The Elements of Innovation Discovered
The Elements of Innovation Discovered
A U.S. House committee proposed investing $1 billion into building a national critical minerals reserve that would help insulate American manufacturers against China weaponizing its supply chain dominance.
China has added significantly to its copper stockpiles.
Careful management of national stockpiles could boost the level of natural and artificial market volatility.
Above and beyond exposing America's lack of critical minerals mining and processing, China's ban on the exports of antimony, gallium, and germanium shines a spotlight on the near depletion of national reserves of mined commodities vital to the nation's economy and security.
Critical minerals and energy analysts at The Oregon Group point out that the United States does have a National Defense Stockpile to draw critical minerals from in case of emergencies, but this store of materials meant to get the nation through emergencies such as war or a major supply disruption has been neglected for decades and is nearly depleted.
According to a late 2023 Congressional report, the National Defense Stockpile held $912 million of total materials, which would only supply an estimated 6% of what is required to meet U.S. military and civilian needs during a national emergency.
"The vast majority of the US$13.5 billion gap between current stockpile assets and current stockpile requirements would support nondefense critical infrastructure demand in the event of an attack on the US," according to the Emergency Access to Strategic and Critical Materials: The National Defense Stockpile report delivered to Congress in November 2023.
Shortly after this Congressional Research Service report landed on Capitol Hill, the U.S. House Select Committee on the Chinese Communist Party called for investing $1 billion into a "Resilient Resource Reserve" to help insulate American manufacturers in the event that the People's Republic of China (PRC) weaponized its dominance of critical mineral supply chains.
Their idea includes using the Resilient Resource Reserve as a tool to level out market fluctuations by buying and stockpiling critical minerals during times when the PRC uses its supply chain dominance to flood the market with critical minerals, driving prices down and discouraging competition; and then sell critical minerals out of the reserve when the communist nation artificially drives up prices with export restrictions.
"This would be similar to how the US Strategic Petroleum Reserve (SPR) is used," The Oregon Group penned in a Dec. 23 report on the emerging critical mineral stockpile race.
Boron, cobalt, gallium, germanium, graphite, manganese, rare earths, and vanadium were listed in the House committee report as highly volatile critical minerals that should be stored in a replenished national stockpile.
Concerns that China could weaponize its dominance over global critical mineral supply chains during an escalating trade war with the U.S. have come to fruition.
After firing several warning shots in the form of requiring Chinese companies to receive government authorization before shipping a growing list of critical minerals out of the communist nation, China hit American manufacturers in early December with a complete ban on the exports of antimony, gallium, and germaniumto the U.S.
These mined commodities are critical to high-tech manufacturing and military readiness.
According to the U.S. Geological Survey, the ban on gallium and germanium used in computer chips and other high-tech applications could send America's gross domestic product (GDP) plummeting by $3.4 billion.
"Losing access to critical minerals that make up a fraction of the value of products like semiconductors and LEDs can add up to billions of dollars in losses across the economy," said Nedal Nassar, lead author of the USGS gallium and germanium study.
Antimony is high on the Pentagon's critical minerals due to its use in ammunition, fireproofing compounds, night vision equipment, and a wide range of other military and civilian uses.
China (48%), Tajikistan (25%), and Russia (5%) control nearly 80% of the world's antimony supply.
In a 2022 report, the U.S. House Armed Services Committee said it "is concerned about recent geopolitical dynamics with Russia and China and how that could accelerate supply chain disruptions, particularly with antimony."
China also leverages its supply chain dominance to hold onto its monopoly by flooding the market and driving down prices to a point where mines and processing facilities outside of its control are no longer profitable. The communist nation used this strategy about a decade ago to retain control of rare earths, and it is now using the same strategy to push down the price of nickel needed for electric vehicle batteries.
Careful management of national stockpiles could boost the level of natural and artificial market volatility.
The Oregon Group points out that in addition to dominating the mining and processing of critical minerals, China maintains large stockpiles of these essential elements.
"The official size and strategy of China's national commodity stockpiles are state secrets – run by China's National Food and Strategic Reserves Administration (or, State Reserve Bureau) – but is reported to stock aluminum, antimony, cadmium, cobalt, gallium, germanium, indium, molybdenum, rare earth elements, tantalum, tin, tungsten, and zirconium," the critical minerals and energy research firm wrote.
In addition to critical minerals, The Oregon Group says China is reportedly stockpiling large reserves of oil, coal, and grain.
The research firm says there are several possible reasons for the increased stockpiling of commodities:
• As a means to store critical minerals as the economy slows.
• As national security prepares for a conflict, such as over Taiwan.
• Preparation for a trade war with potential tariffs from the Trump administration.
"We personally think an invasion of Taiwan is unlikely, and China is, instead, preparing for a trade war," The Oregon Group wrote. "But, whatever the reason, the outcome is the same: these stockpiles give China significant leverage over both the market and the West."
China has added significantly to its copper stockpiles.
The building of U.S. critical minerals stockpiles to reduce China's leverage and insulate American manufacturers from artificial and natural supply shortages has emerged as a topic touted across the political spectrum.
While on the presidential campaign trail, Vice President Kamala Harris laid out plans to establish a national reserve of critical minerals similar to the Resilient Resource Reserve proposed by the House Select Committee on the Chinese Communist Party.
During his first term in office, President-elect Donald Trump asked Congress for $1.5 billion over 10 years to build a stockpile of U.S-mined uranium.
Bipartisan support for a national critical mineral stockpile will likely increase as American manufacturers feel the impact of China's export bans.
The Oregon Group says that expanding critical mineral reserves in the U.S. could have significant upside and downside impacts on the market.
On the upside, the creation of a national critical mineral stockpile in the U.S. would likely:
• Support higher prices that could encourage more investments in domestic supply chains.
• Encourage increased international cooperation across the mining sector in the West.
• Help to diversify global critical mineral supply chains away from China.
"A US national stockpile is essential as a buffer in any national emergency, and low prices across many critical minerals, such as nickel, offers a perfect opportunity for governments to buy," The Oregon Group wrote.
The downside impacts could include:
• Further strains on the supply of minerals that are already in high demand for the energy transition.
• Market distortions and volatility from large purchases or sales from stockpile mismanagement.
• An exacerbation of geopolitical tensions, resource nationalism, and critical mineral export restrictions.
The Oregon Group says that the faster the U.S. builds national stockpiles, the higher the pressure it will put on global critical mineral supply chains, which would likely intensify some of the downside impacts that would go with that.
"Already, demand is expected to exceed supply across a range of critical minerals due to net-zero targets, defense expansion, and the surge of data centers for artificial intelligence," the research firm wrote. "Increased stockpiling efforts may compound existing pressures, heightening the risk of short-term price volatility and market destabilization."
This leaves the incoming Trump administration and Congress with the task of balancing the need to replenish America's critical minerals cupboard without creating too much supply chain, market, and geopolitical volatility.
Further details of The Oregon Group study can be read in the "Can the US match China’s critical mineral stockpiles?" article authored by Anthony Milewski.
With more than 16 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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