We’re not overly surprised, though, to see that there are no major changes compared to last year. The number of metals and minerals for which we are 100% import-dependent may have dropped slightly (from 21 to 18), but a closer look into the footnotes of our favorite chart reveals that for two of the minerals previously included in the 100% import-reliance category, Quartz Chrystal (Industrial) and Thallium USGS states that “not enough information is available to calculate the exact percentage of import dependence” this year. For the third mineral to drop out of the 100% import-reliance category, Yttrium, numbers have dropped to 95% with production in California’s Mountain Pass mine having restarted in the first quarter of 2018. That is a positive development, but hardly a seismic shift in domestic resource development.

The number of metals and minerals for which we are 50% or more than 50% import-dependent is still at 49, down one from 50 – but with the above-referenced caveat of lacking data for two materials – so it may in fact be higher than last year.

The fact of the matter is that U.S net import reliance remains too high, and has – with implications for our economy and national security. USGS’s comparing its net import reliance numbers with the Department of the Interior’s Critical Minerals List, released for the first time in 2017, underscores this:

14 of the 18 mineral commodities with 100% net import reliance were considered “critical” by DOI. 15 of the 30 remaining mineral commodities with imports greater than 50 percent of annual consumption were also reflected on DOI’s list. Aluminum, listed at exactly 50 percent import-reliance on the 2019 Mineral Commodity Summaries, also has “critical mineral” status as per DOI.

Hopefully these findings provide fresh impetus for mineral resource policy reform, for which we saw incremental progress in 2018 – but are still awaiting further steps, including the release of the — by now long-overdue — report by the Department of Commerce subsequent to the 2017 presidential executive order on critical minerals outlining a “broader strategy” and recommending specific policy steps to implement it.

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Against this backdrop, it’s nice to see a little – albeit cautious – optimism spread around here and there. In this particular case, it’s coming via our neighbors to the North. According to the Canadian Government, officials are hopeful that the so-called Section 232 tariffs on aluminum and steel imposed by the Trump administration last year, which were in turn followed by retaliatory tariffs by Canada, are on the way out.

While government representatives have been cautioning that Canadian ratification of the USMCA, the new U.S.-Mexico-Canada trade deal to replace NAFTA struck in 2018 might be delayed if the “the situation with respect to steel and aluminum is not yet resolved,” David McNaughton, Canada’s ambassador to the United States, has expressed optimism that “we’ll get there in the next few weeks.”

As a Mercatus Center study showed late last year, the tariffs “appear to have been far more destructive to domestic industry than the administration anticipated.”

As a result, more than 45 groups representing a wide range of business sectors renewed their call for an end on the Section 232 tariffs in 2019 in a coalition letter sent to U.S. Secretary of Commerce Wilbur Ross and U.S. Trade Representative Robert Lighthizer in January, arguing that

“for many farmers, ranchers and manufacturers, the damage from the reciprocal trade actions in the steel dispute far outweighs any benefit that may accrue to them from the USMCA. The continued application of metal tariffs means ongoing economic hardship for U.S. companies that depend on imported steel and aluminum, but that are not exempted from these tariffs. Producers of agricultural and manufactured products that are highly dependent on the Canadian and Mexican markets are also suffering serious financial losses.”

Both from an economic and national security perspective, doing away with the tariffs would be beneficial to all parties involved. Followers of ARPN will recall last year’s Defense Industrial Base Report listing nearly 300 weak links in the U.S. defense supply chain and stating that “a key finding of this report is that China represents a significant and growing risk to the supply of materials deemed strategic and critical to U.S. national security.” This includes Aluminum.

When viewed in isolation and from the upstream end of the supply chain at the minesite, the U.S. is increasingly import-dependent for the aluminum it needs — and Canada, in the context of a long-standing integrated North American supply chain, has long been instrumental in helping the U.S. close the significant domestic production shortfall.

As ARPN’s Dan McGroarty has pointed out in a piece for The Hill:

“Particularly in the case of Canada, the U.S. tariffs ignore nearly 80 years of deep defense cooperation with our northern neighbor: Aluminum produced in Canadian smelters was central to the Allied war effort throughout World War II, during which the massive plant at Saguenay, Quebec supplied more than 40 percent of the Allies’ overall aluminum production. Today, Saguenay aluminum is on the U.S. tariff list.

With agreement on USMCA, it’s time to reaffirm the importance of an integrated U.S.-Canadian Defense Industrial Base. As the Government of Canada’s official comments on the 232 inquiry noted, ‘open aluminum trade with Canada benefits the U.S. economy and its national security.’ With aluminum on the U.S. Critical Minerals List, with the U.S. producing only 39 percent of the aluminum it uses each year and Russia and China among our leading suppliers, it makes no sense to slap a 10 percent aluminum tariff on Canada.”

Here’s hoping the Canadian government’s optimism is not misplaced.

The post Section 232 Tariffs on Aluminum and Steel on the Way Out? appeared first on American Resources Policy Network.

Bloomberg recently even argued that “Aluminum Is the Market to Watch Closely in 2019.” 

Included in the 2018 list of 35 minerals deemed critical to the United States national security and economy, aluminum is the No. 1 material by annual DoD usage, and “a shortage of aluminum metal was cited in a nonclassified defense study as having ‘already caused some kind of significant weapon system production delay for DoD.’” 

The U.S. is home to significant bauxite deposits, from which aluminum is sourced, but we import a significant percentage of the aluminum consumed domestically.  Unlike with other metals and minerals, however, this represents a marked decrease in geopolitical risk, as most of our aluminum imports are sourced from one of our closest trading partners, Canada, which accounted for 56% of total aluminum imports from 2013-2016.

While viewed in isolation and from the upstream end of the supply chain at the minesite, the U.S. is increasingly import-dependent for the aluminum it needs, but viewed in the context of an integrated North American supply chain between the United States and Canada, our neighbor to the North is helping the U.S. close a significant domestic production shortfall.

Thus, many were startled by the Administration’s decision earlier last year to impose trade tariffs on Canadian-made aluminum and steel under Section 232 of the 1962 Trade Expansion Act.

Followers of ARPN may recall that the USMCA, the new U.S.-Mexico-Canada trade deal to replace NAFTA struck in November 2018, had opened a window to drop these tariffs on steel and aluminum imports from Canada and Mexico, which stand in the way of a fully integrated North American defense supply chain and, particularly with regards to Canada, “ignore nearly 80 years of deep defense cooperation with our northern neighbor.”

Unfortunately, the provision remained intact in the November agreement, prompting more than 45 groups representing a wide range of business sectors to renew their call for an end on the Section 232 tariffs in 2019.  In a coalition letter sent to U.S. Secretary of Commerce Wilbur Ross and U.S. Trade Representative Robert Lighthizer last week, the signatories argue that

“for many farmers, ranchers and manufacturers, the damage from the reciprocal trade actions in the steel dispute far outweighs any benefit that may accrue to them from the USMCA. The continued application of metal tariffs means ongoing economic hardship for U.S. companies that depend on imported steel and aluminum, but that are not exempted from these tariffs. Producers of agricultural and manufactured products that are highly dependent on the Canadian and Mexican markets are also suffering serious financial losses.”  

Meanwhile, on Capitol Hill, a bipartisan group of lawmakers are preparing draft legislation to strip the Administration of the tool it used to impose the above-referenced tariffs, which it is considering to use to implement further duties on car and car part imports.  

According to Politico, the Bicameral Congressional Trade Authority Act, the draft bill’s working title, would strip the president of the unilateral power to “make a final determination on whether to levy import restrictions if a Commerce Department analysis determines that foreign imports are undermining U.S. economic interests in a way that poses a threat to national security,” by requiring congressional approval of any such tariffs proposed under Section 232.  If passed, the legislation would also require a retroactive vote to approve any tariffs imposed under Section 232 within the last four years — including the ones on aluminum and steel the USMCA negotiators failed to strike. 

With the tariffs removed, the November USMCA agreement could well become a “springboard to take the strategic North American alliance to a new level.”  

Here’s hoping Washington will not fail America.  

The post Metals in the Spotlight – Aluminum and the Intersection between Resource Policy and Trade appeared first on American Resources Policy Network.

Where we began. Unlike previous years, we started 2018 with an unexpected level of optimism on the resource policy front. Not only had USGS released a new study in December of 2017 entitled “Critical Minerals of the United States” which discusses 23 mineral commodities USGS deems critical to the United States’ national security and economic wellbeing, but the report had been followed by what we dubbed “an early Christmas present:” A new executive order directing the Secretary of the Interior to publish a list of critical minerals to be followed by a comprehensive report spearheaded by the Department of Commerce outlining a strategy to alleviate our over-reliance on foreign minerals.

At last, a list. The DOI List was published in February, with a public comment period running through March. ARPN’s Daniel McGroarty filed two sets of comments, the first identifying a group of “gateway” metals critical for defense applications but absent from the DOI List, and the second articulating the gateway/co-product relationships between metals and minerals on the DOI List. While the gateway metals did not make the cut, we considered the final list, released in May, a “great starting point” leaving the question of “how the U.S. Government can match policy to the priority of overcoming our Critical Minerals deficit.”

Unfortunately, to date, that question has not fully been answered, and the Secretary of Commerce’s report subsequent to the above-referenced Executive Order has yet to be released. But the stage has been set.

Progress was made on several other fronts:

• Public-private partnerships to advance R&D in materials science — which we have been featuring as part of our “Profiles of Progress series” — have yielded positive results and have been expanded to cover additional metals and minerals
• Awareness of the important inter-relationship of “Gateway Metals” and their “Co-Products,” which we highlighted in our April 2018 report is growing, and is becoming a part of the broader mineral resource policy conversation. See for example Ned Mamula’s and Ann Bridges’s just-released book “Groundbreaking! America’s New Quest for Mineral Independence.
• A just-outlined partnership agreement between Australia and the United States on critical minerals to foster mineral research and development cooperation between the two countries is a welcome development. It could also serve as a precursor to deepening and revitalizing the National Technology Industrial Base (NTIB), which, established in the 1990s to foster technology links between the U.S. and Canada, was expanded in 2016 to include Australia and the UK.
• And while there has not been a tangible result in terms of the formulation of a critical minerals strategy, another landmark study released this year has underscored the need for comprehensive reform, specifically from a national security perspective: The long-awaited Defense Industrial Base Review outlined nearly 300 supply chain vulnerabilities and sounded the alarm on China represents a significant and growing risk to the supply of materials deemed strategic and critical to U.S. national security. As one of the ARPN expert panel members phrased it: “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.”

Opportunities and upticks. In terms of trend lines, the rise of battery tech continues to dominate the agenda, as evidenced by the volume of posts on our blog covering this field. And, based on the analysis provided by our friends at Benchmark Mineral Intelligence we expect this development to continue in 2019.

We have also witnessed an uptick in activity on the trade front in 2018 with tariffs and trade agreements dominating the agenda.

• Chinese-U.S. tensions escalated in 2018 resulting in the imposition of various tariffs targeting the other nation. Initially included on a provisional list of tariffs to be imposed on Chinese goods released by the Office of the U.S. Trade Representative (USTR) earlier this summer, Rare Earth metals and their compounds were ultimately excluded from the final list of tariffs, underscoring the growing awareness of their strategic importance in the United States. Other omissions from the tariff lists give a window into strategic vulnerabilities.
• The U.S. Administration won agreement to replace NAFTA with the USMCA — the new U.S.-Mexico-Canada trade agreement in November. The talks had opened a window to drop the so-called Section 232 tariffs — named for a seldom-used section of the 1962 Trade Expansion Act — on steel and aluminum imports from Canada and Mexico, which stand in the way of a fully integrated North American defense supply chain and, particularly with regards to Canada “ignore nearly 80 years of deep defense cooperation with our northern neighbor.” Unfortunately, the provision remained intact in the November agreement, but, as ARPN’s Daniel McGroarty recently outlined in a piece for The Hill: “The opportunity is here, to use the momentum generated by the new USMCA agreement as a springboard to take the strategic North American alliance to a new level.”

Meanwhile, a glaring missed opportunity in 2018 has a silver lining:

Congressional conferees for the 2019 National Defense Authorization Act (NDAA) failed to retain key critical minerals provisions in the final conference report including the Amodei amendment ARPN followers will be familiar with. And in the one clause in the defense bill that does touch on metals and minerals – a section entitled “Prohibition on acquisition of sensitive materials from non-allied foreign nations” – while cobalt appears as a “sensitive material” (in the form of samarium-cobalt permanent magnets), the list of non-allied foreign nations from which the U.S. is not allowed to acquire the materials does not include DRC Congo.

However, the NDAA’s Section 873, “Prohibition on acquisition of sensitive materials from non-allied foreign nations,” amends Subchapter V of chapter 148 of title 10, U.S. Code by inserting section 2533c – which, among other things, effectively prevents the Pentagon from sourcing of Rare Earth Magnets from China. This is a potentially precedent-setting provision which Jeffery A. Green, president and founder of J. A. Green & Company and member of the ARPN panel of experts called “the single biggest legislative development in the rare earth sector since the 2010 Chinese embargo created an awareness of our military’s reliance on foreign rare earth materials.”

On the whole, 2018 stands for incremental progress on the mineral resource policy front. However, how we harness this progress in the coming months will decide how future generations will judge this year in the history books. The potential for meaningful reform is here and the stage is set. The stakes are too high to let this opportunity slip away.

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