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With the long-awaited Defense Industrial Base report finally released, analysts have begun pouring over the 146-pages-long document.

One of the first issue experts to offer commentary in a national publication was Jeff Green, president of Washington, D.C.-based government relations firm J.A. Green & Company, and member of the ARPN panel of experts.

Writing for Defense News, Green argues that the report – which outlines nearly 300 supply chain vulnerabilities and sounds the alarm on China represents a significant and growing risk to the supply of materials deemed strategic and critical to U.S. national security – provides “a significant step forward for the U.S. military.”

His rationale for this assessment is that the report “goes further than the Department of Defense has traditionally wanted to venture.”

Says Green:

“The report clearly identifies five macro factors that have weakened the defense industrial base, including the ‘Industrial Policies of Competitor Nations.’ Though U.S. manufacturing has declined for a variety of reasons, the report notes that China, in particular, has used illegal means to dominate critical global markets. These means include espionage, evasion of export controls, market access restrictions, subsidies, and dumping, among others.”

He adds:

“Fortunately, the report goes beyond problem identification to provide a Blueprint for Action. Though many of these are locked away in a classified annex to the report, the White House has provided some clues as to how it wishes to proceed.”

Green offers some commentary on some of the report’s suggested fixes, which, among others, include the creation of a “national industrial policy to support national security efforts,” an area in which he says the “Department of Defense has been deficient for decades.” Other suggestions include the encouraged “use of direct funding to target and support critical sectors of the supply chain,” as well as educational efforts and outreach to global allies.

The bottom line, according to Green, is:

“The Department of Defense and the White House have started an important conversation by doing the research to bring these problems to the foreground, and it will be up to Congress next year to provide the resources and legislation necessary to cure them.”

ARPN followers know it’s the elephant in the room. China. Already vast and resource-rich, the country has demonstrated an insatiable appetite for the world’s mineral resources and has pursued an aggressive strategy to gain access to the materials needed to meet the world’s largest population’s resource needs.

Thus, it comes as no surprise that China is also jockeying for “Pole Position,” as Robert Blain writes for China Daily Asia Weekly in what may well be one of the hottest commodity fields of our time: EV battery technology and the electric car industry as a whole – from “vehicle manufacturing and sales to battery technology.” 

Demand for EV technology is surging in China, as electric and hybrid car sales are growing at a rapid pace. A recent survey cited in the article found that while Germany took the top spot for EV technology, China is emerging as an industry leader: “In industry, China has confirmed its pole position. The reason for this is the continuing rapid growth of the market, more than 90 percent of which is supplied with lithium- ion cells produced locally. This high local share is partly due to the fact that subsidies only apply where there is local value creation.”

 The article heavily quotes our friend and member of the ARPN panel of experts, Simon Moores of Benchmark Minerals. Moores believes that “there is no doubt China is the global hub for the electric vehicle revolution.” 

He is quoted as saying: 

“China is producing its own electric vehicles, but the export vehicles are first likely to be Western-branded ones. For example, [US electric-car maker] Tesla is looking to make batteries in a new Gigafactory near Shanghai. This is the first step in making Tesla EVs in China for the domestic and export market. VW [Volkswagen] has similar grand plan.”

Ultimately, according to Moores, “for foreign car manufacturers to have power in the EV market, ‘they need to be in China.’”

The article continues: 

“China is also very well positioned in the production and export of lithium-ion batteries typically used to power electric cars. ‘China already produces the bulk of lithium-ion battery cathode material,’ said Moores. ‘It is locking up the lithium supply chain through Ganfeng Lithium and to a lesser extent Tianqi Lithium. It controls cobalt supply and battery grade refining and produces the vast majority of the world’s graphite anode material.’ Nearly 70 percent of all new lithium-ion battery capacity being built in new megafactory structures will be based in China, he said.”

In a recent commentary for Investor’s Business Daily, our very own Dan McGroarty pointed out China’s prominent role as a lead supplier of the world’s mineral resources :

“As noted by the U.S. Geological Survey, we are 100% import-dependent for 20 metals and minerals, and 50% or more dependent for another 50. As for where the U.S. obtains these metals and minerals it needs but does not mine, China is a leading supplier of 28 of the 50 — up from 21 just a year ago.”

Time for policy makers to take note. We may not always be able to significantly reduce our reliance on foreign mineral resources, but where possible, we should work towards that goal – particularly when our lead suppliers are not the most reliable trading partners. We have several opportunities to do so – some of which McGroarty outlined in his commentary.  

China will certainly remain a force to be reckoned with in the mineral resource realm, but Lithium and Lithium-ion technology represent a great case in point for comprehensive mining policy reform in the United States.

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