Policy, Risk, and New Supply Chains for Critical Minerals with Abigail Hunter at SAFE

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Critical minerals serve as the fundamental building blocks for the global energy transition and new industrial revolution, appearing in everything from batteries and microchips to magnets and electrical wiring. However, a significant vulnerability exists because the United States relies heavily on foreign sources for these resources; recent data indicates that over half of non-mineral commodities and critical minerals come from outside US borders, with total import dependence reaching 100% for twelve specific minerals. This heavy reliance is expected to intensify by 2035 as electrification accelerates demand, creating a scenario where the nation risks becoming merely an assembler if it cannot secure access to raw materials needed for factories producing advanced goods like electric vehicles and wind turbines. Furthermore, China's dominance in these supply chains hinders domestic innovation by limiting hands-on manufacturing experience, while geopolitical tensions pose a threat of economic coercion that could lead to bottlenecks undermining the US GDP. To address these challenges, organizations like SAFE focus on developing secure international partnerships with allies and mineral-producing nations while engaging deeply with the US policy ecosystem for rulemaking and implementation. The urgency is heightened by the fact that defense applications rely on many of the same minerals used in commercial energy sectors, such as graphite found in fighter jet engine thermal covers and gallium or germanium essential for semiconductors powering digital transformation and AI systems. To prioritize these diverse resources effectively, experts utilize a framework combining their importance to the US GDP with the probability of disruption; under this methodology, certain minerals like samarium emerge at the top due to high risk convergence, guiding government efforts toward the most vulnerable areas where supply chain security is paramount for national defense and economic stability. The current administration has deployed an expansive array of policy tools ranging from legislation and rulemaking to investment incentives aimed at de-risking critical mineral projects through technical, financial, compliance, and geopolitical lenses. A key metric for success in this strategy is the willingness of private capital markets to invest; if investors allocate funds to mining or processing facilities despite high costs, it signals that government policies are effectively mitigating risks enough to justify such expenditure. This approach has fostered unique public-private partnerships where governments provide tax credits and loans while companies like General Motors commit direct investment for off-take agreements, creating a stable triangle between the state, producers, and manufacturers similar to collaborations involving Schneider Electric with copper suppliers or Lockheed Martin securing germanium from Korean partners. Ultimately, solving the critical mineral dependency issue requires a coordinated effort that extends beyond US borders through initiatives like the rebranded Mineral Security Partnership under Forge, which continues international cooperation alongside bilateral memorandums of understanding signed by over thirty countries. These global efforts are complemented by domestic strategies where private sector actors actively engage in supply-demand partnerships to ensure resilience against rising copper demand and insufficient new production capacity. By triangulating government support with producer capabilities and end-user needs across various industries, the strategy aims not only to diversify sources away from single points of failure but also to build a robust industrial base capable of sustaining both commercial innovation and national defense requirements in an increasingly complex geopolitical landscape.

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Now critical minerals are the building blocks for the energy transition and the new industrial revolution. They are in the batteries, microchips, magnets and even the wires that are core to electrification and technological advances. And they are largely extracted and processed outside of the United States. A report from last year from the US Geological Survey found that the US is over 50% dependent on 21 non-mineral commodities and another 21 critical minerals for suppliers outside of the US borders and 100% import dependent on 12 critical minerals. So quite a lot of exposure across the different uh technologies that we'll be hearing about today. And how will that change going forward? By 2035, demand for these resources is expected to increase drastically with electrification and takeoff of technologies that use this. A report from the Carnegie Endowment for International Peace published last fall categorized lithium, manganese, graphite, silver, nickel, and cobalt as high priority minerals to develop secure international supply chains around. for those critical minerals we can supply and de process domestically in the US. There's an important dynamic around cost to understand. So um higher cost domestic production production can impact uh the technologies that they go into. There's a lot to consider here and we'll dive into it today. We'll start by hearing from Abigail Hunter. Abigail over to you. >> Thank you for the already the overview of SAFE. just again nonpartisan nonprofit advocacy organization. Uh the mineral center focuses both internationally on partnerships with our international allies and mineral producing countries through a unique relationship we have with the US Department of State and then domestically we're very tapped into the US policy ecosystem supporting rulemaking legislation uh and implementation of different policies. So, I think you did a great job, Jake, articulating the big picture, but just to drill down drill down a little bit more into why we care. Downstream manufacturing depends on access to raw materials and without access to them, we cannot run factories and risk becoming the assemblers of the future, losing jobs. investment associated with different uh advanced manufactured goods like batteries, magnets, but then also the things that they go into like cars, wind turbines, defense systems. Second, uh expertise and innovation flows from the ability to make changes on the factory floor. So currently, China dominates critical mineral supply chains and that's really undermining our ability to innovate in other places uh like the United States because we do not get that hands-on experience. And then finally, we need to remember that obviously defense applications rely on many of the same critical minerals that go into energy and commercial applications. the demand growth for both of these is intensifying and so it's really important that we are watching the geopolitical challenges in this space um that can be used for economic coercion um leading to bottlenecks that could undermine our GDP. So that was obviously kind of the looming scary context, but what what are critical minerals used for? How do we kind of make this a little bit more accessible? Um right now energy and transportation sectors are getting a lot of attention for critical minerals applications obviously in EV batteries. You have battery materials like lithium, nickel, cobalt, cobalt, maganesees. Um you also have permanent magnets that are used in electric motors, wind turbines, defense systems, sensors and cars. Uh the thing that makes your phone buzz when you get a text message, that's a permanent magnet. Um critical minerals are used in solar panels. um and also in the solar frames. So, cadmium, torium, germanmanium, aluminum, especially uh titanium, zinc, magnesium. Obviously, chemistries for all of these things can differ. Um so, this is just kind of the the higher demand application considerations. The same minerals also go into the defense sector that go into the applications that I just went into, energy, into transportation. I'm not going to rattle through all of these, but just get a kind of taste of where we see uh relevant minerals used in fighter jet engines. So, the anode of a lithium ion battery is filled with graphite, but so is kind of that thermal coverage of a fighter engine so that you don't get that thermal signature when you're tra um traveling. Electronic systems that underpin the ongoing digital transformation and deployment of a lot of AI also use other critical minerals. We get a lot of attention on gallium and germanmanium used in semiconductors here as well as the permanent uh magnet minerals that we talked about earlier. You also have uh a high amount of cabling and transmission needs to fuel these uh data centers indirectly and directly. And so there you're getting a lot of attention towards things like copper. So you're probably thinking now, Abigail, that was way too many minerals. How can we possibly prioritize these? They're they can't be all created equal. Um, and so here's a really helpful, if not very intense, graphic that we use to help really anchor our work and that the US government has been uh doing as well. Um, so this year's US Geological Survey methodology for the US critical minerals list was adjusted and they did this really excellent deep report. Um, and we can put in the chat the analysis we did on that report that's titled we read the US geological method um, geological survey methodology changes so you don't have to truly for that reason. But ultimately they combined many of the risks we talked about at the beginning. Uh the importance minerals for our manufacturing, defense and technology base all measured in their impact to US GDP. And then they weighed the probability of a disruption to access to those minerals. So on the far right of this chart, you can see where you had that convergence of a high risk of disruption and a high importance to US GDP. and Samarium has that top spot there. So hopefully this is a a helpful guide and again our analysis can maybe help it be a little bit more digestible in terms of where the US is focusing on the most vulnerable minerals today. So now you understand what we're concerned about, why we're concerned about it, but what are we going to do about it? And under this administration, I think that we can fairly say that they've thrown every policy solution at the problem. Many of these policy tools were leveraged in the last administration and even in Trump 45. So, a lot of credit goes there in terms of um the legislation and rulemaking that went into making these optional. But this administration has gone even further, a much more expansive policy creativity, particularly on the investment and trade side in terms of really trying to see what tools we have in the government toolbox to solve our critical mineral dependency concentration vulnerability challenges. How are these policies working? Uh, one metric we like to use is how the capital market is responding. Um, obviously financing new mines, extraction sites, smelters, refineries, chemical processing facilities all come with a price tag, but not one that the US government nor partner government should pay alone. Private sector finance is a good metric also because they are constantly evaluating the risks of critical minerals projects to make sure that they're capable of investing for a return. So if they're willing to allocate capital to critical minerals projects in any specific supply chain, it's it's a good litmus test for a defrainment of risks from the government policies that are being deployed. We released a report last year right before inauguration that bucketed minerals projects into four risk categories. Technical, financial, compliance, and geopolitical. Um we have used uh those to determine where government support is needed and where gaps remain. and we worked with a handful of investors to be able to do this analysis. This chart is probably a little bit dated, but here is the bucketing of those risk types again, but then looking at the specific policy motives um and policy tools across the inter agency in the US context that are rallying to uh create solutions. So, I'm not going to run through all of these, but just so you have it, there is obviously quite a long list of policies that are um being deployed in different arms of the government to really get at some of these technical financial compliance and geopolitical risks. And the other thing I want to emphasize is that we're obviously not doing this alone. Uh there are many permutations of G7 plus countries who have committed to solving this problem. And in this administration's recent work, you have a lot of I think 30 plus memorandums of understanding that have also been signed bilaterally with many of these countries that are focused on making sure that the US is not alone in creating policies and investment streams into critical minerals projects, but that's happening alongside partner nations that they're also considering their own unilateral authorities like regulations, permitting regimes, um, and other funding tools. Um, notably on this slide, you have a lot of continuity of international partnerships. The mineral security partnership, which was started under the Biden administration, has been rebranded by this administration for continuation um by Forge. And so, quick update there. And lastly, we also have a private sector who is very activated on this problem. We've seen some really uh incredible supply demand partnerships emerging. Uh some examples that I've included on the screen include GM and Lithium Americas. So Lithium Americas is one of these companies that's seen a lot of support from investment um pro uh production tax credits um as well as uh a department of energy loan as well as getting the um General Motors to invest in invest directly into the project and have offtake. And so really you see that kind of perfectly triangulated government offtaker supply chain producer all working together. Another really interesting novel partnership worth touting is Schneider Electric with two of their customers. So Schneider Electric was anticipating the challenges that we're seeing in terms of the rising demand for copper with insi insufficient supply of new copper coming online. and they work with many different subtier suppliers that feed into their digital automation electrification products um but are price takers and are not actually able to produce the copper but one of their big clients is Glenor and so they were able to bring together this really unique partnership where they could toll that material through and have a vested interest obviously in Glenor's ability to deliver on that because they themselves are selling those technologies very similar concept is being used with Torot Metals which is a rare earth producer in Northern Quebec. And then lastly, we're seeing some of these changes as well in the uh defense industrial base Loheed Martin's partnership with Korea Zinc focused specifically on Germanium supply for their defense and space applications. Um this is particularly critical because defense contractors are finding it increasingly challenging to get materials out of China and obviously with today's concentrations most mineral supply chains have to cut through China for that processing stage. And so making sure that they're not only working with alternative companies um but they're actually able to source them for their defense applications is quite crucial. The best group of life you