing on guiding principles for how the MSP will develop projects around the world with local value-add, sustainability, and high environmental, social, and governance (ESG) standards front and center. Meetings were followed by bilateral trade agreements as well as U.S.-EU discussions to launch a “critical minerals club.”
And stateside, U.S. President Joe Biden once more invoked Title III of the Defense Production Act (DPA) to strengthen critical mineral supply chains – and in doing so, effectively created a new category of Critical Materials – which ARPN has dubbed the Defense Criticals (see our post here). His February 27, 2023 Presidential Determination was followed by another DPA Presidential Determination (2023-5), designating airbreathing engines, advanced avionics navigation and guidance systems, and hypersonic systems and their “constituent materials” as priority DPA materials.
We posited in early 2023, that against the backdrop of surging demand and geopolitical volatility, we could expect to see more active government involvement in the critical minerals sector – and the coming months certainly delivered.
China Tightens Export Ratches as West Gets Reality Check on Decoupling
In July, China upped the ante in the Tech Wars by placing export restrictions on gallium and germanium – key components of semiconductor, defense and solar technologies. Beijing’s move was considered a “show of force ahead of economic talks between two rivals that increasingly set trade rules to achieve technological dominance,” according to the Wall Street Journal. As Alastair Neill, board member of the Critical Minerals Institute, told the Wall Street Journal: “If you don’t send high-end chips to China, China will respond by not sending you the high-performance elements you need for those chips.”
While some chipmakers downplayed fears of shortages, former Chinese Vice Commerce Minister Wei Jianguo’s comments to the China Daily newspaper “that countries should brace for more should they continue to pressure China, describing the controls as a ‘well-thought-out heavy punch’ and ‘just a start,’” prompted fears that more export curbs on critical materials, including on rare earths could be on the menu, and analysts called for big investments on the part of the United States and its partners to reduce their reliance on China.
Later that month, China announced a new set of export controls — this one on certain drones and drone-related equipment — to “safeguard national security interests,” only to follow it up with restrictions on graphite later in October. The decision to require export permits for certain graphite products was seen by analysts as a play “to control supplies of critical minerals in response to challenges over its global manufacturing dominance.”
China’s moves also underscored the massive challenge of decoupling for Western nations. In the case of graphite, which is the largest component by volume and mass in EV batteries and has been deemed the “unsung player” in the battery supply chain, China “is on track to retain over 85% of the global anode market share by the end of the decade,” according to Benchmark Mineral Intelligence.
While momentum to decouple was continuing to build, a new report by the consultancy Rhodium Group and the German Mercator Institute for China Studies (MERICS) pointed to the real-world challenges of decoupling from China from a European perspective:
European national governments and the EU may have worked to devise policies to strengthen domestic and regional critical mineral supply chains, but Chinese companies continued to invest in the region: Overall, Chinese foreign direct investment in the EU and the UK dropped, but, as Mary Hui writes for Quartz, “for the first time since 2008, the value of Chinese greenfield investments have exceeded that of M&A flows,” and was “mainly driven by several large-scale initiatives by Chinese battery giants to build factories in Germany, Hungary, the UK, and France.”
As the Rhodium report determined, “Europe has become a key part of China’s global electric vehicle expansions,” adding that “[b]attery investments are now the mainstay of Chinese investment in Europe.” The emerging conundrum is not lost on EU policy makers, who resolved to formally “recalibrate” the EU’s China policy, with an emphasis on “de-risking” by screening investments more closely and resorting to more robust export controls.
The West’s resolve to break China’s dominance may be building, but as Christina Lu wrote for Foreign Policy:
“(…) there are more questions than answers about how these efforts will pan out. As lawmakers continue to hammer out new agreements behind closed doors, it remains unclear how they align with global trading rules and what this momentum means for countries that lack free trade agreements with the United States. Engineering supply chains isn’t as simple as finding new mines, either; it involves an entire ecosystem of processing, refining, and manufacturing capabilities.”
The Rise of Geopolitical Swing States
As the West continued to assess its options against the backdrop of an increasingly assertive China leveraging its advantage in the Tech Wars, a new class of states have entered the spotlight in the context of the global geopolitical realignment – the “geopolitical swing states,” as Goldman Sachs’s Jared Cohen suggested this June, and their role could grow exponentially in the coming years.
Cohen defines a geopolitical swing state as “critical to the world economy and balance of power” but without “the capacity by themselves to drive the global agenda, at least for now.” He adds that “as long as the tensions between the U.S. and China continue to get worse, they will have outsized abilities to navigate geopolitical competition and take advantage of and influence it.”
According to Cohen, there are four – often overlapping — categories of geopolitical swing states:
- Countries with a competitive advantage in a critical aspect of global supply chains;
- Countries with a unique ability to make themselves attractive for nearshoring, offshoring, or friend-shoring;
- Countries with a disproportionate amount of capital and willingness to deploy it around the world in pursuit of strategic objectives; and
- Countries with developed economies and leaders who have global visions that they pursue within certain constraints.
As Cohen concluded, “[t]he rise of geopolitical swing states may balance the great powers and help stabilize the global order. Their interest-based decision-making could be a source of consistency in uncertain times. Or their newfound prominence may increase global instability by putting more actors and variables in play. But even if today’s world is not yet multipolar, a rising group of countries recognize that they can determine the course of world events. Those geopolitical swing states are aware that their power may be unsustainable, or event fleeting and they are determined to take advantage of the current window of opportunity.”
While the rise of the geopolitical swing states has business implications for multinational businesses and investors, these trendlines are have real-world implications for U.S. stakeholders from a policy perspective, and, in the critical mineral resource realm, underscore the importance of a comprehensive all-of-the-above approach to securing critical mineral resource supply chains.
Critical Mineral Focus Grows, New Players Emerge
Meanwhile, real world challenges associated with securing supplies for the metals and minerals underpinning 21st Century technology prompted more countries to emphasize supply chain security and define their own sets of metals and minerals critical to their own domestic industries.
Perhaps most consequential in light of the fact that it has overtaken China as the most populous country in the world this year, may be India’s push onto the global critical minerals stage. Following the release of a comprehensive Critical Minerals List, consisting of 30 metals and minerals deemed critical for India’s ambition for cleaner technologies in electronics, telecommunications, transport and defense, in the summer, along with a pledge to encourage public and private investment in exploration, mining and processing to secure the country’s critical mineral supply chains, India announced its consideration of an export ban on four key metals – lithium, beryllium, niobium and tantalum – in a move to ensure the country’s self-sufficiency in crucial minerals for India’s national security and technological advancements. In late November, the Indian government announced its first ever auction of critical mineral leases for commercial mining by the private sector.
But another player has arrived – perhaps in another indication that we have indeed entered the Post-Petro Tech Metals Age: Saudi Arabia.
As part of his Grand Vision 2030 plan to transform the Saudi economy, the oil giant’s Crown Prince Mohammad bin Salman is preparing to invest billions of dollars into the mining sector to harness the potential of more than $1.3 trillion worth of metals and minerals the Saudi government claims are buried in the kingdom, and effectively make mining the so-called “third pillar” of the economy next to oil and gas. Rumors of a deal with Tesla have been swirling, even though they have been denied by Elon Musk himself.
Analysts say that while the crown prince’s plans are met with plenty of skepticism, even if only partially successful, implications of Saudi Arabia turning into a metals hub could have far-reaching implications not just for metals mining, but geopolitics and trade, especially if the other component of the crown prince’s plan to buy up resources from elsewhere to be refined and processed at new facilities in Saudi Arabia.
As Bloomberg reports, the kingdom’s long game is to position itself as an alternative supplier to China for the metals and minerals underpinning the green energy shift and 21st Century technologies. The news outlet cites Khalid Al Mudaifer, vice minister of mining affairs, who said in an interview that “Saudi Arabia needs more than one engine to achieve its vision,” and that to transform itself into an economic and industrial powerhouse, the kingdom needs minerals.
Global Tensions Mount – Gaza and Tech War Confrontation
If the watershed moment for geopolitics in 2022 was the Russian invasion of Ukraine, this year’s defining moment was probably the Hamas-led incursion from the Gaza Strip into the Gaza envelope of neighboring Israeli territory on October 7, 2023, which initiated the ongoing Israel-Hamas War. Throwing a wrench into arguably efforts to de-escalate tensions in the Middle East, the conflict threatens domestic stability in many states in the region and has exposed the deep-rooted nature of obstacles to normalization.
While China has claimed neutrality and has called on both sides to exercise restraint, China, while criticizing Israel’s massive bombardment of Gaza in response to the incursion, but never officially condemned the initial attack started by Hamas. Experts believe that the Israel-Hamas war is viewed in Beijing as a convenient opportunity to gain ground against the United States in the battle for influence in the Arab world, as tensions between China and the West, and specifically the U.S. continue to mount.
As Hot Wars Rage, All Arrows Point to Escalation of Tech War
With hot wars raging in Central Europe and the Middle East, the question is, do we have bandwidth to focus on a war that’s metaphorical – for now, at least: The Tech War pitting China versus the U.S.?
While the recent meeting between U.S. President Joe Biden and his Chinese counterpart Xi Jinping on the sidelines of the APEC summit in San Francisco last month was seen by some as a step towards alleviating tension between the two global powers, U.S. Secretary of Commerce Gina Raimondo’s latest speech and subsequent comments at the Reagan National Defense Forum in California left no doubt that, at least on the trade front, all arrows very much point to confrontation.
The Secretary did not mince words, stating: “(…) make no mistake about it, China’s not our friend, and we need to be eyes wide open about the extent of that threat. I am ready to win, and I’m ready to do that with all of you, but it’s time to open our aperture and challenge the way we’ve done business in every way if we’re going to meet the threat China poses.”
When asked if there were other U.S. origin products or types of technologies that the U.S. Government was “looking at in a similar fashion right now” – i.e. would consider imposing export controls on, she said:
“Absolutely, in biotechnology, AI models, AI products, cloud computing, supercomputing. So short answer is yes.”
Unsurprisingly, China has already voiced criticism of Raimondo’s comments with officials lamenting the “Cold War mentality” on the part of the U.S. which showed its “desire for hegemony.”
Diplomatic efforts to improve ties between the countries in the wake of Raimondo’s remarks may continue but to the keen observer it appears all but certain at this point that we’ll be seeing a further escalation of the Tech Wars in the coming months, with the export control ratchet playing a central role.
The question is, which critical mineral will find itself in the crosshairs this time.
Turning the Same Stone Twice
With more confrontation on the horizon, there are some silver linings, thankfully. Not only are domestic policy stakeholders more attuned to the critical minerals challenge and are working on policy solutions including permitting reform, the mining industry itself has been stepping up its game.
In their quest to secure critical mineral supply chains against the backdrop of surging demand and rising geopolitical pressures, stakeholders are leaving no stone unturned – quite literally — and have in fact begun turning the same stone twice, harnessing the materials science revolution to unlock minerals that were previously bound up, and extracting minerals from unconventional sources such as rock piles and tailings.
In 2023, ARPN featured several of these initiatives:
- The “Atlas of Australian Mine Waste”, an Australian government mapping project of sites containing mine waste with reprocessing potential,
- The USGS’s solicitation for proposals for FY2023 grants to collect data on mine waste using funds from the Bipartisan Infrastructure Act in the context of the Earth Mapping Resources Initiative (Earth MRI), in the context of which more than $5.8 million will go towards mapping critical-mineral resources in Alaska in partnership with the Alaska Division of Geological & Geophysical Surveys. Minerals included in the context of USGS and the Alaska Division of Geological & Geophysical Survey research projects Alaska are: Arsenic, antimony, bismuth, cobalt, graphite, indium, platinum group metals, rare earth elements, tantalum, tellurium and tin.
- Australia-based New Century Resources current operation of the largest tailings retreatment operation at its zinc tailings retreatment operation in Queensland,
- A Reuters lists of six major projects outside of China aimed at extracting the critical minerals from waste or byproducts, including Iluka Resources Ltd’s and VHM Ltd’s operations in Australia, Rainbow Rare Earths Ltd’s endeavor in northeast South Africa, Swedish state-owned LKAB’s plans to extract REEs from two existing mines, and two U.S. operations:
- Phoenix Tailings, a privately held U.S. company plans to launch operations using waste materials from a former iron ore mine in New York using its own processing technology.
- U.S. Energy Fuels, originally focused on uranium production, started acquiring monazite, a byproduct of mineral sands, to extract REEs with plans to open its own separation plant by 2024.
- Global miner Rio Tinto’s production of tellurium at its Kennecott copper operation in Utah, where roughly 20 tons of the material are generated from by-product streams generated during the copper refining process; and the company’s partnership with CR Minerals Co. LLC to extract a material called pozzolans from Rio Tinto’s Boron California operations, which can be substituted for or combined with cement to decarbonization construction materials. Meanwhile, in Canada, the miner is producing scandium from titanium waste, becoming the first North American producer of scandium in the process.
- The October 2023 Fortune Minerals/Rio Tinto announcement of a collaboration to develop technology to improve the recovery of cobalt and bismuth from co-product streams of minerals recovered at Rio Tinto’s Kennecott smelter in Utah which will be processed at Fortune Minerals’s smelter operations.
As the materials science revolution marches on and continues to unlock new technologies allowing for the safe and commercially viable recovery of mine waste tailings, harnessing this – to date largely untapped — potential could play a significant role in a comprehensive “all-of-the-above” approach to bolstering critical mineral supply chains.
U.S. Supply Chain Initiative, Plan to Release National Defense Industrial Strategy
On the policy front, the Biden Administration recently announced new steps to bolster supply chains for U.S. domestic industries. One highly anticipated component with implications for the critical minerals sector is the Department of Defense’s release of a first ever National Defense Industrial Strategy (NDIS), which, according to the White House, “will guide engagement, policy development, and investment in the defense industrial base over the next three to five years.”
2023 – Metals in Focus
From Battery Criticals to Defense Criticals, and Copper’s Rising Star
In keeping with last year’s trend lines, ARPN-dubbed Battery Criticals – Lithium, Cobalt, Graphite, Nickel and Manganese – continued to dominate the critical minerals discourse (along with the Rare Earths) against the backdrop of surging needs of the green energy transition.
See our coverage of these materials here.
As previously outlined, however, President Biden’s invocation of Title III of the DPA effectively created a new category of Critical Materials – which ARPN has dubbed the Defense Criticals – a whopping list of 35:
See our post with more context here.
Meanwhile, one mainstay metal’s star has continued to rise in 2023 – Copper.
Copper prices may have dropped, however demand for the metal, which is not only a key mainstay metal, but also an indispensable component in green energy technology, is expected to increase drastically to keep pace with the material requirements of the global push towards net zero carbon emissions.
According to the Financial Times, its growing application in this field will result “in it being dubbed the ‘metal of electrification’, with forecasts that it will double to a 50mn tonne market by 2035 compared with 2021 levels, according to S&P Global, which predicts a ‘chronic gap’ between supply and demand.”
While U.S. import reliance for copper hovered around 30 to 35 percent in the 2010s, that number has gone up to more than 40 percent in the 2020s, according to the USGS Mineral Commodity Summaries.
Miners are pointing out that a confluence of complex permitting timelines, rising inflation and the fact that the commodity is “harder to find in high quantities in the ground” may have led to a situation “where it’s likely there won’t be enough copper to meet decarbonization goals in the next few decades.”
While Copper is a key component of technology in the context of decarbonization efforts, the material was left off the overall U.S. government’s critical minerals list. Congressional efforts to change this may have not succeeded in 2023, but the Department of Energy designated the material a critical material as part of its 2023 Critical Materials Assessment, further raising the material’s clout.
Meanwhile, on December 16, 2023, the Australian government released an update to its list of critical minerals deemed essential to the nation’s energy and security requirements, and also released a new Strategic Materials List of commodities with plans to scope the creation of Strategic Critical Minerals Hubs around the country. Bearing testimony to the material’s strategic and economic value, Copper made the Australian Government’s Strategic Materials list (along with nickel, aluminum, phosphorus, tin and zinc), a list that identifies commodities which, while not currently considered at risk of supply chain disruption, are essential for the energy transition and the Australian government “will continue supporting the extraction and processing of these minerals and monitoring their market developments.”
It remains to be seen whether the Australian developments will provide a further boost to U.S. domestic efforts to afford copper Critical Mineral status, but it is clear that with or without government action, the material’s star is not going to fade anytime soon.
Time may tell whether 2023 was in fact a watershed year in the critical minerals realm. It appears that we have indeed entered to Post-Petro Tech Age, and it was certainly a year in which tensions between two key global players – the U.S. and China – have reached new heights. Whether or not China overplays its hand in the long run is almost beside the point, as, in the short- to medium term its chokehold in the sector is strong, and we know that the country does not shy away from confrontation. To not fall behind in the Tech War, decoupling the West’s critical mineral supply chains from China must be the name of the game.
As the West continues this quest, a wary realization appears to have emerged — that the need to coordinate Critical Mineral policy coexists with the growing awareness that even increased supply of essential metals and minerals may not keep pace with rising demand.
How the U.S. and its allies navigate this new resource relationship – multiplied across several score of Critical Minerals – may be one of the principal commercial, diplomatic and national security challenges of this century, and will be a guiding question for 2024.