CMR Podcast — Xi Comes to Washington with America’s Critical Minerals Supply on the Line

[music] Today I have the pleasure of speaking with Melissa Sanderson and Jack Lifton, the co-chairs of the Critical Minerals Institute, uh, with some highlights from the last two weeks. Starting with the significant, I perceive I think most people agree with me, the significant news on Thursday. Jack, we're going to start with you. We were discussing a behind thescenes conversation you were having with a legacy media uh outlet about the how China is halting some US shipments over geopolitical issues in preparation for President Xi's uh visit to Washington. The the news was that Chinese shippers, chi Chinese suppliers have begun to stop processing orders from from the United States. And this has they have not been ordered to do this. So, what my analysis is is as an old-time metal trader, what they think, the Chinese producers think that there's not going to be a happy resolution for the United States of the Chinese prohibitions. Therefore, rather than have shipments of theirs, even approved shipments stuck in ports and not not able to be delivered because China withdraws that permission and that therefore they would be have a lot of money tied up in useless inventory that they'd have to retrieve. They've decided ahead of time the prohibitions will not be uh re retrieved and that China will in fact aggressively stop supplying the United States with materials and technology that this is absolutely unofficial just based on what I see in the world of trade. And of course, Melissa, with all of your experience in Washington DC, we are very interested in your perception on President Xi coming to the United States on September 24th. Can you comment on what Jack just said, please? >> Well, I absolutely agree with Jack that one interpretation of the Chinese company's decisions is that they are sending a leading indication of intentionality. However, it strikes me also that it can be a pressure tactic. There's virtually nothing that Western companies have in their pipelines because of the scarcity of alternatives that exist to Chinese supply. So by squeezing those pipelines ahead of that negotiation, it could be seen as an attempt to exert additional pressure on the White House to be receptive to whatever demands China might be bringing to the table. >> Jack, you wrote a headline piece today about the best outcome from this visit. So can you start by talking about the two most consequential dates that are upcoming beyond September 24th and how they that will be impacting the strategy between the two leaders? >> Yes. uh on November 10th, uh China has to decide whether to continue the temporary uh reprieve of the United States uh with regard to China's laws on the export of materials and technology uh about rare earths. And on the 27th, they have to decide whether the United States I is covered by the China's total prohibition of export to the United States of materials for the electronics and semiconductor industry such as gallium, germanmanium, antimony, things like that. And this is really really important because both if if China says no the the reprieves will expire and Chinese law now applies okay which is which means we don't get those things from China. It it quite frankly much worse than us not getting the the raw materials is us not getting the processing technology because we have spent 25 years not continuing that processing technology and we've really lost our edge on that. the the men and women who developed and ran those technologies are now either dead or in other in other jobs perhaps in the house cleaning industry. We have completely abandoned that that area. So, China would lose business and therefore revenue. We we would lose any advantage we had by getting technology as well as raw materials from them. They understand this very well. They have to decide which is most important to them. We are really we we are simply going to have to abide by whatever they do and planning for whatever they do is must be very difficult for Washington because quite frankly we have no idea what they're doing. You know, I wonder if Washington and Beijing have the same perception of what's going on because I think you, as you have said, Jack, for China, this is an economic issue more than a political issue. I think for Washington, it's the opposite. And that disconnect is what is complicating the potential for dialogue. It wouldn't surprise me if the September 24th talks featured Washington saying, "You know what? We understand that you Chinese have dependence on oil just like we have dependence on rare earths. So if you think you don't want to provide us with rare earths, maybe we'll make sure that you stop getting provided with oil because Washington doesn't think about this from an economic perspective. That could be an interesting approach for Washington to take with China and I absolutely agree with you as regards the technology for processing. We've seen that China is already withholding that from many countries that are trying to rush and build processing capacity with an intentionality of selling to the US which China very well understands because it watches that economic web. This is why I've been arguing for a while that we're not going to beat China by doing what China is doing. We're going to beat China by finding different ways to do these things. Better, but at least different. >> You know, I agree with you completely and I thought of a simple way of uh stating all of this this morning. In my opinion, the United States practices lair capitalism. In other words, we just let things happen. China practices state capitalism only they call it socialism. They call it capitalism or socialism with Chinese characteristics. It's just state capitalism. Yeah. Okay. Here's here's the point. We react to situations. Our government reacts. The Chinese government is proactive. They plan for the very long term. Yes, they have limits on the president's term of office, but that doesn't seem to matter for the current president. Okay? Our limits on on administrative length are absolute. So, we have no idea what the policies of this country are going to be two years from now or four years from then. Not a clue. The Chinese planned decades ahead. They have a five-year plan. That's just a uh window dressing. They really have a very long-term plan. Again, they have state capitalism. Their bureaucrats are selected by ruthless examination that most people fail. They only the top top tier of intellects get chosen for Chinese bureaucracy. In America, it's cronyism and credentialism. Neither of which can hold a candle to the selection method they use. Okay, that's the real problem. We just let things happen. They think they can plan the future. We have no idea what the future is. That I see is the real problem here. I don't think that President Xi of China I don't think he doesn't understand that whatever deal he makes with our current president will have to be renegotiated in two years. He knows that. I'm not sure our president understands how China works. I really that's what I think is the total confusion here. I don't think our government can see how the Chinese function and I think they can see how we function. So get your popcorn, let the games begin. >> Speaking of games, uh Melissa, you've had experience actually living in Russia. And all over the headlines today, of course, are the American communications with Putin's uh uh uh group. And uh and of course, Russia, as we all know, controls most of the world's uranium, the yellow cake that we really want. Correct me if I'm wrong here, Jack, but I believe that's correct. And of course, Russia has always been rumored to have a lot more of the core four, as you coined, uh Melissa, of the magnetic materials. Uh, how do you think this will affect the visit from Xi or do you think Russia will or will not be a factor? >> I think it's a rather transparent political ploy by part of Washington to try to signal to China that they may be able to prize Russia out of China's grasp. Think Putin is too smart to fall for it. Now, I also think Putin is smart enough to balance both countries. He would love to have some money coming in by selling uranium to the United States. There's no doubt about that. Um he would love to have some support for his ongoing position that the Ukraine needs to be partitioned. The terms of dealing with Putin in order to quote prize him out of China's grip unquote I think are going to prove very very steep. And I don't think that Washington understands Putin any better than they understand Xi. The Russians also play the long game. >> Uh I I'd like to comment on that Tracy. My my opinion is is first of all what Russia supplies us is processed uranium in in the form of fuel nuclear fuel. Okay, 40% of our fuel for our reactors all of them comes from Russia. Now why did we stop doing that? Why did the United States stop enriching uranium to the point of where it could be used as fuel? my opinion very very very short thinking and uh stupidity. So we can't just say hey screw you to the Russians. We're stuck. We have to get nuclear fuel process from them. Oh yeah, we're going to rebuild that industry too along with our you know our popcorn industry and our caramel candy whatever. Okay, great. Now the other thing is this. What is one of the world's top three producers of oil? That's right. It's Russia. Okay. Russia needs money. That's correct. So they can sell their oil to the Chinese. Well, they they do sell oil to the Chinese. But what doesn't exist at this time are pipelines from the Russian oil fields to China. Okay? Those are very expensive and also very political. Here's my opinion. I think that our two negotiators that just spoke with Putin are listening, not talking. And he's telling them what he will take in order to help with the sanctions against his friends in China. You know what? He'll take money. And the other thing he'll take is any settlement of Ukraine that he thinks will keep him in office. Okay? Now, what I'm saying here, the bottom line, what I'm saying is we are not in charge of this. They are, the Chinese, the Russians, they're calling the shots. And while our administration stands tall, we're going to spend a trillion and a half dollars, not just a trillion, on the military next year, providing we can get fuel for our ships from the Russians, oil from the Middle East, you know, we we produce oil, right? But we are a capitalist nation. Our oil companies would rather sell their oil overseas where they can get more money than sell here where they're worried about control the control of prices by the government. LZair capitalism is doesn't work very well against state capitalism. China practices state capitalism. Russia practices state capitalism. Iran practices state capitalism. That's the problem. We have to decide just how much control, i.e. interference, our central government can have on industry before we decide how we're going to interact with the rest of the world. That's a really interesting point because it's becoming a a matter of some concern even in Washington as to how far that should go. There's many in the Republican party who think that already the government taking um capital positions in private companies is an absolute fundamental violation of the way that America has and should comport itself in the economic arena. But coming back to this question of Russia, the the dilemma for Putin is that the US is not in any likely scenario going to become any friendlier to Russia, particularly as long as he remains in power. And his objective is to remain in power. He needs a victory in the Ukraine to strengthen his capacity to stay in power. Sooner or later, it's happened throughout history. some close bodyguard is going to turn around and shoot him in the head unless he is able to change some fundamental dynamics which is why he needs money. But here's the other part of his dilemma. China likewise has never been a friend to Russia. China has invaded Russia. China has undercut Russia's economic power when it has had the capability to do so. He cannot and knows he cannot think of Xi as an ally, much less a friend to Russia. So the question for Putin really is what is going to be a less painful and b more profitable. Well, China has pretty deep pockets, too. I don't think necessarily that Putin wants to build a pipeline to China because that makes Russia vulnerable to China, but it is a question at the end of the day for every player in this game. How much pain can you sustain? Because that's what a trade war is about. Mhm. >> And the the leader who correctly analyzes how much pain [clears throat] his country can and is willing to tolerate is to his position for victory. And just one last thought on this because you're absolutely right, Jack, these so-called directed or managed economies, he have a clear advantage in the current critical minerals game in particular. But the other disadvantage for the United States is fundamentally democracy. Because at a certain point, people are going to get up on their hind legs and say, "We have had enough pain. Find a solution." And they're not going to care what that solution implies. >> I I'd like to just make I agree with you 100%. And I'd like to uh bring up something I I've been saying for most of my life. Perspective is the key to objectivity here. And I want to just remind everyone that the last administration told the car industry they have to build EVs. It's the wave of the future. You must do it. the the industry therefore invested $150 billion dollar in into a change a major change in its output that did not happen. They wasted the $150 billion. Can I please point out to people that all of this nonsense about recreating the rare permanent magnet industry so far the US government has promised perhaps $20 billion. I don't think they've delivered a dime yet because it's it's just promised against meeting benchmarks. This whole, you know, halaloo is trivial compared to the EV mistake the last administration made. Please understand that in Washington people think in trillions now, not billions and certainly not millions. Okay, this it the the absolute disregard for for money which is just monopoly money now in Washington amazes me. And I don't think it's the same thing in Russia or in China. I think they're thinking very hard about economics. And again, I'll repeat, put myself in a box. I don't think Washington has any idea how this is going to play out. A normal manager would assume different outputs and he'd be prepared with plan A, B, and C. I wonder if we've got plan half A done yet. Okay. I think the the problem is in is not in our stars. It's in our Washington. So, let's talk about money. Uh, a couple of headlines from the last two weeks. Uh, US steps up aggressive mineral push with up to 1 billion backing for DRC copper and cobalt railway was one of the three that I highlighted for this interview. Uh, Department of War announces a 750 million investment as part of a 1.55 billion initiative to secure critical rare earth elements from Sarah Verde. And of course, en the US energy department announces 500 million to secure America's critical mineral and battery supply chains were all headlines from this last week. But let's move straight to Africa. Mel, you were talking to me about something called resource survivability this last week, which I thought was a fascinating discussion. And you were discussing uh central Africa as being really a location that ultimately would be the place to be. Now on that topic, both the US and China are in play for Africa. Can you give us any updates from this last two weeks or would you like to comment on the DRC uh uh copper and cobalt railway for instance? >> Oh, I'm I you know how I love to talk about the Congo. So I'm very happy to talk about Congo in central Africa. The idea of resource, you know, survivability goes to many, many factors which are impacting not just the mining industry but the planet globally. It's climate change, it's resource exhaustion, it's political shifts. And when you put all those things together over maybe the next 25 to 50 years, we're going to experience this profound shift in where the actual power players are. Irrespective of their current relative incapacity to become power players, they inevitably will become so. China has outplayed the United States in the Congo for the last 25 years or so. As usual, we're running from behind. As usual, we're running from behind without a clear plan. In the meantime, I'm not sure if Washington has noticed what's going on in in Congo. The Chinese have. In a nutshell, and this seems to be a trend, Preston Tishiketi is fishing around for a way to stay in power that will appear as if it does not violate the country's constitution. He is trying to co-opt the opposition. The Chinese have a hand in all of this. They are funding Tishiketi's efforts. Now, why would they do that when the United States is actively courting President Chisheti? So, we're going to build yet another railroad. H the US has already done that. In case anyone has forgotten, we actually funded the one that we were trumpeting so hard, as Jack noted in the last administration, that runs from the prime copper cobalt grounds down through Angola and out the Angolan port for distribution. Why Angola? China's very strong and Angola has been for decades. So now we're going to build another railroad. This is not what Congo needs. They are exporting what they produce right now except for the quantities of cobalt that the government is withholding from export. So that particular investment is not what the president wants. What does President Tisha Kenny want from the US? He wants Marines on the ground to kick the Rwans out of the Ku provinces. Why should the United States even think about doing that? because that's where a lot of the rare earths are in the Congo. They're scattered around in other places, too, that are currently more peaceful, but a heavy concentration of them are in the Keos. Gee, wonder where those are currently going in the chaos that no one is looking into. Russia and China spring to mind. So, we're missing out on all kinds of levels on this great scale of time. We're missing out on immediate opportunities. We're missing out on midterm opportunities and we're definitely missing out on long-term opportunities when you think about that issue of resource sustainability. >> Okay. You know, Mel, you're making me think I'm wondering if if this isn't the end of the 19th century. Okay. Because what's happened here is that we I don't know if if people who worry about Taylor Swift understand this, but the British Empire was built by accident. It was private capital taking over as resources that forced the British government to take control be because it it was totally out of control. So for example, the Suez Canal was built privately and and what the great imperial move of the 20 of 19th century was the British purchase of the Suez Canal. They didn't conquer anything. They bought it, okay, to to ensure their route to India to make sure that they had an easy way to get the finished goods made in the UK to to India to sell for Indian gold, etc. Of course that changed immediately. But the point is this. The Chinese have planned their imperialism. First they they bought all the raw materials they could get. Then as these nations developed, they they noticed that these nations wanted to improve themselves. So they said, "You know what? We'll build you schools, railroads, etc. you pay us in raw materials. And by the way, um we will trade with you so that you have lots of our currency and you can use that currency to buy from us. You don't need to use those green backs from that other place. Okay? And and what did those people say? Hey, that's a good idea because you know we don't have because the Americans say we'll buy your stuff outright but it only goes to the owners of the mines and the and the permanent president or dictator we happen to have at the time. So again the Chinese have seen what to do to ensure the security of their supply of raw materials. They are now even willing to give technology to some of these countries so they can keep adding value in their own country providing they keep supplying China with raw materials. Everybody seems to be happy in Africa, South America, Southeast Asia. In the meantime, in this country, we worry about Taylor Swift's next album. Does anybody see the problem? >> Speaking of issues, uh this last week uh Donald Trump has renamed Lake Ontario to Lake America. And uh of course the it was just two weeks ago that the headlines read to Trump pauses 50% Canada tariff says the two slides have a deal. Well, that's not taken place. Jack, you've been a leader on explaining why the United States and Canada need to work together with Critical Minerals. So, I'm going to let you answer this last for this week's Critical Minerals report. And I'm going to start with Mel. Mel, can you comment on what's going on be between Trump and uh uh Carney and make a recommendation perhaps on how we can get this solved. >> Oh, I can do both of those very concisely. What's happening is a uh egoistic demonstration of pseudo power. What from the US side, what needs to happen is that the White House gets the heck over it and makes an attempt to understand that our short-term and midterm survival really depends on getting along with Canada. It's our closest, most secure supply chain for critical minerals. It's racing to develop them. And while the personality based tit fortat continues, Canada isn't standing still. It's making deals with the Commonwealth and with China. So, we're frittering away our best possible opportunity. Get over it. >> I'd like to just add this point. I'm in Detroit, as you know. We import from Canada uh nearly two million cars a year that are made by American companies. Okay? Most. So if if you put a 50% tariff on that, then the cost of that vehicle imported into the United States will far exceed the selling price. Okay? You you have handed the industry to those foreign companies that still that make cars in the United States. I don't know if if Trump has thought about this or if he thinks at all. Okay. And then how about the oil we import from Alberta in and Saskatchewan into the United States? The enormous amounts of oil. You want to raise the price of that 50. This president says he's worried about the pump price. He must be not worried about anymore because he'll be there'll be it'll skyrocket if this goes through. and on raw minerals and raw materials 50%. Okay, th this is who benefits Canada cuz you don't really Okay, the car industry will be destroyed. I understand that the American car industry. I understand that. But Canada doesn't have to worry about who's going to buy its oil or minerals. Guess who? Okay, would be right there with gold bullion or if if Carney is crazy enough, RMBB. Okay. But I don't understand what this is about. I can tell you that the average American has no animosity to Canada whatsoever. I don't know what's going on here. If this is a excused expression pissing match between Carney and Trump, then what can we expect between Trump and she? I'm telling you, get popcorn. Get ready. >> For everybody out there interested in receiving Critical Mineral reports regularly, please go to the Critical Minerals Institute website. And thank you so much Melissa Sanderson and Jack Lifton for your time. Thank you.