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The West is getting serious about reducing its vulnerabilities against the backdrop of an increased threat of China weaponizing its control of critical materials supply chains.

As the Financial Times reports, the Minerals Security Partnership, convened by the U.S. in June of 2022 which encompasses 12 countries plus the European Union, is planning to release by the end of this year a shortlist of “some 15 projects culled from about 200 options,” according to Jose Fernandez, U.S. undersecretary for economic growth, energy and the environment.  Projects slated for MSP support will be located in various parts of the globe with some in Africa, “a couple” in Europe, a few in Latin America, and others in Asia, and will involve various segments of the supply chain, including mining, processing, and recycling.

According to Fernandez, being a victim of Chinese supply chain weaponization had prompted several countries to join the MSP in the first place, and with China continuing to ratchet up export restrictions in the face of skyrocketing demand for battery criticals — lithium, graphite, cobalt, nickel and manganese — and other materials underpinning the green energy shift and defense technology, the stakes are only getting higher.

As ARPN outlined, Beijing — known to have a penchant for tight state control over its resource sector, has been tightening its reins on its critical mineral supply chains even further in recent months, specifically for the country’s lithium battery supply chain, and has established a new state-owned group to serve as a “consolidated hub for the country’s iron ore trade,” with the mandate for “China Mineral Resources Group” covering mining, ore processing and trading.   The Chinese government is currently considering prohibiting exports of certain rare-earth magnet technology, adding fuel to the fire as tensions between China and the West soar.

As the Wests resolve to break China’s dominance over critical mineral supply chain mounts, Christina Lu, writing for Foreign Policy, cautions:

 “(…) 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.”

She adds:

“China spent decades building out its industry, and experts warn that wrestling new supply chains will be an expensive and arduous uphill battle that the United States is only just beginning.” 

However, every success story has a beginning — and agreement on a series of projects to support as a unified bloc can be an important piece of the puzzle if embedded in a comprehensive all-of-the-above approach to mineral resource security; one that covers both partnerships and alliances as well as supporting the domestic advancement of projects covering all aspects of the supply chain.

As ARPN stated before:

“Beijing will not slow down its global quest for resource dominance, and the critical mineral arms race will continue to heat up.  As such, it is good to see that stakeholders here and elsewhere are finally beginning to acknowledge this fact and are ‘gearing up for the long haul.’”

Chilean President Gabriel Boric’s April announcement of his plan to nationalize the country’s lithium industry to boost the Latin American nation’s industrial base and protect the environment may have prompted observers to declare his action a “shock move,” but as ARPN outlined in our last post, the “shock seems to result from global observers who are still learning to appreciate the importance of parts of the Periodic Table more critical to economic growth than ever before.” 

To those dialed into the issue, Boric’s move was hardly shocking. For one, he had made his plans known before he even assumed office. Furthermore, Boric’s announcement ties into an overall trend of countries resorting to resource nationalism, a trend which has certainly been noticeable in Latin America, an area with a historic penchant for nationalist policies, but also in other parts of the world.

Globally, recent steps taken by governments to nationalize their mineral resources have involved

• Myanmar, where the ethnic minority Wa militia has announced the suspension of work at mines in areas it controls beginning in August – a move that has led to a surge in tin prices with the Wa-controlled region estimated to account for over 70% of the country’s tin production;
• Indonesia, where the government has enacted an export ban on nickel and was exploring a ban on tin exports, with a scheduled bauxite export ban scheduled to take effect in June of this year, and more export bans for other materials to be announced in the coming years;
• Zimbabwe, where the government imposed a ban on unprocessed lithium in December of 2022, reportedly to prevent artisanal mining projects from taking the minerals across borders.

And then of course, as followers of ARPN well know, there is China, a country with traditionally tight state control over its resource sector. Beijing has been tightening its reins on its critical mineral supply chains, specifically for the country’s lithium battery supply chain, and has established a new state-owned group to serve as a “consolidated hub for the country’s iron ore trade,” with the mandate for “China Mineral Resources Group” covering mining, ore processing and trading.  As ARPN recently discussed, Beijing is currently considering prohibiting exports of certain rare-earth magnet technology, bringing back the specter of trade weaponization as tensions between China and the West soar.

But even in the Western world, government involvement in the critical minerals sector is on the rise.

While modern Western democracies are typically hesitant to embrace more state intervention in the critical minerals sector, many believe that in order to succeed, the United States and its allies need to learn “how to stomach more state intervention [themselves].” 

As Nabeel Mancheri, Secretary General of the Belgium-based Rare Earth Industry Association recently stated, “The EU is still reluctant to have state-oriented investment in the mining sector, but in certain cases, we have to do it.”

In the U.S., calls for a more robust industrial policy have also gotten louder – a recent piece in National Defense Magazine is a case in point – and recently passed legislation like the CHIPS and Science Act as well as the Inflation Reduction Act exemplify a more active government role in this sector as stakeholders increasingly acknowledge the importance of critical minerals to their nation’s economic wellbeing and national security.

As the Western world continues its quest to decouple from China, we can expect to see more active government involvement in the critical minerals sector.

For nations to prosper in this brave new world, the challenge will be to balance domestic and global policy approaches and public and private sector involvement with economic and security concerns to reflect today’s political and geopolitical realities.

The coronavirus pandemic and associated supply shocks, surging demand for critical minerals against the backdrop of an accelerating global push to net zero carbon emissions, as well as rising geopolitical tensions on the heels of Russia’s invasion of Ukraine and the looming tech war between China and the West have catapulted the issue of securing [...]

As the Wall Street Journal reports, a new OECD study has found that export restrictions on Critical Minerals have increased more than fivefold from January 2009 to December 2020, suggesting that “export restrictions may be playing a non-trivial role in international markets for critical raw materials, affecting availability and prices of these materials.”   While this significant shift [...]

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Followers of ARPN are well aware that China has long dominated the global mineral resource wars on the development and processing fronts, and the United States in recent months has taken a series of unprecedented steps in an effort to decouple U.S. critical mineral supply chains from China. A recent paper published by the American [...]

Geopolitical tensions, Russia’s war on Ukraine, rising resource nationalism in the Southern hemisphere – against the backdrop of ever-increasing stakes it appears that a new theater in the global resource wars has opened up: Cyber warfare, and more specifically, according to Defense One, “weaponized NIMBYism.” The U.S. Department of Defense has announced that it is investigating a recently-unearthed disinformation [...]