The world is witnessing a strategic shift in the global race for critical minerals, with the United States at a pivotal moment in reshaping its policy landscape. The Biden administration introduced the Inflation Reduction Act (IRA) in August 2022, aiming to bolster green technology industries by providing tax credits, loans, and other incentives to technologies that reduce greenhouse gas emissions. However, the US faces a significant shortage of critical minerals, which are essential for technologies such as electric vehicles and solar panels. This shortage has led to a reliance on imports, primarily from China, which dominates the market for processing these minerals.
Critical minerals, composed of rare earths and other metals like lithium, vary in their availability across nations. Each country maintains its own list of critical minerals based on its industrial needs and geopolitical strategies. The scarcity of these resources in the US has prompted measures such as export controls on critical minerals, including graphite and tungsten, to curb dependency and enhance domestic supply chains.
China’s stronghold on the critical mineral market is a result of strategic investments over the last decade. The nation has heavily invested in Africa and South America to secure a steady supply of these essential resources. Bob Ward remarked, "China made a decision about 10 years ago about where the trend was going and has strategically pursued the development of not just renewables but also electric vehicles and now dominates the market."
The Trump administration has expressed opposition to maintaining the IRA, favoring a different approach that emphasizes securing agreements for critical mineral procurement. Daisy Jennings-Gray commented on this shift, stating, "Trump is changing tact and looking at securing critical minerals agreements that owes something to the US." This contrast highlights differing priorities between administrations, with Biden focusing on downstream manufacturing while Trump prioritized mineral procurement.
Despite the abundance of certain minerals like lithium on Earth, their extraction poses significant logistical challenges due to their often remote locations. These challenges result in high costs for mining projects, as highlighted by Elon Musk’s observation: "Price of lithium has gone to insane levels! Tesla might actually have to get into the mining & refining directly at scale, unless costs improve."
The US government recognizes the risks posed by its current dependence on China for critical mineral supply chains. A statement from the US Government Select Committee emphasized the need for a revised policy approach: "The United States must rethink its policy approach to critical mineral and rare earth element supply chains because of the risks posed by our current dependence on the People's Republic of China."
Furthermore, experts underline that establishing new mining and processing facilities is a long-term endeavor. Prof Willy Shih noted, "If you want to build a new mine and processing facility it might take you 10 years." This timeframe reflects the complexity and regulatory hurdles associated with developing domestic capabilities.
China’s dominance extends beyond mere possession of resources; it capitalizes on the processing stage, which is a high-margin segment of the business. Christopher Knittel explained, "It is that processing stage, which is the high margin stage of the business, so China is making a lot of money." This economic advantage underscores China's influential position in the global market.
The Biden administration's efforts to limit trade and ensure supply from friendly nations align with broader geopolitical concerns about critical minerals. However, achieving domestic independence in this sector remains a formidable challenge due to existing infrastructure and investment gaps.