By Kenneth Rapoza, CPA Industry Analyst
President Biden’s Executive Order on critical supply chains and their resiliency needs special attention to be placed on the mining and the recycling of key minerals used in electronics, electric car batteries and magnets used in defense navigational equipment.
President Joe Biden issued an Executive Order last week to study critical supply chains, reveal their bottlenecks, and make a recommendation within 100 days on what to do about it. Of course, we think reshoring a chunk of that is essential to the cause.
We have been hearing a lot about the semiconductor shortage due to foundries in Asia unable to crank out chips in time. GM and Tesla have shut assembly lines because of it. Industry executives are saying they expect that shortage to last the entire year.
We have also been made aware of the problems with sourcing medical equipment and pharmaceuticals in the middle of the worst global pandemic since the Spanish Flu of 2018.
But while the semiconductor industry expects its supply issue to be worked out next year, and the pandemic is winding down thanks in large part to vaccines, one sector on Biden’s list needs special, long term attention. That’s essential metals processing companies and miners digging for things like cobalt and rare earths used in navigational equipment on fighter planes.
Any company working with metals used for electric car batteries is going to be an essential part of the post-carbon economy that the Biden administration and its allies in Europe are gung-ho about. As it is, most of our those metals are sourced from elsewhere. There is no sense going green if we are relying on China mining companies and its weak environmental rules to get us there.
CPA believes that in thinking of critical minerals, we need to focus on what that also means for US jobs and industries that can provide those minerals either through mining or through up and coming battery recycling solutions.
Rare earth elements are a group of 17 minerals critical to the defense industry and to consumer goods, like cellphones. We import 80 percent of these elements directly from China – a dependency that presents serious economic and national security risks to our nation.
Moreover, we have also heard that China has at least considered withholding some rare earth minerals from exports in an effort to sideline production of some manufacturing contracted by the US Defense Department.
Still, a lot of the minerals we need are not rare earths. They are things like lithium and cobalt and nickel, all powering your smartphone, and EVs.
CPA member American Manganese likes the move by the Biden administration, which continues along the same lines of the previous administration. Trump signed an Executive Order in October ordering his Cabinet secretaries to study the matter, with an eye toward government grants for production equipment, as well as tariffs, quotas or other import restrictions against China and other non-market foreign adversaries. The Trump administration had previously identified 35 minerals as both essential and whose supplies are vulnerable to disruption. He called it an issue of national security, and he was right.
“The Biden admin has built on what Trump did in October and we are happy to see that,” said Larry Reaugh, CEO of American Manganese. “What it really means is that Biden is going to be behind EV battery manufacturing and is getting down to our level — recycling, which is catching fire right now.”
American Manganese owns manganese resources in Arizona at a site called Artillery Peak, and is working with the Defense Logistics Agency on a 320,000 ton manganese stock pile, also in Arizona. Their newest patent takes recycle scrap metals used by the EV car battery manufacturers and reprocesses it into cathode material that can be used to make batteries again. They call it “urban mining.” A lot of that material will be used to make new EV batteries. In a few trials, their recycled minerals came in at 99.9% recovery and purity.
“If they are going to back EVs and battery manufacturing, that also speaks well for people who are in the critical metals space,” Reaugh said. “China controls cobalt; they certainly control lithium, and it won’t be long before they are the biggest in nickel so it was a good time for Biden to come out with that EO. We think we can benefit from that.”
Pure play miners say a lot of these critical metals are in short supply. Either the US doesn’t have them, or it’s not competitive to dig them out of the ground.
“The Biden Administration is right to examine the criticality of numerous US materials and electronic goods that are vulnerable to global disruption on a daily basis, including rare earth elements. There is already surging demand for lithium and EV battery materials, and US manufacturers will need new sustainable supply to meet near term goals this decade,” said Pini Althaus, CEO of USA Rare Earth in Texas.
USA Rare Earth works inside the Round Top Project in the state, owning 80 percent of it. Round Top contains 13 of the 35 minerals deemed “critical” by the Department of the Interior. They opened the first rare earth and critical minerals processing facility in the US and also acquired the neodymium iron boron (NdFeB) permanent magnet manufacturing equipment formerly operated by Hitachi Metals America in North Carolina. That facility will produce approximately 17 percent of the current US permanent magnet demand used in things like navigational equipment. At present, no other NdFeB permanent magnet manufacturing plant exists in the country.
Within the next 100 days of the EO, heads of agencies are required to submit reports to the White House on their findings. For critical minerals, the onus falls on two departments: the Department of Energy and the Department of Defense.
Energy must submit a report identifying risks in the supply chain for high-capacity batteries, including EV-batteries, and policy recommendations to address any shortfalls.
Defense shall submit – in consult with other heads of agencies – a report on supply chain for critical minerals, strategic minerals, and rare earth elements that includes policy ideas for stockpiling and other measures.
“President Biden’s executive order represents an important and far-reaching step,” said CPA Chair Zach Mottl. “For years, America’s productive capacity in strategic industries has been progressively dismantled by subsidized overseas competition. As a result, the nation is now facing serious supply chain vulnerabilities—something Americans saw during the onset of the COVID-19 pandemic. The president’s order will help to identify these critical shortages and also initiate steps to reverse the current, troubling trajectory.”
The White House says it wants to hear from domestic industry on the best ways to address supply chain risks and production challenges.
“We’re pleased that the President and his team are moving rapidly,” said Michael Stumo, CEO of the CPA, making a note we need action, rather than constant, year-long studies on the matter. “The administration must quickly pivot from assessment to action.”