Stressing that the “The United States depends on unreliable foreign sources for many of the strategic and critical materials necessary for the clean energy,” specifically for EV and large capacity batteries, U.S. President Joe Biden invoked the Defense Production Act (DPA) to accelerate buildout of domestic supply chains via Presidential Determination earlier this month.
While, as Reuter columnist Andy Home points out, “the initial impact is likely to be incremental rather than revolutionary,” observers and stakeholders hope that it will “will likely oil the wheels of domestic mining and refining” by “funding easy wins” and “low hanging fruit,” as Simon Moores, Managing Director of Benchmark Mineral Intelligence phrased it, and will set the stage for subsequent additional steps to support domestic mining and processing projects.
Russia’s recent invasion of Ukraine, and rising resource nationalism in various parts of the world, have raised the stakes for U.S. mineral resource security, as we have highlighted in several posts – but of course, as Home points out “’unreliable foreign sources’ is usually diplomatic code for China, when it comes to strategic metals.”
And while price surges for raw materials for EV and other automobile parts such as palladium, nickel, and aluminum in the wake of Russia’s war on Ukraine have certainly “open[ed] up new potential mineral hostilities and underlines the need for greater self-sufficiency,” Chinese “EV manufacturers grapple with rising raw material costs, shrinking margins,” as Tyler Durden reports for ZeroHedge – which will only add fuel to the fire as the global race for battery materials kicks into high gear. Already, some observers are warning that China may attempt to exploit the current global focus on Ukraine to further bolster its critical mineral assets.
Meanwhile, automakers have begun securing their own supply chains, with Tesla leading the pack having signed several deals for nickel over the past few months in anticipation of a looming supply challenge. Followers of ARPN may recall his public direct plea to mining executives to “please mine more nickel” stating that his company would give them a “giant contract for a long period of time” if they mined nickel efficiently and in an environmentally sensitive way.” Other EV manufacturers “are left scrambling,” as ZeroHedge’s Durden writes.
As such, the Defense Production invocation can and should be seen as, in the words of Reuters’s Home, “a federal government accelerator for a domestic battery metals supply chain that is still in its infancy” – but Homes believes that “[t]he real significance of invoking the DPA […] is that it elevates battery metals to the top of the U.S. critical materials supply list.”
Concludes Home invoking a “Back to the Future” theme:
“Industrial metals moved out of the geopolitical limelight after the 1970s, when successive oil shocks rocked the global economy.
President Biden’s lithium echo of Truman’s [1952] steel warning [-- "Our national security and our chances for peace depend on our defense production, (and) our defense production depends on steel"--] tells you they’re rapidly returning to centre stage.”
