🔋Mine Oh Mine
🔋Mine Oh Mine
China out, US in. US government gets involved in Canadian mines and defense funding has ramped up for battery and rare earth materials.
Press the heart button on this article, yes you! I would greatly appreciate it :)
Last April, I talked about how the US invoked the Defense Production Act of 1950 (DPA) to supply funding for critical materials necessary for the energy transition. These materials including lithium, copper, nickel, and rare earths represent strategic choke points in the supply chain in terms of defense and national security, which gives them the leeway to use these extraordinary powers.
Recently, the US military is looking to fund Canadian mines for several of such materials. This is in an effort to reduce the reliance on foreign nations with higher risk for supply disruption. Russia is a good example of a country that can no longer be relied upon. Trade disagreements with China further rationalized the use of the DPA in this manner, although the DPA in its use is restricted to US and Canada.
Last November in That’s Mine, I wrote how Canada blocked Chinese investment in their mining industry. As I suspected at time, the US was certainly involved and is now forcing their capital into the mines. These are de-facto capital controls on the economy by directly controlling who can buy certain things. From a free market perspective, this is quite bad. This is about US national defense and not economics, so anything goes in such cases.
Canada, while not leading in reserves of battery or rare-earth metals like some other countries, it has an established mining industry in general and is geographically as close as it gets. This cooperation in mining between the two nations has historical precedence with the aluminum industry in 1940, which ended up paying off with the onset of WWII not long after. In the 60s during the Cold War, Russia had much of the titanium supply necessary for aerospace technology. The CIA underwent operations to buy this under the nose of the Russian government and then used the materials against them in the form of spy planes. There is deep historical precedence to the military and other US organizations getting involved in the industry of mining of various raw materials.
While I’m no expert in military equipment, rare earths currently have a key importance to the military’s ability to build advanced circuits and hardware necessary for almost everything high-tech these days. On the flip side, the battery materials and other energy transition type materials are needed on an energy security front so long as the US continues down the path of its current energy transition. I doubt that climate change itself would be reason enough for the DPA, but the fact that the country aims to rely on these technologies in the future places them as of critical importance. Then again, the US recently announced plans to electrify its military vehicles, so it looks like the DPA may be due to military need as well. I’ll leave it up for you to decide whether that’s a good use of batteries.
What else is going on in the resource front? The Pentagon is interested in starting new mines in the UK and/or Australia which is not directly under the DPA guidance which means it would need congressional approval - no update on this yet. The US leads a partnership with other countries with the goal to secure critical materials in an environmentally friendly way. The Department of Defense has been busy granting money for rare earth materials. Back in 2020 as well as more recently for light and heavy materials processing facilities. The Department of Energy (DOE) is looking for a place to put money into recycling critical materials out of mine waste. From the Infrastructure bill, the DOE also has given grants to a number of battery related companies.
All in all, with lots of federal money behind it, Canada seems primed to jump into the scene of critical materials for batteries and other clean energy technology. While this would certainly decrease the supply chain risk from China in what seems to be worsening relations, it is against market principles. Maybe if not for the monetary policies that drove mining and industrial sectors out of the US in the first place, it would not be in a scramble to re-secure these materials with records amount of tax-payer dollars. Government funding tends to cause dislocations in the markets, and with the recent push toward these certain areas I expect changes to come. However, it really is a structural lack of investment in natural resources in general and globalization over the past decade or so that has led to this position where these critical materials and many legacy materials do not have secure supply. It is interesting to note the cyclicality of these actions and how history often rhymes in terms of the government’s behaviors. Once again we are seeing the US get involved in resource management and capital controls in the economy. Until next time,
-Grayson
Leave a like and let me know what you think!
If you haven’t already, follow me at twitter @graysonhoteling and check out my latest post on notes.
Loading...
Let someone know about Better Batteries and spread the word!
Socials
Twitter - @graysonhoteling
LinkedIn - Grayson Hoteling
Email - betterbatteries.substack@gmail.com
Archive - https://betterbatteries.substack.com/archive
Subscribe to Better Batteries
Please like and comment to let me know what you think. Join me by signing up below.
Given the near impossibility of moving the EPA et al on mining and processing in the US, at the moment, getting that done in other nations seems reasonable. OTOH, given the need for quantities needed, the lead times seem near impossible. Those who advocate for hybrids and hydrogen are better bets. The next administration has a lot to do in reworking policy to fit reality.
In this case it seems like a good thing to be proactively concerned about rare earth minerals---I think we were to lax about it. Assuming we could rely on China and Russia for such materials was an oversight.