One of the hot topics over the past several months for the mining industry has been a resurgence of discussions on “Strategic and Critical” minerals. On December 20, 2017, just two days before he signed the “Tax Cuts and Jobs Act,” President Donald Trump issued Executive Order No. 13817, “A Federal Strategy to Ensure Secure and Reliable Supplies of Critical Minerals.”Now this is nothing new.
In the early 1980s, then-Senate Majority Leader Paul Laxalt secured funding for a new 60,000-square-foot building for the Mackay School of Mines (the Laxalt Mineral Research Building) designated to house a Center for the Study of Strategic and Critical Minerals. This was during the Cold War era, and folks in Washington were very concerned about the U.S. not having access to minerals essential to national defense (Strategic) due to disruptions in import supply lines (Critical). The initial report from the Center identified four mineral groups that met the criteria of Strategic and Critical: platinum group metals, chrome ores, manganese and rare earth elements. All four were necessary for defense industries, and none was being produced in the U.S. In fact, the principal production for these minerals was either southern Africa or the Soviet Union.
Concern over supply security for minerals dates to the early 1950s when the ramifications of the impacts of the Cold War on global economic activity were being realized, and the impact of U.S. reliance on foreign sources of supply in the post-World War II era became part of our national security policy. By 1954, net import reliance (defined as the amount of imported material, including changes in stocks, minus exports and expressed as a percentage of domestic consumption) was recognized as an important factor in global economic success. The U.S. Bureau of Mines was tasked with tracking production and consumption of minerals both domestic and foreign, and ascertaining the percent net import reliance for all the commodities used in our economy. After the demise of the Bureau of Mines during the Clinton administration, the responsibility was transferred to the U.S. Geological Survey.
Since 1954, several additional studies have been authorized by either the executive or the legislative branches. Usually, about every time the administration changes, someone notices our reliance on foreign mineral sources, goes into panic mode and demands that “Something must be done!”
So, here we go again.
Now, it is not as if we are reinventing the wheel every time another study is done, as one of the most important principles in mineral economics is that technology changes the parameters of mining. Over the past seven decades, changes in exploration, mining methods and processing have changed what we think of as ore deposits (supply), and changes in the technologies of transportation, electronics and manufacturing have totally redefined the set of minerals required by our economy (demand). Finally, the changing geopolitical landscape has redefined our notions of what are risky supply lines. Therefore, it is not only appropriate, but also actually essential, that we reexamine the status of critical and strategic minerals on a regular basis.
In its current form, as contained in Executive Order No. 13817, Critical Minerals are defined as:
“(1) identified to be a nonfuel mineral or mineral material essential to the economic and national security of the United States, (2) from a supply chain that is vulnerable to disruption, and (3) that serves an essential function in the manufacturing of a product, the absence of which would have substantial consequences for the U.S. economy or national security.”
This is a great starting point for the study. Note that the percent net import reliance is accounted for in item (2), vulnerability of supply chain to disruption. For example, while copper is certainly an essential material, it is not considered critical because the U.S. produces 67 percent of what we consume (percent net import reliance is 33 percent) and of the remaining third of our consumption, 94 percent comes from Western Hemisphere countries (Chile, Canada and Mexico). Even for minerals with a high percent net import reliance, we may not consider them critical based on security of the supply chain. For example, potash, which provides potassium fertilizer essential for our nation’s agriculture, has a percent net import reliance of 90 percent. However, Canada holds almost 25 percent of the total world reserves, and so from a supply chain perspective, it also misses the critical designation as it is covered under the North American Free Trade Agreement.
Nonetheless, the USGS has produced a draft list of Critical Minerals as required by the executive order that includes 35 minerals ranging from aluminum to zirconium. Of these, China is the world’s top producer of 19 and the top U.S. supplier of 13. The problem with these materials is that in almost every case, the U.S. has scant minable deposits of these materials, or if we have resources, they have not been developed and would take considerable investment to bring on-line. So, the problem of critical minerals needed for our economy and national defense is indeed worth studying to inform a rational minerals policy for our country.
I suggest we all keep an eye on the results of these studies.
One last point is that the current status of our supply chains is dependent on the status of world trade. That status is based on international trade agreements such as NAFTA and the Trans-Pacific Partnership. If something were to disrupt those agreements, such as perhaps a trade war triggered by unilateral tariff increases, the entire system would need to find a new equilibrium with new assessments of supply chain security. This applies especially to minerals where the high percent net import reliance is due to lack of resources within our borders.
Maybe we need to keep both eyes on this situation.
Meanwhile, “Keep on Muckin’.”
[I]t is not only appropriate, but also actually essential, that we reexamine the status of critical and strategic minerals on a regular basis.