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Pentagon prioritizes critical minerals

Metal Tech News - January 15, 2024

Reshoring mineral supply chains lost to globalization is a key part of DOD National Defense Industrial Strategy

The urgency to onshore critical mineral supply chains in the United States has begun to shift away from a need to secure reliable sources of the minerals and metals needed to support the nation's economy and clean energy ambitions toward the need for these same mined commodities to defend American ideals and interests at home and abroad.

"Establishing a fully domestic mineral supply chain, stretching from mining operations to the final market, is essential for ensuring security for long-term competition with China," Joe Buccino, a retired U.S. Army colonel, inked in a Dec. 23 RealClear Defense column on the strategic importance of rare earth elements to the U.S. military.

Buccino's concerns reflect the growing realization that over the past 30 years of globalization China has gained market dominance in the mining and processing of critical minerals and metals, as the U.S. and other Western nations became increasingly willing to offshore the production of these materials essential to the economy.

"Over three decades the People's Republic of China became the global industrial powerhouse in many key areas – from shipbuilding to critical minerals to microelectronics – that vastly exceeds the capacity of not just the United States, but the combined output of our key European and Asian allies as well," the U.S. Department of Defense penned in its inaugural National Defense Industrial Strategy published on Jan. 11.

Reflecting on America's industrial might that helped the Allies overcome Axis powers during World War II and the U.S. to deter the Soviet Union during the Cold War, the Pentagon says America's defense is closely tied to its industriousness.

"The NDIS recognizes that America's economic security and national security are mutually reinforcing and, ultimately the nation's military strength cannot be untethered from our overall industrial strength. We must act now to build on recent progress and ensure we have the capacity to produce at speed and scale," said William LaPlante, undersecretary of defense for acquisition and sustainment.

This intrinsic link between America's economy and security, and the role the mining sector plays in both, is also an area of concern for the U.S. Department of Homeland Security.

"Our ability to maintain our way of life, our ability to maintain our position in the world, our ability to fund our physical security – all of these things are dependent on a strong and robust economy," Tim Moughon, director of field intelligence at the U.S. Department of Homeland Security, said during a Dec. 8 presentation at the American Exploration & Mining Association conference. "The mining sector is critically important in this respect."

America's rare earths myopia

Due in part to the U.S. military's "procurement holiday," a term given to an extended period of decreased DOD budgets and spending following the end of the Cold War, coupled with the globalization of the economy, America offshored much of its industrial capabilities to countries with much lower labor costs and environmental standards.

This includes the mining and refining of minerals and metals that are essential in some way to virtually every American supply chain.

As a result, the U.S. is more than 50% reliant on imports for 64 mined commodities, including 100% for 15 of them, according to the U.S. Geological Survey.

This list is dominated by the 50 mineral products that have been deemed critical "to the economic or national security of the U.S."

The USGS estimates that China is the world's top supplier of 30 out of the 50 minerals critical to the U.S. This list includes the 14 rare earth elements that are needed across an increasingly wide array of consumer, industrial, and military goods.

"Before the 1980s, the United States was the global leader in the rare earths market. Since then, increasing environmental regulations and high labor costs moved much of the production abroad," Buccino wrote.

By the early 2000s, China had established a near complete global monopoly over this group of 14 technology elements. While some capacity has been outside of China, the communist nation still controls roughly 65% of rare earths mining and nearly 90% of separation and processing.

"China's foresight here is as clear as the United States' myopia," Buccino penned in his article. "Should China, in the leadup to an invasion of Taiwan, block exports of rare earths or processing technology, this would cripple the U.S.'s ability to produce the kinds of ammo required to sustain a long-term high-tech war."

Restrictions not hypothetical

While rare earths are a prime example, they are not the only critical minerals for which America's shortsightedness has resulted in a heavy dependence on China for its supply.

This includes antimony for ammunition, night vision goggles, and grid-scale energy storage; germanium and gallium needed for computer chip manufacturing and fiber optics; graphite, the single largest ingredient in the current generation of lithium-ion batteries; and tungsten used in alloys for aerospace, durable tools, and armor shielding.

Department of Homeland security says China's critical minerals dominance can be used as an economic and geopolitical tool.

"With this monopoly power comes tremendous ability to target adversaries and to use this economic position to shape the behavior of other governments," Moughon said.

Over the past six months, China has demonstrated its ability and willingness to leverage its critical minerals position in an ongoing tech trade war with the West.

In August, the communist government began restricting exports of gallium and germanium, a pair of tech metals critical to computer chips and other technologies.

Market and geopolitical analysts believe that China's export restrictions of these two critical semiconductor metals were a counter to restrictions by the U.S. and other Western countries on the exports of chipmaking technologies and equipment to China.

The Chinese government then followed up on the restrictions of this pair of tech metals with curbs on the exports of graphite, which went into effect on Dec. 1.

China produces roughly 60% of the world's mined graphite as well as nearly 90% of the processing of this mined commodity into anode materials for the lithium batteries powering EVs and storing renewable energy.

"So, these aren't hypotheticals," said Moughon. "We see adversaries use monopolistic power very intentionally to advance their own national interests."

Broken energy supply chains

The strategic importance of critical minerals to the nation's economy and security is further elevated by the global transition to clean energy and transportation.

This shift to electric vehicles and low-carbon energy is powering enormous new demand for battery materials, copper, rare earths, and other critical minerals. The International Energy Agency has forecast that the market for more commonly used metals such as nickel will double over the course of two decades, and the demand for lesser-used mined commodities like graphite and lithium could rocket as much as 40 times between 2020 and 2040.

This massive demand growth is upsetting the balance that made globalization work and is spurring an every-nation-for-itself competition to secure minerals and metals essential to the low-carbon energy future.

The urgency to establish more mining and mineral processing in the West, especially for the materials needed for the energy transition, significantly increased during the COVID pandemic, an eye-opening event that drove home the idea that global supply chains work great, until they don't.

"The events of recent years dramatically exposed serious shortfalls in both domestic manufacturing and international supply chains," the Pentagon penned in its National Defense Industrial Strategy. "The COVID-19 crisis demonstrated America's near wholesale dependency on other nations for many products and materials crucial to modern life."

This is why the Biden White House is increasingly instructing the Pentagon to utilize the Defense Production Act to "secure American production of critical materials to bolster our clean energy economy by reducing our reliance on China and other countries for the minerals and materials that will power our clean energy future."

Tech War DPA

Established in 1950 as a tool to ensure the United States could secure goods needed for national security during the Cold War, the Defense Production Act provides American presidents with the authority to expedite and expand the supply of materials and services needed to promote the national defense.

While Biden's invocation of DPA to bolster American supplies of critical battery materials has been viewed as just another mechanism to advance the White House's clean energy agenda, this Tech War-era application of the Cold War-era defense supply act began under the Trump administration and has bipartisan support.

In 2019, President Trump used presidential powers under DPA Title III to authorize the Pentagon to pursue the re-establishment of a mines-to-magnets rare earths supply chain in the U.S.

President Biden invoked the Cold War-era act to speed the production of vaccines and other supplies needed to battle COVID.

Biden's use of DPA presidential powers to authorize the Department of Defense to invest in domestic battery material supply chains came at the behest of a bipartisan group of lawmakers.

"The authorities provided to you as President under the Defense Production Act will help to ensure that America's critical mineral supply chains are strong, responsibly produced, and ethically sourced. Given the stakes, America cannot afford to wait any longer for that day to arrive," Senators Lisa Murkowski, R-Alaska, Joe Manchin, D-W.Va., Jim Risch, R-Idaho, and Bill Cassidy, R-La. penned in a 2022 letter to Biden.

Pentagon invests north of $500 million

Shortly after taking office in 2021, President Biden issued Executive Order 14017, which instructed federal agencies to conduct a 100-day review to investigate what needs to happen to strengthen the resilience of America's supply chains.

The findings of this investigation recognized DPA as a "powerful tool" for bolstering American supply chains.

Over the ensuing three years, DOD has committed more than $893 million of DPA Title III funds to five critical sectors – weapon systems, microelectronics, energy storage and batteries, strategic and critical materials, and castings and forgings.

Domestic critical minerals projects that have received Pentagon funding over the past three years include:

Lynas Rare Earths Ltd. – $258 million in funding to establish a rare earths processing facility in Texas.

Albemarle Corp. – $90 million to support the reopening of the Kings Mountain lithium mine in North Carolina.

MP Materials Corp. – $44.6 million to commercially separate rare earth elements at its Mountain Pass Mine in California.

Graphite One Inc. – $37.5 million to support a domestic graphite supply chain that includes a mine in Alaska and processing facility in Washington.

Perpetua Resources Corp. – $40.8 million to reestablish a domestic source of antimony at the Stibnite Gold project in Idaho.

Talon Nickel Corp. – $20.6 million to advance exploration and resource definition at the Tamarack project in Minnesota.

Jervois Mining Ltd. – $15 million to support the expansion of the Idaho Cobalt Operations.

In addition to this $506 million to support critical minerals mining and processing projects in the U.S., DOD is investing $30 million to establish an energy storage systems campus that will serve as the headquarters for a U.S. military-private sector alliance to accelerate the transition to next-generation batteries powering everything from smartphones and household appliances to electric vehicles and military hardware.

The energy storage systems campus is part of DOD's Scaling Capacity and Accelerating Local Enterprises, an initiative focused on building sustainable markets for technologies essential to national security.

"The SCALE initiative is built on robust research that indicates market pull is needed to transition innovative technologies into new domestic industrial base capability and capacity," said Laura Taylor-Kale, assistant secretary of defense for industrial base policy. "Our approach of aggregating demand across national security and commercial markets will generate that market pull, drastically reducing timelines to transition and scale emerging technologies."

This reflects the opening statement in the Pentagon's National Defense Industrial Strategy report, "A robust and resilient industrial base provides the enduring foundation for military advantage."

Author Bio

Shane Lasley, Metal Tech News

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With more than 15 years of covering mining, Shane is renowned for his insights and and in-depth analysis of mining, mineral exploration and technology metals.

 

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