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To counter Chinese ambitions, McGroarty calls for policy makers to consider restoring a strategic aluminum stockpile to keep our remaining handful of smelters from shutting down — because “[when the COVID-induced recession gives way to national economic recovery, we’ll need an American aluminum industry – not only for the metal it makes, but for the jobs and GDP it generates as well.”

Don’t Let COVID-19 Kill American Industry: Bring Back the Aluminum Strategic Stockpile

by Daniel McGroarty
RealClearDefense, March 31, 2020

Coronavirus kills more than just people. While the world is reeling from the health impact, our "force quit" shutdown of the U.S. economy threatens the longer-term prospects of entire industries. But hard as it is to believe right now, the COVID-19 pandemic will one day recede. The question is whether United States' inaction will let this public health crisis spiral into a strategic resource crisis as well, allowing China to grab global market share. The crucial aluminum sector is a case in point.

Aluminum is economically ubiquitous, from cans, cars and consumer durables, to airplanes and building construction. While the U.S. and other Western nations suffer a swift deceleration in all sectors, China – first to be struck by the virus and first to recover –is revving up its dormant economy, unconstrained by free-market laws of supply and demand. According to Reuters, while “Aluminum prices in China are at the lowest since 2016 and many mills are believed to be in deficit,” Chinese aluminum production is considerably higher for January and February, as smelters “run flat out,” fattening surpluses on the Shanghai Futures Exchange and sinking aluminum prices. 

Even day-to-day shifts in Chinese production prove the point.  Recent announcements suggest China will take more than 300,000 tons of smelting capacity out of production.  Sounds like a large number until you consider that it's less than 1% of China's aluminum capacity of 36 million tons.  The London Metal Exchange shrugged off the news, and aluminum slumped further.

Classical economics teaches us markets are inherently self-correcting, and that China will only hurt itself if it continues full-out production.

A prediction:  China will take that pain because it has its eyes on the geopolitical prize. If post-pandemic China wants to put people back to work, juice its economy – and, just maybe, drive U.S. and other competitors out of the aluminum sector entirely – it will maintain full production, regardless of the price impact. COVID has not erased the “great game” for global economic dominance – to the contrary, it has accelerated it.  A new report from strategic consultancy Horizon Advisory suggests that leveraging China’s COVID recovery is government policy, quoting a statement made by a director with China’s Ministry of Civil Affairs just days after China “flattened its curve”:  "It is possible to turn the crisis into an opportunity - to increase the trust and the dependence of all countries around the world of 'Made in China.’”

In response, U.S. policymakers must go back to the future, studying the lessons of the last superpower conflict, when the strategic value of metals and minerals – and the dangers of foreign dominance – were well understood. From World War II through the Cold War, our government kept aluminum reserves in the National Defense Stockpile. But that ended with the implosion of the Soviet Union; we sold off the stockpile, and global supply chains took hold. By the turn of this century, the U.S. became a net importer of aluminum, along with scores of other metals and minerals once deemed strategic.

The stockpile may be gone, but aluminum remains critical to "the national economy and national security," in the words of the U.S. Geological Survey. The Survey added aluminum to its Critical Minerals List of 35 minerals and metals in 2018, and it's one of only nine "criticals” essential to all industrial sectors, including defense. And on the subject of defense, open-source Pentagon reports list aluminum as the number one defense material by volume, while an unclassified defense study cites a shortage of aluminum as “hav[ing] already caused some kind of significant weapon system production delay for DoD.”

For all its strategic importance, American aluminum has been left to weather harsh market forces on its own. After reaching two million metric tons per year as recently as a decade ago, U.S. aluminum production fell 60% in 2015. With the sector shrinking from 13 smelters in 2013 to just 5 smelters today, production in 2019 was 1.1 million tons, barely half the former amount. Now comes the COVID-19 gut-punch, and a roller-coaster plunge into recession.

It’s harsh but true: America’s crisis is China’s opportunity. There’s a cruel asymmetry here. China’s state-owned enterprises can incur deficits without consequence, as the government plays the long game for market dominance. Without U.S. Government backing and at the mercy of Chinese market-flooding, U.S. aluminum producers could well be driven into bankruptcy and out of business.

The United States has allies in its effort to keep the aluminum industry alive. Canada, recognized by statute as part of the U.S. Defense Industrial Base, has been integrated into our supply chain since the eve of World War II. And now that U.S. law has expanded the National Technology Industrial Base to include Australia – which hosts four aluminum smelters, down from six in the last decade – any policy adopted by the U.S. should recognize this “aluminum alliance” as a national security asset. We have an opportunity to coordinate aluminum stockpile purchases, or even maintain an allied aluminum stockpile.

As the pandemic spreads, U.S. policymakers are discussing direct cash payments to every woman, man and child, and low- or no-interest loans to keep small businesses alive. In the same spirit, the President and Congress should consider restoring a strategic aluminum stockpile to keep our remaining handful of smelters from shutting down. When the COVID-induced recession gives way to national economic recovery, we’ll need an American aluminum industry – not only for the metal it makes but for the jobs and GDP it generates as well.

In a new piece for RealClear Politics, ARPN’s Daniel McGroarty argues that while the current focus on ending the dangerous dependence on critical medicines needed to combat COVID-19 is more than warranted, Congress and the administration “may want to broaden their focus from critical medicines to critical minerals.”

Read his full piece here:

Getting Critical Medicines From China Is Risky. Critical Minerals, Too
by Daniel McGroarty
RealClearPolitics, March 17, 2020

The rapid spread of the coronavirus is doing more than claim an alarming number of new human hosts – it is burning through decades of bureaucratic inertia and plain inattention as the American economic ecosystem has become dangerously dependent on China.

Take the current focus on critical medicines needed to combat COVID-19, everything from basic drugs to treat the virus to N95 surgical masks to guard against its spread. We’re learning that these essentials come from China, ground zero for the virus itself. At the White House and on Capitol Hill – at least those corners of the Congress that have not gone into self-quarantine – efforts are now underway to jump-start U.S. production and end this dangerous dependence.

It’s an urgent issue demanding immediate attention. But while Congress and the president are at it, they may want to broaden their focus from critical medicines to critical minerals.

Just as critical medicines from China are integrated across the U.S. health care spectrum, so too are critical minerals imbedded into all aspects of the U.S. supply chains for energy, high-tech manufacturing – and most worryingly, national defense. Everything, in short, that makes 21st century America the economic and military power that it is.

In terms of critical minerals vulnerability, the main focus is on rare earths, a group of 17 elements on the periodic table that are essential to everything from laptops and LEDs, electric vehicle drive trains and wind turbines to smartphones and smart bombs. But the potential exposure of the U.S. is far wider than just the rare earths. Is the U.S. interested in developing new fleets of electric vehicles – not to mention all manner of aerospace applications from miniaturized drones to private-sector space vehicles? We’ll need graphite and manganese, two materials for which the U.S. is presently 100% import-dependent. The world’s leading producer in both cases? China. Do we want to see the U.S. develop next-generation high-speed computer chips? We’ll need gallium and arsenic, two more 100%-dependent materials. The world’s leading producer? Once again – China.

As for national security, 16 of the 35 materials on the U.S. Government Critical Minerals Mist appear in a non-classified defense study as “hav[ing] already caused some kind of significant weapon system production delay for DoD.” For 22 of the 35 listed minerals, China is either the leading global producer, leading U.S. supplier – or both.

It would be one thing if the U.S. had no geological presence of these metals and minerals, and was consigned to be an importer from supplier nations. But the U.S. is resource rich, geologically blessed with known resources of at least 32 of the 35 critical minerals, with deposits of heavy rare earths in Texas, graphite in Alaska, manganese in Arizona – not to mention innovative methods to recycle and recover critical minerals from spent EV batteries, rhenium for jet fighter engines from copper waste in Utah, and all manner of critical minerals from coal waste in Pennsylvania that’s never been considered as a potential supply source.

As these examples suggest, American innovation is ready to “work the problem” of critical minerals supply. What remains is for American political leadership to make U.S. production a priority, and align public policy with a pressing national need. With the coronavirus reaching pandemic proportions, America’s political leaders are right to focus on the dangers of reliance on a Chinese supply chain for critical medicines. But the danger is no less real when it comes to reliance on Chinese supply of the critical minerals that power our 21st century tech economy – along with every advanced weapons platform in the American arsenal.

The U.S. Senate may cast a vote on a comprehensive bipartisan energy legislation package that contains provisions pertaining to critical mineral resource supply issues as early as this week.   S. 2657 is the legislative vehicle for the American Energy Innovation Act (AEIA), a package consisting of several pieces of legislation, which reflect the “priorities of [...]

Last week, USGS released its 43rd Mineral Commodity Summaries – a comprehensive snapshot of global mineral production which gives us a window into where we stand as a nation in terms of mineral resource security.   Perhaps most instructive from an ARPN perspective is the chart depicting U.S. Net Import Reliance — previously casually referred to as [...]

The long-awaited October 2018 Defense Industrial Base Report served as a wake-up call for many regarding our nation’s military readiness and associated mineral resource supply challenges. The “first governmentwide assessment of America’s manufacturing and military industrial base (…)” identified almost three hundred areas of concern with regards to material supply chains and sounded the alarm [...]

As followers of ARPN know, the United States has finally embarked on a quest to look for ways to reduce its over-reliance on foreign mineral resources, and in doing so, reduce the leverage it has yielded to nations like China over our national security. In a new series for the Capital Research Center, geologist and [...]

It’s official. On January 9, 2020, the governments of the United States and Canada formally announced the finalization of the Canada-U.S. Joint Action Plan on Critical Minerals Collaboration to advance “our mutual interest in securing supply chains for the critical minerals needed for important manufacturing sectors, including communication technology, aerospace and defence, and clean technology.” [...]

Against the backdrop of the recently-signed memorandum of understanding (MOU) for critical materials between the U.S. and Canada to reduce U.S. reliance on Chinese Rare Earths supplies, and the FY 2020 National Defense Authorization Act (NDAA) which  “has expanded its recognition of the critical importance of the rare earths” … “2020 looks to be a [...]

We realize that New Year’s resolutions are somewhat controversial.  Some say, they‘re not worth the paper they’re written on – but we feel that whether or not we implement all of them, they offer a good opportunity to both step back to reflect and set goals as we look at the big picture ahead. And that [...]

We blinked, and 2020 is knocking on our doors. It’s been a busy year on many levels, and mineral resource policy is no exception. So without further ado, here’s our ARPN Year in Review. Where we began: In last year’s annual recap, we had labeled 2018 as a year of incremental progress, which had set [...]