At ARPN, we have long highlighted the importance of geopolitics in mineral resource policy.  Recent supply chain shocks, growing trade tensions and ever-increasing critical mineral needs have brought the geopolitical challenges associated countries’ and stakeholders’ efforts to build resilient and diversified supply chains into focus.

A new piece by the Office of Applied Innovation at Goldman Sachs illustrates the challenge.

Against the backdrop of growing demand for critical minerals in the context of the green energy transition, national defense and other high-tech applications, Goldman Sachs’s analysts expect geopolitical competition to increase, with the rise of resource nationalism and a five-fold increase in export controls on critical minerals, many imposed by China but also other countries, a sign of what’s to come.

The authors believe that “future success in diversifying and building more resilient global supply chains will require investments and partnerships by the public and private sectors at every step of the value chain, streamlined project development, cooperation with likeminded partners, a global engagement strategy, and training a new generation of mining professionals.” 

While acknowledging the difficulty of “derisking” or “diversifying” critical mineral supply chains in light of related costs and complexities, they argue that the right strategy – effectively a comprehensive all-of-the-above approach that includes strategic investments and the application of advancements made in the context of the materials science revolution – can approach this goal “in a way that reduces geopolitical risks, creates new market opportunities, and provides a more sustainable path to the new, green economy.”  

The piece stresses the importance of a holistic supply chain approach, and emphasizes the need to focus efforts to diversify critical mineral supply chains not only on the upstream supply side, but also on the downstream segments of the value chain – i.e. processing and manufacturing — where China continues to have the upper hand.

Goldman Sachs suggests the following six steps towards building “more diverse and resilient critical mineral supply chains”:

1. Investing in every step of the value chain.  The authors highlight the need for significant financial investment to bolster critical mineral supply chains, arguing that while vehicles like the United States’ Inflation Reduction Act (IRA) and the EU’s Critical Raw Materials Act (CRMA) are promising government initiatives, more “strategies that offer incentives across the supply chain (…) and priorities where supplies are most likely to fall short of demand” are needed.
2. Streamlining project development.  Permitting reform will not only be key to building an “ex-China”supply chain for critical minerals, say the authors, it could also help “reduce the industry’s carbon footprint and advance sustainability goals.”
3. Strengthening cooperation with like-minded partners. Pointing to recent bi-and multilateral agreements on critical minerals, including the Mineral Security Partnership of which the U.S. is a founding member, the authors argue that economic competition can in fact increase international cooperation with like-minded partners.
4. Competing Globally. The authors argue that countries will have to seek out new opportunities and partnership abroad – and while China has a leg up by having pursued a comprehensive investment strategy to “secure and control a global and domestic supply” for decades, there are opportunities for other countries to develop alternatives.
5. Training a new generation of mineral professionals. Goldman Sachs stresses the importance of human capital, urging a recommitment to closing what has become a “talent deficit” with mining and mining engineering programs at American colleges and universities having seen a steady decline.
6. Focusing on R&D. Technological innovations hold great potential, and new production techniques, new sources, new extraction methods, and substitution methos – many of which ARPN has featured in recent months — may hold the key for significant changes to critical mineral supply chain security.

They close by arguing that “building a more diverse and resilient critical mineral supply chain would come at short-term and medium-term economic costs. But it would also reduce the potential for critical minerals to be used for geopolitical advantage and provide long-term security, environmental, and economic gains. In geopolitics, as in economics, there are rarely clear solutions. More often, there are complex choices and tradeoffs.”

The time to act, however, is now — because “waiting for a geopolitical shock to make necessary investments in more diverse, resilient supply chains is not a strategy that will serve countries, companies, or consumers well.” 

Here’s hoping the message resonates in Washington, D.C. and beyond.