Set to deliver his first State of the Union address today (March 1, 2022), U.S. President Joe Biden will likely have to tweak the outline for his speech considering the latest developments in Ukraine, and the resulting implications for the United States, and the world as a whole.
Against growing tensions, we recently highlighted mounting geopolitical pressures on critical mineral resource supply, but Russian President Vladimir Putin’s decision to launch a full-scale invasion of Ukraine on February 24, 2022, has raised the stakes, and infused a new level of urgency into the push to secure supply chains for mineral resources and other critical goods.
The invasion of Ukraine has serious implications for European energy supply. While some nations may attempt to fill a supply gap through inner European imports, Norway, Europe’s second largest oil supplier, is already operating at maximum capacity and won’t be able to replace any missing supplies from Russia. Even before Russia launched its attack on February 24, Germany decided to halt the Nord Stream 2 gas pipeline certification process.
In a region that has already shut down old coal-fired power plants and partially phased out nuclear energy, the geopolitical challenges of mineral resource supply, the scope of which reaches far beyond natural gas (even if that is at the center of the current tensions), are becoming increasingly clear and pressing.
However, the ramifications of Russia’s actions stretch beyond well beyond natural gas, and well beyond Europe.
Russia is a global supplier of rare earth minerals and heavy metals including titanium, a key metal for the aerospace sector. With Ukraine supplying more than 90% of U.S. semiconductor-grade neon, and about 35% of palladium, a material used in catalytic converters as well as semiconductors, being sourced from Russia, the current eruption of war in Ukraine could send the global chip industry, which is already seeing its supply chains severely strained, into turmoil.
The Russian invasion of Ukraine and its ramifications is hardly the only geopolitical challenge placing a strain on critical mineral supply chains.
As we pointed out earlier, a wave of resource nationalism is sweeping Central and South America, which is home to several key metals and minerals underpinning 21st century technology, and specifically the green energy transition.
Furthermore, the fact that China, a key player in the resource war theater which has long understood the strategic importance of critical minerals and dominates the supply chains for many metals and minerals, has entered into a “no limits” strategic partnership with Russia places an additional strain on U.S. (and broader Western) mineral resource security. Already, according to Oilprice.com writer Tsvetana Paraskova, “while the U.S. is working in working groups, China and Russia are moving in African countries rich in mineral resources to gain access to their reserves in legislations with low environmental standards, cheap labor, and few regulations.” Closer relations between the two global powers may intensify their activities in Africa, further complicating the resource challenge for the West.
Meanwhile, material pressures on critical mineral supply will continue to soar against the backdrop of the global push towards net zero carbon, which will require massive amounts of the metals and minerals underpinning the technology supporting the shift to renewables.
The stakes were already high before the Russian invasion of Ukraine, but they just got higher.
Against this backdrop, it is encouraging that the Biden Administration reaffirmed its commitment to securing U.S. critical mineral supply chains last week.
During a virtual event held on Tuesday, February 22, 2022 with Administration and state partners, industry executives, community representatives and California Governor Gavin Newsom, the Biden Administration and participating stakeholders announced several “major investments in domestic production of key critical minerals and materials, ensuring these resources benefit the community, and creating good-paying, union jobs in sustainable production.”
These investments include:
- A $35 million award by the Department of Defense’s Industrial Base Analysis and Sustainment program to MP Materials to “separate and process heavy rare earth elements at its facility in Mountain Pass, California, establishing a full end-to-end domestic permanent magnet supply chain.” To complement this award, MP Materials plans to invest an additional $700 million into the project.
- Plans by Berkshire Hathaway Energy Renewables (BHE Renewables) to break ground on a demonstration facility in California “to test the commercial viability of their sustainable lithium extraction process from geothermal brine.”
- A pilot program by Redwood Materials in partnership with automakers Ford and Volvo for “collection and recycling of end-of-life lithium-ion batteries at its Nevada based facilities to extract lithium, cobalt, nickel, and graphite.”
- A $140 million DOE demonstration project, funded by the Bipartisan Infrastructure Law (BIL) to “recover rare earth elements and critical minerals from coal ash and other mine waste.”
- A $3 billion investment, also funded by this year’s congressional infrastructure package, into “refining battery materials such as lithium, cobalt, nickel, and graphite, and battery recycling facilities.”
In conjunction with the event, the Department of Interior released its updated Federal list of critical minerals, which includes 15 more minerals than the first critical minerals list released in 2018, including nickel and zinc (see our coverage on the draft updated list here). Subsequently, the Administration “will direct agencies to prioritize the production and processing of minerals necessary to produce key products like batteries, semiconductors, and permanent magnets, consistent with our strong environmental, social and labor principles.”
The Department of Interior (DOI) also announced the establishment of an Interagency Working Group (IWG) to lead an Administration effort on legislative and regulatory reform of mine permitting and oversight and submit recommendations to this effect by November of this year. The IWG has released a “list of Biden-Harris Administration fundamental principles for mining reform to promote responsible mining under strong social, environmental, and labor standards,” (which we will review in a separate post).
[See the Administration’s Fact Sheet for the Supply Chain Strategy Announcements here]
With the release of its 100-Day Supply Chain Report last summer, the Biden Administration had initially embraced the “all-of-the-above” approach to critical mineral resource security we and many others had called for.
This approach was set to encompass both investing in “sustainable production, refining, and recycling capacity domestically,” AND working to “diversify supply chains away from adversarial nations and sources with unacceptable environmental and labor standards” by cooperating closely with allies and partners.
However, since then, the overall plan to date appeared more geared towards “rely[ing] on ally countries to supply the bulk of the metals needed to build electric vehicles and focus[ing] on processing them domestically into battery parts, [as] part of a strategy designed to placate environmentalists.”
Last week’s announcements are encouraging, as they point to a broader realization that while “friend-shoring” and recycling are important components of a comprehensive critical mineral resource policy, as ARPN has long argued, a true “all-of-the-above” approach for a competitive United States of America warrants a stronger emphasis on domestic sourcing and production as part of the overall strategy.
The events unfolding in Ukraine underscore the urgency to act swiftly and comprehensively to secure our critical minerals supply chains. The mining industry, as we have outlined on several occasions, is ready to meet the challenge and is leveraging the materials science revolution to sustainable develop and process the materials underpinning 21st century technology.
President Biden’s State of the Union Address should reflect these new realities, and policy makers and other stakeholders must take comprehensive action to ensure that supply chain security can move from rhetoric to reality.
