Critical Minerals Are Among The United States’ Greatest Vulnerabilities… And What To Do About It.
The United States imports 100 percent of many critical minerals that are essential for our national security and high-tech economy.
Right now during the COVID-19 pandemic, we are learning just how vulnerable some of our country’s most critical supply chains are to global disruptions. From masks to medicine, the pandemic sparked a new focus on national supply chain security in both the public and private sectors.
But the most significant vulnerability in the United States economy is not our COVID death rates and not even our nation’s ability to compete with sub-30 dollar-per-barrel oil… it’s our dependence on adversary-supplied (read: China) critical minerals.
Right now the United States relies on China to supply 100 percent of the country’s Scandium, 78 percent of the country’s rare earth metals (including Neodymium), and 41 percent of the country’s Arsenic.
There’s a complex history for why the critical mineral supply chain became so intensely offshored (I will explore some of the problems with bringing these sources back within our borders).
The short answer is cost and accessibility of materials.
But now we need to start pricing national and long-term economic security into our country’s supply chain and sourcing calculus.
We need to dramatically shift our current sourcing paradigm for critical minerals… and we need to do it now.
Let’s explore.
Why Are Critical Minerals So Important?
Critical minerals are found in nearly every high-tech product we use today.
For example, an iPhone is made of over 40 different elements (see Figure 1 below) found in dozens of different as-mined critical minerals (e.g. the rocks that come out of the ground).
Lithium, cobalt, and graphite are critical to advanced batteries. The seemingly indestructible iPhone case is made of aluminum, magnesium, zinc, copper, titanium, chromium, manganese, and other elements. Integrated circuits and internal electronics function by pumping electrical signals through painstakingly constructed grids of gallium, arsenic, silicon, phosphorus, nitrogen, gold, copper, tantalum, etc.
Figure 1: breakdown of the elements in a smartphone.
And that’s just in smartphones.
These same critical minerals are critical for a reason — they are found in every consumer device, every automobile, and every airplane in America. They are critical for national defense, as they serve as enabling materials in key defense technologies like the F-35, missile systems, and pretty much every laser.
Clearly, critical minerals are the backbone of our technology-driven economy.
Where Do We Get Our Critical Minerals Right Now?
These critical minerals have a complex global sourcing engine behind them.
Unfortunately, that sourcing engine has evolved to be highly concentrated with adversaries of the United States, making the U.S. dependent on those countries that are less than friendly.
Figure 2 breaks down the geographic sources of the 35 minerals deemed critical by the U.S. Geological Survey. If you look at the figure, you will find many of the elements essential to constructing an iPhone discussed above.
For 31 of the 35 critical minerals, the U.S. meets more than 50 percent of demand from imports. The U.S. does not have any domestic production capacity for 14 of these critical minerals, making the nation completely dependent on foreign imports.
Figure 2: 2017 U.S. Net Important Reliance For Critical Minerals
One more important point: not only is the U.S.’s critical mineral supply chain dependent on other (often adversarial) nations, but our research and development value chain that makes these industries more efficient is also being offshored.
Long-term productivity gains earned through production experience are being awarded to producing countries. Put another way, these producing countries have a massive head start in production, while U.S. mining technologies for these critical minerals are almost standing still.
Both of these problems — the reliance on sourcing and lagging in critical minerals production R&D and capital spend — pose a significant national security risk to the United States.
To ensure long-term national security, the United States needs to create a more robust critical minerals supply chain and risk management strategy.
Luckily, the Trump administration, Department of Defense, businesses, and other federal agencies are tackling this problem head on.
Solutions to Date: Building A Robust Federal Strategy
Recognizing the severity of this supply chain vulnerability, in 2017, President Donald Trump signed Executive Order 13817, A Federal Strategy to Ensure Secure and Reliable Supplies of Critical Minerals.
The order directs a variety of Federal agencies to build a list of critical minerals (and data points about their usage and imports/exports shown in Figure 2), develop strategies to improve U.S. critical mineral supply chain strength, and take actions to increase domestic supplies of critical minerals.
Two years later, the US Department of Commerce released the Federal government’s strategy to pursue and act on President Trump’s 2017 executive order. The document, titled A Federal Strategy to Ensure Secure and Reliable Supplies of Critical Minerals, lays out an innovation-centric solution set, calling for the government to:
- Advance Transformational Research, Development, and Deployment Across Critical Mineral Supply Chains
- Strengthen America’s Critical Mineral Supply Chains and Defense Industrial Base
- Enhance International Trade and Cooperation Related to Critical Minerals (e.g. build out production capabilities with our allies, like we are with Australia).
- Improve Understanding of Domestic Critical Mineral Resources (both what’s underneath us in the ground and what is downstream in secondary sources, like recycling).
- Improve Access to Domestic Critical Mineral Resources on Federal Lands and Reduce Federal Permitting Timeframes
- Grow the American Critical Minerals Workforce
Building on this Federal Strategy, a group of senators are proposing the “ORES ACT.” Here are four main actions that bill will implement (if passed):
- Require the Department of Defense to use U.S.-derived products in all weaponry
- Open up $50 million in grants for a rare earth pilot project, with an emphasis on recycling technology
- Allow electronics manufacturers to deduct 200% of the cost of U.S.-derived rare earth mineral purchases
- Enable mining companies to deduct the cost of building new rare earth mining infrastructure
Each of these initiatives is designed to encourage innovation in order to strengthen domestic rare earth production capacity.
Challenges to Developing Domestic Critical Mineral Capacity:
For brevity, I’m only exploring a few of the challenges to securing the U.S. critical mineral supply. If you want more detailed information and an expanded understanding of the problem space, I recommend reading the Federal Strategy.
1. Geological availability of minerals
If you look at the Universe as a whole, or even our Solar System, critical minerals are in unimaginable abundance.
When you zoom in on Earth, critical minerals are also in abundance. For example, Uranium — the key fuel for nuclear technologies — is found almost everywhere (in bodies of water, the air, and in our food).
So what is the problem? Why did mineral supply chains evolve to be increasingly global?
Abundance does not mean equally distributed or accessible. The diverse geography of planet Earth means that every region is rich in different elements.
More so, even if a region has deposits of a certain element, that does not mean that the element is easy to access or in a high-enough concentration to warrant building a multi-million-dollar (or even billion dollar) mining operation for extraction.
The Substance of Civilization by Stephen Sass is a great book describing how different civilizations evolved at different speeds depending on how easily they could access minerals.
The first challenge in creating a more robust critical mineral supply chain is that we might not have easy access to a given mineral within the confines of our borders and exclusive economic zone (the area on a nation’s coast where we can make use of marine resources, including mining and energy production).
For other minerals, we might have small or dilute deposits that need better technology to make extraction more economically worthwhile by lowering unit costs. Incentivizing the development of this technology is one of the key calls to action in the referenced US Department of Commerce Strategy. Sheer access to minerals is a problem; however, there is one important caveat when it comes to the current U.S. situation… and that’s figuring out what’s actually there.
2. Availability of geological, topological, and bathymetric data
Put simply, we do not have any idea what minerals we really have access to.
Throughout history, finding mineral deposits has literally been a game equivalent to striking gold during the westward expansion.
One of the greatest challenges that the country faces in derisking the critical minerals supply chain is learning and understanding what resources we can mine inside of our borders.
To do this, we need to build new technology to see deep into the Earth and hundreds of miles underwater to know what mineral deposits lie beneath.
Additionally, we also need to tackle the daunting challenge of digitizing all of the unstructured geological survey data collected over the past 240-plus years since the country was founded into an easy-to-access open database.
Data abundance and accessibility are on the critical path of de-risking the critical mineral supply chain.
3. Finding alternative sources to mining
What happens when the data collected in solving the prior challenge shows us that we just do not have domestic access to a given mineral inside of U.S. territory?
A massive challenge that we face is opening up alternative methods to domestic mining and sourcing from adversaries to keep that mineral moving through the U.S. economy.
Here are a few potential solutions to this alternative sourcing challenge:
- Building recycling technologies
- Developing suppliers in countries with mineral deposits that are close allies of the U.S.
- Stockpiling minerals now to prepare for any near-term supply cut-offs
Of course, each of these strategies has trade-offs, risks, and sub-challenges.
- Recycling technologies are expensive to build and deploy.
- Developing new suppliers takes time and still maintains some risk even though they are currently allied countries.
- Stockpiling is costly and presents inventory carrying costs and risks while pushing our dependency problem down the road.
In the long run, recycling and supplier development will prove to be the best solution. In the near-term, the federal government needs to create substantial stockpiles for the most vulnerable and important of the 35 minerals outlined in the report.
4. Building downstream processing capacity
Once we (1) know what mineral deposits we have access to, (2) explore secondary sources for those minerals, and (3) create the technology we need to more efficiently and effectively mine, extract, and recycle those minerals, we then need to establish the downstream processing capacity to turn those raw minerals into usable goods and services.
Mining gallium ore domestically does nothing to improve supply chain security if that ore still needs to be sent overseas to an adversary for processing to achieve purity high enough for semiconductor applications.
Another major challenge to derisking is incentivizing industry to develop domestic process capacity for these critical minerals.
Recommendations: How Do We Start To Solve?
It is imperative that the United States act now to ensure a secure and reliable supply chain of critical minerals.
This approach must empower industry to innovate rather than stifle innovation by imposing excessive regulation and red-tape. Therefore, building on the Federal Strategy document, we need to consider the following two specific recommendations:
Recommendation #1: Incentivize commercial innovation with competitions and SBIRs.
I believe that incentivizing prize competitions and Small Business Innovation Research (SBIR) grants centered around solving the technology problems outlined above (data collection, recycling, mining, and processing) will result in the most efficient return on investment.
The SBIR/STTR is an approx. $3 billion (per annum) non-dilutive seed fund offered by the U.S. government.
More than eleven government agencies participate in the SBIR program, and the program is estimated to return greater than 10x the initial capital invested.
How to fund this program is another question that deserves more research on my part before expanding on it — If you’re experienced in this area, I’d love to hear from you in the comments.
Recommendation #2: Roll out a “BUY AMERICAN” program for DoD acquisitions.
Department of Defense (DoD) spending accounted for over $640 billion in 2018 (that’s over 3% of U.S. 2018 Gross Domestic Product).
The DoD’s primary objective is ensuring the security of our nation.
They can not do that job without the materials required to operate on the world stage.
Therefore, strategically requiring that a certain percentage of DoD acquisitions contain “MINED IN THE USA” critical minerals (as opposed to imported) would be a cash-flow boon for companies building new mining, processing, and data technology that are MADE IN THE USA.
Right now the Trump administration is considering an executive order to roll out a similar program to strengthen the domestic drug supply.
As I was preparing this blog post, the Senate’s ORES ACT proposed to make this the letter of the law.
Conclusion
Critical minerals source security is one of the greatest threats that the United States faces heading into this new decade.
Recognizing this potent vulnerability, the Trump administration and the federal government are developing a strategy to mitigate the risk posed by single-sourcing critical minerals from adversarial and unstable countries and regions.
Mitigating this risk requires developing new technologies and domestic capacity for mining, surveying, processing, and recycling critical minerals.
The country faces many challenges on the road to critical mineral independence, but with well-thought-out sourcing strategy and proper risk management, the United States federal government and industrial base will come out with a secure and reliable critical minerals supply chain.
