Washington and Beijing: America's reshoring of Critical Raw Materials

  circular economy | February 15, 2023

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rienergia 

In the current context, characterized by very heated international geopolitical competition and a systemic climate crisis, the issues of national security and energy transition emerge daily, in all their complex facets, in the decisions implemented by the US government. It is therefore not surprising that within the increasingly fragmented international framework, the competition between Washington and Beijing in various sectors of the so-called green economy has become the central pivot around which the Biden Administration is acting to support a reshoring and decoupling of the green industry, laying the foundations for the creation of value chains

However, being able to guarantee a reliable and continuous supply of these materials is a need that goes beyond the borders of the States and which concerns indiscriminately every country that must support the effort in the energy transition process. As an example, consider that the input of mineral resources intended for a single electric vehicle is equivalent to that necessary for the construction of six combustion cars, while the quantity intended for the construction of a wind farm corresponds to approximately thirteen times that of a gas system of the same capacity. If we look specifically at rare earths, approximately 100,000 tons of permanent magnets synthesized with these materials are used annually in the renewable industry, as well as in other sectors such as robotics, machine tools, mobility and communication and information technologies.

The estimates of the main research institutes all converge in the same direction: the amount of resources required is huge. According to S&P, approximately 700 million tons of copper will be needed globally over the next 22 years: an amount equal to that extracted in the last 5,000 years of history. According to the American think tank Silverado, however, by 2030 the opening of around 300 new mines across the planet will be necessary to support these efforts. From lithium to cobalt, from nickel to graphite, obviously passing through rare earths.

Yet, looking at the Old Continent, the clear need for further investment in the mining sector has only recently been a matter of debate. The announcement regarding the exploitation of the Swedish Per Geijer field has put the spotlight on the need to deepen European commitment and coordination. Technological progress may, in the future, increase the efficiency in the use of these materials, but the road appears to be uphill.

But let's go back to the United States, and why in the last 20 years the attention of governments towards these raw materials has been growing, in parallel with the increasingly heated conflict with the Chinese giant.  If the issue of the strategic challenge with China had already attracted the attention of the White House during the presidency of George W. Bush, it was, however, only during the Obama era that the reorientation towards the Asian theater Pacific has acquired centrality. The subsequent administration led by Donald Trump transformed the competition into a real attempt to dismantle the model of interdependence from the supply networks established with Beijing, triggering processes of reshoring and friendshoring, renationalization and decoupling whose effects are destined to amplify in the next future. Executive orders such as the Threat to the domestic supply chain from Reliance on Critical Minerals from Foreign Adversaries, of 2020, and the collaboration plans signed with Australia and the Lynas company, from 2019 onwards, mark a point of no return and a marked a step forward, but not a decisive one (see following figure), in the de-sinicization of American supply chains.

Influenced by the global energy crisis, since 2022, in fact, the United States has accelerated these processes which is unprecedented and whose repercussions will be global. With the Fact Sheet Securing a Made in America Supply Chain for Critical Minerals, China is clearly identified as a systemic competitor, a source of concern due to the “increasing dependence on external sources.” Which explains why the US Senate has forced defense industry contractors to stop purchasing rare earths from China by 2026 and has indicated the Pentagon as the body destined for the creation of permanent reserves of strategic minerals.

With the Inflation Reduction Act (IRA), however, approved by Congress last August, the aim is to incentivize new investments in clean energy, facilitating coordination between the various federal entities and private actors, mobilizing an enormous mass of investments, in hundreds of billions of dollars in the form of incentives and loans.

Both acts are a clear signal of greater ambition from the White House in promoting a transition model closer to the values ​​and processes constitutive of American society, underlining how business, federal states, local communities and individual families will be able to benefit, in the words of the White House itself. Biden, “of one of the most significant laws in our history.” However, at the moment, without any internal capacity to process rare earths in the United States, it is up to the private sector to take advantage of the unprecedented volume of capital made available by the Biden Administration and defend national interests.

In January 2023, General Motors decided to invest $650 million in the Thacker Pass lithium mine in Nevada, with the aim of bringing enough production back to the United States to support a local battery industry. American reshoring, precisely, while companies aspire to defend themselves from the price war that can be glimpsed on the horizon between the main players in the market, including Chinese companies. MP Materials, on the other hand, has begun construction of a plant for the separation and purification of rare earths in Fort Worth, Texas. Here, over the next few years, minerals mined in California's lonely Mountain Pass deposit will produce metals, alloys and magnets.

The road ahead towards greater autonomy from China still remains long and, according to Washington, investments in the sector are still insufficient. A factor of "great concern" for the White House special coordinator for energy security Amos Hochstein, according to whom the IRA wants to "secure, from the American perspective" the creation and stabilization of "a value chain for the United States" in the critical raw materials sectors. To defend Washington's interests, there are currently no alternative paths.