Opinion
China’s export ban on key minerals may have a silver lining for the US
Summary
- With geopolitics at work, a counter strategy is likely to find bipartisan support in America even under a Trump administration. Those who oppose an energy transition would still want reduced import dependence.
China is the handmaiden to the globe’s energy transition—and will continue to be so once an anti-transition president occupies the White House again next month. As if to advertise that, Beijing announced that, in response to US export controls on advanced chips, it was banning exports to the US of several critical minerals and tightening restrictions on sales of another, graphite.
Trade wars are, in general, not good for decarbonization. Falling prices for clean tech are owed primarily to China’s low-cost supply. The domestic content provisions in US President Joe Biden’s signature climate legislation, the Inflation Reduction Act, will inevitably put upward pressure on prices for those technologies, for a while at least.
Yet unease at China’s hold over this sector, built with the help of decades of industrial-policy support, is justified to some degree, as is an effort to build domestic capacity. For critical minerals, this strategic element will be vital during President-elect Donald Trump’s second term.
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Trump wants to roll back at least some parts of Biden’s green agenda, such as federal tax credits for buyers of EVs. At the same time, he has an affinity for digging and drilling, ranging from his professed love of coal miners to his drill-baby-drill energy approach, plus his 2020 declaration of a national emergency over import dependence on a range of critical minerals.
Not all critical minerals are necessarily critical for an energy transition. Antimony, gallium and germanium, the three metals under China’s new export ban, are known more for their applications in ammunition, semiconductors and electronics, respectively.
Graphite, though, has both a wide range of military applications—from airframe components to electronics to bombs—and is the primary material for the anode in lithium-ion batteries for EVs and grid storage. Other such minerals with dual uses include cobalt, nickel, tellurium and rare earths like lanthanum and praseodymium. Lithium is, too, as the military needs batteries as much as smartphone users and EV drivers do.
US dependence for these on foreign suppliers, especially China, is stark. Of 50 critical minerals identified by the federal government, the US relies 100% on imports for 12 of them—including gallium and natural graphite—and more than 50% for a further 29. Strategic reserves are a shadow of their former selves: In the early 1960s, the US stockpiled such materials at more than 200 locations whereas today there are just nine.
US government support for critical minerals development doesn’t necessarily run through specifically green policy frameworks, therefore. For example, the Department of Energy’s Loan Programs Office, effectively a federal venture capital fund for clean-tech in Republicans’ crosshairs, reports only a small proportion of loan applications as coming from minerals projects.
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Graphite One, a startup aiming to mine a graphite deposit in Alaska, received a grant last year not via the DoE but the Pentagon, and it now has initial interest for a further loan from the government’s Export-Import Bank, predicated on countering China’s dominance of the sector.
Congressional Republicans are likely to back continued support for critical minerals because, even if they share—at least rhetorically—Trump’s antipathy to the energy transition, their districts are overwhelmingly set to benefit from investments in clean-tech supply chains. It’s also worth pointing out that in 2023, non-fuel mineral mining employed 150,000 people, almost as much as oil and gas production and coal mining combined.
Besides grants, loans and domestic-content subsidies, the incoming administration has other tools to boost US critical mineral production, as outlined in a recent essay for Benchmark Minerals by Gregory Wischer and Morgan Bazilian of the Colorado School of Mines’ Payne Institute for Public Policy.
These include direct procurement of minerals for stockpiling, likely changes to environmental permitting legislation for mines as well as opening more federal lands to critical mineral mining. On the latter, the most promising regions for deposits are in the West, so federal lands are likely to play a significant role, unlike for oil and gas, and could offer a new source of revenue for an administration seeking offsets for tax cuts.
Also read: Mint Primer | When the chips are down: A US-China trade war?
In a sense, US weakness in critical minerals offers a source of strength: Trump may slow the uptake of things like EVs, but US production of these materials starts from such a low base that even reduced demand forecasts represent a big market. It is not ideal that support for critical minerals rests on geopolitical tensions, nor that it sits in tension with hostility to decarbonization. Given the setbacks coming for US climate policy, though, mining such opportunities will be a skill in demand. ©Bloomberg
