The U.S. Needs Minerals for Electric Cars. Everyone Else Wants Them Too.

The U.S. Needs Minerals for Electric Cars. Everyone Else Wants Them Too.

For decades, a group of the world’s largest oil producers have wielded great influence over the American economy and the popularity of US Presidents by controlling the world’s oil supply. Decisions by the Organization of Petroleum Exporting Countries determine how much US consumers pay for the pump.

As the world transitions to cleaner energy sources, control over the materials needed for this transition is still open.

China currently dominates global processing of the critical minerals that are currently in high demand to make batteries for electric vehicles and renewable energy storage. To gain more power over this supply chain, US officials have begun negotiating a series of deals with other countries to expand America’s access to key minerals like lithium, cobalt, nickel and graphite.

However, it remains unclear which of these partnerships will be successful or whether they will be able to generate anywhere near the mineral supply that the United States is likely to need for a wide range of products, including electric cars and batteries used to store solar energy.

The leaders of Japan, Europe and other advanced nations meeting in Hiroshima agree that the world’s reliance on China for more than 80 percent of mineral processing exposes their countries to political pressure from Beijing, which has historically weaponized supply chains in times of conflict.

On Saturday, the Group of Seven leaders reiterated the need to manage the risks posed by vulnerable mineral supply chains and build more resilient sources. The United States and Australia have announced a partnership to share information and coordinate standards and investments to create more responsible and sustainable supply chains.

“From our point of view, this is a big step – a big step forward in our fight against the climate crisis,” President Biden said on Saturday as he signed the deal with Australia.

But figuring out how to get all the minerals the United States needs will still be a challenge. Many mineral-rich countries have poor environmental and labor standards. And while speeches at the G7 have emphasized alliances and partnerships, rich countries still essentially compete for scarce resources.

Japan has signed a key minerals agreement with the United States, and Europe is in the process of negotiating it. But like the United States, these regions have far greater needs for critical minerals to feed their own factories than for reserves.

Kirsten Hillman, Canada’s ambassador to the United States, said in an interview that the allied countries have an important partnership in the industry, but that they are also commercial competitors to some extent. “It’s a partnership, but it’s a partnership with certain tensions,” she said.

“It’s a complicated economic and geopolitical moment,” Ms. Hillman added. “And we’re all committed to getting to the same goal, and we’ll work together to get there, but we’ll work together to do it in a way that’s good for our businesses, too.”

“We need to create a market for the products that are made and manufactured in a way that is consistent with our values,” she said.

The State Department is advancing a “Minerals Security Partnership” in which 13 governments seek to encourage public and private investment in their critical mineral supply chains. And European officials are advocating a critical minerals “buyers’ club” with the G7 countries that could set certain common labor and environmental standards for suppliers.

Indonesia, the world’s largest nickel producer, has floated the idea of ​​joining forces with other resource-rich countries to form an OPEC-style producer cartel, an arrangement designed to attempt to shift power to mineral suppliers.

Indonesia has also approached the United States in recent months in an attempt to secure a deal similar to that of Japan and the European Union. Biden administration officials are considering whether to grant Indonesia some sort of preferential access, either through an independent deal or as part of a trade framework the United States is negotiating in the Indo-Pacific.

However, some US officials have warned that Indonesia’s lagging environmental and labor standards could allow materials to reach the United States that undermine the country’s emerging mines and values. Such a deal is also likely to provoke fierce opposition in Congress, where some lawmakers have criticized the Biden administration’s deal with Japan.

Jake Sullivan, the national security adviser, hinted at those compromises in a speech last month, saying holding negotiations with critical mineral-producing states was necessary but would raise “tough questions” about labor practices in those countries and in America more broadly environmental goals.

Whether America’s new accords would take the form of a Critical Minerals Club, broader negotiations, or something else is unclear, Mr. Sullivan said: “We are now in the midst of figuring that out.”

Cullen Hendrix, a senior fellow at the Peterson Institute for International Economics, said the Biden administration’s strategy to build more secure international supply chains for minerals outside of China has so far been “somewhat incoherent and not necessarily sufficient to achieve that goal.”

Demand for minerals in the United States was fueled in large part by President Biden’s climate change bill, which provided tax incentives for investment in the electric vehicle supply chain, particularly in the final assembly of batteries. But Mr Hendrix said the law appeared less successful in rapidly increasing the number of domestic mines that would supply these new factories.

“The United States will not do this alone,” he said.

Biden officials agree that ensuring a secure supply of the minerals needed to power electric vehicle batteries is one of their most pressing challenges. US officials say the global supply of lithium alone will need to increase 42-fold by 2050 to meet rising demand for electric vehicles.

While innovations in batteries could reduce demand for certain minerals, estimates suggest the world is currently facing dramatic long-term shortages. And many officials say Europe’s dependence on Russian energy after the invasion of Ukraine helped highlight the threat of foreign dependencies.

Global demand for these materials is triggering a wave of resource nationalism that could intensify. Outside the US, the European Union, Canada and other governments have also introduced subsidy programs to increase competition for new mines and battery factories.

Indonesia has gradually tightened restrictions on the export of crude nickel ore, requiring it to be processed domestically first. Chile, a major lithium producer, has nationalized its lithium industry to better control resource development and exploitation, as have Bolivia and Mexico.

And Chinese companies are still investing heavily in acquiring mines and refining capacity around the world.

For now, the Biden administration appears reluctant to do deals with countries where labor and environmental balances are more mixed. Officials are reviewing the changes needed to expand US capacity, such as faster mine permitting processes and closer partnerships with mineral-rich allies like Canada, Australia and Chile.

On Saturday, the White House said it plans to ask Congress to add Australia to a list of countries where the Pentagon can fund critical mineral projects, a criterion that currently only applies to Canada.

Todd Malan, chief external affairs officer at Talon Metals, which has proposed a Minnesota nickel mine to supply Tesla’s North American production, said it is adding a key ally like Australia, which has high manufacturing standards on the environment, labor rights and indigenous participation Being included on this list was a “smart move”.

But Mr Malan said expanding the list of countries eligible for benefits under the government’s new climate law beyond countries with similar labor and environmental standards could undermine efforts to develop a stronger supply chain in the United States.

“If you start opening the door to Indonesia and the Philippines or elsewhere where there are no common standards, we would see that as outside of the spirit of what Congress is trying to do by incentivizing a domestic and friendly supply chain creates for batteries. ” he said.

However, some US officials argue that supplies of critical minerals in wealthy countries with high labor and environmental standards will not be sufficient to meet demand, and that the failure of new agreements with resource-rich countries in Africa and Asia is leaving the United States in distress could bring vulnerable.

As the Biden administration attempts to streamline the permitting process for new mines in the United States, such projects may take years, if not decades, to be approved. Auto companies, which are among the most important US employers, are also warning of the likely bottlenecks in battery materials and are calling for regulations that would allow them more flexibility and lower prices.

The G7 countries, along with countries with which the United States has free trade agreements, are estimated to produce 30 percent of the world’s lithium chemicals and about 20 percent of its refined cobalt and nickel, but only 1 percent of its natural flake graphite by Adam Megginson, a benchmark pricing analyst Mineral Intelligence.

Jennifer Harris, a former Biden White House official who worked on the critical minerals strategy, argued that the country should move faster to develop and permit domestic mines, but that the United States also needs a new framework for multinational ones Need negotiations involving key countries mineral exporters.

The government could also launch a program to stockpile minerals like lithium when prices fall, which would give miners more confidence in finding destinations for their products, she said.

“There’s so much to do that this is a world of ‘both and,'” she said. “The challenge is that we have a lot more rocks to responsibly pull out of the ground yesterday.”

Jim Tankersley provided coverage from Hiroshima, Japan.