The package included funding for tax credits and rebates for consumers buying electric vehicles, installing solar panels or making other energy-efficiency upgrades to their homes, including, a credit of $4,000 for lower-and middle-income individuals purchasing used EVs, and up to $7,500 tax credits for EVs.  These represented a renewal of the existing $7,500 electric vehicle Federal tax credit starting in January of 2023, carrying it through until the end of 2032.

However – and of considerable interest for followers of ARPN — a new requirement is that qualified cars must be assembled in North America, and adhere to mandated “escalating levels of critical minerals to be sourced from the U.S. or a country with a free-trade agreement with the U.S.”

Said provision was hailed by some as key to addressing “emerging energy security vulnerabilities before they are intractable crises,” but the law’s vague terms left some of the United States’ partners scratching their heads wondering what these provisions meant for them.

A flurry of activity has followed, including the European Union’s response to the United States’ IRA in March of this year: the just-dropped Critical Raw Materials Act (CRMA) paired with sister legislation, the Net Zero Industry Act (NZIA), which aims to support investment in manufacturing capacity in ‘net zero emissions’ technologies in Europe.

(Read ARPN’s discussion of the EU’s response to the IRA here.)

Only days later, the United States Trade Representative Katherine Tai and Japan’s Ambassador to the United States, Tomita Koji, signed a critical minerals agreement (“Agreement Between the Government of Japan and the Government of the United States of America on Strengthening Critical Minerals Supply Chains”) which builds on the 2019 U.S.-Japan Trade Agreement and seeks to strengthen and diversify critical minerals supply chains and promote the adoption of electric vehicle battery technologies.

According to the Biden Administration, “in particular, the Agreement memorializes the shared commitment of the United States and Japan with respect to the critical minerals sector to facilitate trade, promote fair competition and market-oriented conditions for trade in critical minerals, advance robust labor and environmental standards, and cooperate in efforts to ensure secure, transparent, sustainable, and equitable critical minerals supply chains.”

Observers believe that the trade agreement may allow Japanese companies greater access to the Inflation Reduction Act’s clean vehicle credit.

Write lawyers Thomas G. Allen, Stephen M. Anstey and Kurtis G. Anderson in an Insights Alert for international law firm Kilpatrick Townsend:

“While the United States has established comprehensive free trade agreements with over twenty countries, Japan is not one of them. This has left Japan (a critical U.S. ally and the second largest democratic economy in the world) and its companies ineligible to benefit from valuable IRA tax incentives. The new trade agreement on critical minerals may change that.

The IRA does not define several key terms concerning tax credits, including what constitutes a ‘free trade agreement.’ The Biden Administration hopes that this new self-styled free trade agreement on critical minerals will suffice. The free trade agreement is specifically tailored to create eligibility, explicitly circumventing ‘prohibitions or restrictions on imports of critical minerals,’ including lithium, graphite, manganese, cobalt, and nickel, from and between the two countries.” 

Allen, Anstey and Anderson suggest that if this strategy is successful, the Biden Administration would use this tailored trade deal as a template for ongoing negotiations with the European Union currently excluded on the same basis from the benefits of the clean vehicle credit, and news reports seemed to confirm this suggestion.

With the Department of the Treasury and the Internal Revenue Service having released new guidance to clarify how manufacturers may satisfy the critical mineral and battery component requirements of the IRS’s clean vehicle tax credit on March 31, negotiators may have received more clarity and be able to reach agreement soon.

Treasury’s Notice of Proposed Rulemaking (NPRM) proposes:

“a three-step process for determining the percentage of the value of the critical minerals in a battery that contribute toward meeting critical minerals requirement: 1) determine procurement chains, 2) identify qualifying critical minerals, and 3) calculate qualifying critical mineral content. 

a set of principles for identifying the set of countries with which the United States has a free trade agreement in effect, since this term is not defined in statute. This term could include newly negotiated critical minerals agreements.”

These agreements, according to the proposed notice which is filed for public inspection and will be published in the Federal Register on April 17, 2023, “would be considered based on whether they reduce or eliminate trade barriers on a preferential basis, commit the parties to refrain from imposing new trade barriers, establish high-standard disciplines in key areas affecting trade, and reduce or eliminate restrictions on exports or commit the parties to refrain from imposing such restrictions on exports, including for trade in the critical minerals contained in electric vehicle batteries.”

The IRS has announced that an updated list of electric vehicles that qualify for the tax credit after April 17, will be available on April 18.

But while tax guidance can clarify, it can also sharpen points of contention.  U.S. Senator Joe Manchin has expressed his displeasure with the proposed notice arguing that ignores “the purpose of the law which is to bring manufacturing back to America and ensure we have reliable and secure supply chains,” and has threatened legal action against Treasury.

ARPN will be following the developments surrounding the proposed notice and related trade negotiations closely.   Consider it a sign of the rising importance of Critical Minerals:  Tax, trade and investment policies are being mobilized to incentivize Critical Mineral development.  ARPN will watch closely for progress as well as unintended consequences as these policies take shape.

The post Inflation Reduction Act Spurs Trade Agreement Between USA and Japan, Deal with EU Likely to Follow Soon as Treasury Releases Clarifying Guidance appeared first on American Resources Policy Network.

Leaders must “pivot to the new reality provoked by the Covid-19 pandemic, the war in Ukraine, the growth of extreme inequalities and aggressive Russian and Chinese autocracies,” writes the NYT.

In the critical mineral realm, these recent events have served as a catalyst for the new “Great Game,” which the geopolitics of mineral resource supply had triggered and which had gained momentum with the adoption of the Paris agreement in 2015 which in turn had committed countries to significantly reduce greenhouse gas emissions and transition to renewables.

Over the course of the last few months, awareness of the importance of securing critical mineral supply chains and decoupling form adversaries, i.e. China, continued to grow against the backdrop of an increasingly volatile geopolitical landscape and mounting environmental pressures.  While, as the New York Times suggests, “the shape of an alternative international system is unclear,” we are seeing first steps towards a realignment as nations around the world rethink and reorganize their critical mineral supply chains.  

ARPN has discussed several developments involving the United States and key allies like Canada and Australia, but Asian nations, too, are taking steps to diversify their supply chains away from China, particularly in the rare earths (REE) space.

In spite of having signed a deal with Vietnam on rare earth development after having experienced the ramifications of an over-reliance on Chinese minerals first hand with the 2010 rare earths standoff between China and Japan, Japan’s domestic rare earth production has remained limited to date, with more than two thirds of the country’s rare earth supplies coming from China.  With demand surging in the context of growing EV markets, Japan is looking to “curb excessive dependence on specific countries, carry forward next-generation semiconductor development and manufacturing bases, secure stable supply for critical goods including rare earth, and promote capital reinforcement of private enterprises with critical goods and technologies,” according to a government strategy paper cited by Qu4tro Strategies this month.

To do so, Tokyo inked a critical mineral agreement with Australia in October of 2022 and Japan’s Organization for Metals and Energy Security (Jogmec) is working with private companies to take control of its holding in a joint venture to develop dysprosium-terbium heavy rare earths in Namibia.  Jogmec is also an investor in Australia-based Lynas Rare Earths’s latest push to increase its meaning capacity in Western Australia.

Vietnam, not traditionally known as a global mining powerhouse, is looking to become a key player in the global REE supply chain.  While, as Qu4tro Strategies outlines, North Korea is believed to be home to the world’s largest rare earth deposits, Vietnam’s large REE reserves are more viable as an alternative to Chinese REEs, as North Korea’s political situation and economic sanctions prevent the country from becoming a link in the global supply chain.

While exploration in Vietnam has so far been unable to tap into the country’s considerable mineral potential, that may be changing. As a fast-growing economy, Vietnam is attracting companies trying to find new regional bases as U.S.-Chinese trade tensions rise, and post-Covid supply chains remain strained.

In recent months, several countries have entered into partnership agreements with bot the Vietnamese Government and private companies to establish “an integrated supply chain for rare earths and other critical minerals.”

Qu4tro Strategies cites the December signing of an agreement between Vietnam and South Korea to jointly explore and develop core minerals including rare earths in Vietnam, as well as a partnership between Australia Strategic Minerals (ASM) and Vietnam Rare Earths for “long-term supply of rare earths to provide feedstock for ASM’s Korean Metals Plant.” 

Trade between Canada and Vietnam is reported to increase under the Trans-Pacific Partnership free trade agreement, and the Canadian province of Saskatchewan is actively exploring the “potential for the countries to collaborate on green energy, including sustainable mining and rare earth elements.”

The Middle East, traditionally known as a leader in the fossil fuel realm, could also emerge as a critical mineral player in a newly realigned world, particularly as nations like Saudi Arabia incentivize investment towards creating integrated value chains, with the country currently processing 145 exploration license applications sent in by foreign companies, according to a new report issued by the Future Minerals Forum in Collaboration with the Payne Institute for Public Policy Colorado School of Mines.

Meanwhile, Africa’s resource richness is well known. As the Future Minerals Forum’s report outlines, trade tensions with China as well as Russia’s ongoing war have triggered many Western countries to turn to Africa for investment opportunities in critical mineral supply during 2022.

Discussions between Minerals Security Partnership countries (see our post here) have begun involving African regions as targets for potential partnerships, and five countries — the DRC, Mozambique, Namibia, Tanzania and Zambia – have initiated conversations on development opportunities to “diversify and bolster critical mineral supply chains while lowering trade reliance with China and Russia” during the UN General Assembly conference in September 2022.  Deals made at the U.S.-Africa Leaders Summit, which included a commitment of over $150 million dollars into Zambia’s mining sector to develop copper and Cobalt, are a case in point.

However, as the authors of the Future Minerals Forum’s report point out, of Africa, “the scale and pace of investment inflows will largely hinge on the restructuring of domestic governance and policy changes.”

As leaders continue to deliberate on the new realities of the post-Cold War world order in Davos this week, we will continue our focus on the realignment underway in the minerals sector and will zero in on the West in our second post this week.

The post A New Critical Minerals World Order? — A Look at the Post-Cold War Realignment in the Wake of Covid, War in Ukraine and Geopolitical and Economic Tension appeared first on American Resources Policy Network.

Reports the Straits Times:

“Australia will step up production of rare earths and other militarily sensitive ‘tech metals’, the country’s defence minister said Monday (Aug 12), as doubts grow over the reliability of Chinese supplies.”

According to Ms. Linda Reynolds, Australia has “at least 40 per cent of the known reserves of tech metals, whether it’s lithium, cobalt, nickel, graphite but also most of the rare earths that our current technology and our lifestyles today relies on (…)” — deposits that “could safeguard supplies for allies including the United States and Britain.”  

The possibility of Western allies obtaining metals from Australia had been discussed “at length at recent Australia-US ministerial consultations and in discussions with British counterparts,” reports the Straits Times.

The news comes on the heels of an Australian mining company striking a deal with a German industrial company to develop Rare Earths in northern Australia after terminating a previous agreement with a Chinese firm.

Earlier last month, a partnership between the U.S., Australia and Japan which includes the setting up of a separation facility in the United States was announced.

The next few weeks an months will be instrumental in the “tech war” — the competition to see which country will dominate the 21st Century Technology Age. As the U.S. begins to take steps aimed at breaking free from the shackles of Chinese Rare Earths dominance, it is encouraging to see this increased level of cooperation with important strategic allies like Australia. 

The post As Tech War Deepens Over REEs, Australia Steps Up to the Plate appeared first on American Resources Policy Network.

The most recent case in point – a partnership with Australia and Japan – includes the setting up of a separation facility in the U.S.

Reports the International Business Times: 

“The Australia-based corporation Lynas, which is the world’s only major rare earth producer outside China, has joined hands with Texas-based Blue Line to set up the facility in Texas. Operations are expected to begin in 2021.”

The move ties into the overall context of an unfolding tech war that has been lurking underneath the surface of the trade confrontation between the United States and China.  

As ARPN’s principal Dan McGroarty recently explained: “The specter of using rare earths as an economic weapon makes clear that the current trade war between the U.S. and China is in fact one front in a larger tech war – a competition to see which country will dominate the 21st Century Technology Age.” 

With brinkmanship looming large on the REE and critical minerals front, the United States is finally taking  steps to adapt to the realities of 21st Century resource policies. 

In early June, the U.S. Department of Commerce released its Critical Minerals Strategy calling for “unprecedented action to ensure that the United States will not be cut off from these vital materials.” 

Also in June, the US state department and its Canadian and Australian counterparts announced that to ensure future supplies of materials needed for new energy technologies, including lithium, copper and cobalt, they will cooperate and “work to help countries discover and understand their mineral resources.”

And after weeks of Chinese threats that it could cut off U.S. access to the essential technology materials known as rare earths, the Trump Administration in July took a counter-action of its own invoking the 69-year old Defense Production Act to spur domestic REE development.

The latest partnership announcement between the United States, Australia and Japan ties into this overall realization that the materials science revolution requires a more comprehensive, strategic and concerted approach to resource policy than that pursued by the United States to date.

All of this is good news.  However, after decades of failing to prioritize mineral resource policy, big questions remain for the U.S., as McGroarty recently outlined:

“How will China respond to the new U.S. action?  And how quickly can the U.S. close the rare earths gap — with production today at zero, even as known U.S. rare earth resources exist — before China loses its leverage over materials the U.S. Government has deemed critical to ‘the national economy and national security?’”

The post U.S. Steps Up International Cooperation to Counter Chinese Resource Threat appeared first on American Resources Policy Network.

As Nikkei Asian Review reports, state-owned Japan Oil, Gas and Metals National Corp. (JOGMEC) has cancelled a joint exploration contract for a tungsten mine in Australia, and chemical Showa Denko has announced plans to dissolve its China-based rare-earth magnet alloy-manufacturing and –selling subsidiary Baotou Show Rare Earth High-Tech New Material.

The Japanese retreat is providing China, which is also putting out feelers regarding acquiring bankrupt American REE producer Molycorp after Japanese companies declined, with yet another opening to tighten its grip on the rare metals market.

Says Rurika Imahashi, Nikkei staff writer:

“Slowly but surely the market is being forged into an oligopoly. More than 100 rare-earth producers in China will be consolidated by June, leaving 90% of global supply in the hands of a mere six companies. Similar moves are also afoot in the antimony and other rare metals markets.”

Imahashi’s observation regarding the consequences is spot on:

“Concerns over supply may be waning due to falling prices, but stable supply could be at risk in the medium and long term.”

Meanwhile, the United States appears to be dozing off again on the critical minerals front. While the USGS recently released a study showing that the U.S. reliance on foreign imports has increased significantly over the past 30 years, Congress has failed to pass legislation to facilitate exploration and development of domestic mineral resources for several years in a row.  Instead, like Buzz Lightyear — and in a sad commentary on the burdensome permitting process on the patch of Earth called the United States —  American lawmakers decided to look To Infinity and Beyond!, passing legislation allowing for the commercial extraction of minerals and other materials, including water from the moon and asteroids.

The post As Japan Retreats, US Dozes Off Again On Critical Minerals appeared first on American Resources Policy Network.

The latest one of these deals, struck by the Nipponese Oil, Gas and Metals National Corporation’s (JOGMEC) in late October with local Kazakh authorities to jointly explore for rare earths in the Karaganda and Kostanay regions, solidifies Japan’s foothold in the resource-rich Central Asian nation.

Policy makers in the U.S. – which is no stranger to import dependencies for critical mineral resources – should take note.  Commodity prices may have cooled in recent years, and manufacturers are increasingly looking to substitution and recycling, but these are no silver bullets to alleviate supply shortages, particularly as demand for tech minerals will likely continue to soar.

Meanwhile, the global resource wars are continuing to heat up before our very own eyes.   Japan may have learned its lesson the hard way, when China cut off its REE exports to Japan in 2010. It is now approaching its mineral supply issues strategically, with a long-term vision in mind, and is not only looking to Kazakhstan, but has also signed a partnership agreement with India to explore stakes in deep-sea mining.

Whether or not we may one day see OPEC-style coordination between China, Russia and Kazakhstan on global REE supply, as some fear, the United States, would be well-advised to join Japan in formulating a long-term critical mineral resource strategy – the stakes are too high, and the nature of mining and challenges associated with it are just not conducive to improvising policies on the fly.

The post Japan Pursuing Long-Term Critical Mineral Strategy in Kazakhstan appeared first on American Resources Policy Network.

That question and more is answered in a new report co-authored by ARPN Expert Simon Moores LINK and his colleagues at Industrial Minerals Data.

As Simon writes:

“Does Elon Musk really know where Tesla Motors’ battery grade graphite comes from?

The chances are no, and neither do the sellers as the spotlight intensifies on the sourcing of critical minerals and metals that will fuel the new age battery economy

Tesla Motors’ CEO Elon Musk was forced to defend the company’s sourcing of graphite used in its electric vehicle (EV) batteries following a Bloomberg article in February linking the company to controversial graphite mining in China.

The link between Tesla – the US’ most high profile electric vehicle (EV) manufacturer – and environmentally damaging practices as far upstream as the mine seems harsh but is becoming unavoidable for large public companies.

In reaction to the story, Musk took to Twitter to explain that the company’s graphite was sourced in Japan and was mined on a “clean way”. But that didn’t really tell the whole story.

In fact, Japan does not operate any graphite mines. It sources all of its product from China.”

Read the full article @ data.indmin.com/Tesla

The post Does Elon Musk Know Where His Giga-Metals Will Come From? appeared first on American Resources Policy Network.

In an ongoing reaction to China’s restrictive mineral policies, countries are expanding their efforts to look for alternative supplies of sought-after commodities. Case in point is Japan, which in recent months has inked cooperative agreements with a number of other nations including India and Vietnam. Its most recent effort is focused on what is better known as a primary vacation destination for some – Jamaica.

According to the Associated Press, a team of Japanese researchers has found what they consider highly viable concentrations of Rare Earth Elements in Jamaica’s red mud. Nippon Light Metal Company Limited, the Tokyp-based aluminum company to commission the research, has “put up US $3 million for a pilot project that could result in Jamaica earning billions in foreign exchange.”

As the Jamaica Observer reports, the Jamaica Environment Trust (JET) has given “tentative support” to the pilot project, which was announced by Jamaica’s government last week.

As the global race for resources heats up and we’re seeing new players entering the stage, it is encouraging to see at least parts of the United States government take steps towards addressing our mineral resource supply challenges, as the Department of Energy with the launch of its new critical materials research hub. With the second term of the Obama Administration beginning this week, we’ll hopefully see a more forceful and coherent approach to this issue, which has yet to receive the attention it deserves.

The post New year, new players in the REE game? appeared first on American Resources Policy Network.

Against the backdrop of mounting tensions in the territorial dispute between Japan and China over the Senkaku/Diaoyu Islands, Japan has recently been stepping up its efforts to diversify the sources of its mineral resource supply.

Japan-based Sumitomo Corporation will import Rare Earths from Kazakhstan, according to the website Finance GreenWatch. With the backing of the Japanese government, which will also provide financial support, the company has formed a joint venture called Summit Atom Rare Earth Company LLP (SARECO) with Kazakhstan’s National Atomic Company Kazatoprom. Established in May 2010, the joint venture completed construction and opened its first factory earlier this month.

Sources expect that roughly 1,500 tons of REEs will enter Japan per year, which accounts for 7.5 percent of annual demand, which currently is about 20,000 tons.

Heavily dependent on especially heavy REEs from China, the Japanese government started negotiations including Australia and India, after China temporarily suspended exports to the country in 2010. The flare-up of territorial tensions in the East China Sea has provided new impetus for Japan to “lessen the diplomatic pressure China is able to exert due to its possession of natural resources.”

As the East China Sea, Africa, the Arctic, and other parts of the world increasingly turn into geopolitical battlefields of the global resource wars, the big question is: What (if any) is the United States’ mineral resource strategy? Hopefully the issue will be addressed and resolved after the dust of the Presidential elections has settled – our manufacturing base depends on it.

The post Japan continues to diversify its REE suppliers with imports from Kazakhstan appeared first on American Resources Policy Network.

In a three-part interview series with Metal Miner, American Resources principal Daniel McGroarty discusses resource nationalism, the role of China in global resource wars and lessons for the United States’ mineral resource strategy against the backdrop of the East China Sea territorial dispute between China and Japan over a tiny group of islands, with outsized importance in terms of seabed rights.

Outlining the takeaway for U.S. policy as it relates to domestic rare earth mineral/resource policies, McGroarty argues:

“I do believe there is an impact on the US – the question is, to what extent? What form does that impact take? Can we affect it in a positive way? From a security standpoint, we have a treaty relationship with Japan that requires us to come to their defense and will guarantee that our policymakers will watch this closely. Longer-term, it reminds us that resources will be fought over (metaphorically and hopefully not militarily) and can be used as a policy tool. This conflict should give us pause to develop [the United States'] own strategic rare earth resources. We need to cover our own dependencies.”

Click here to read part one, part two, and part three of the interview.

The post Interview: Putting the Chinese-Japanese island dispute into perspective appeared first on American Resources Policy Network.