The historic Inflation Control Act (IRA) of 2022 has the twin goals of supporting a rapid energy transition and reducing U.S. dependence on China and Russia (U.S. Department of Energy). Bold steps were taken to boost production of important minerals. has been tagged as a “Foreign Company of Concern” (FEOC). According to the U.S. Geological Survey, China accounts for 70% of the world’s rare earth mining and 90% of its refining production.
Unfortunately, decoupling from China’s vast renewable energy sector is proving easier said than done, as China tightens its grip on the renewable energy industry. The Middle Kingdom is using its overwhelming advantage in rare earth elements (REEs) and critical clean energy minerals to oust Western competitors and protect its market share.
Chinese producers have flooded the market with battery metals such as rare earth metals and lithium, leading to a sharp collapse in prices and the inability of competitors to stay in business. Since last year, lithium has fallen more than 80%, and nickel and cobalt have both fallen more than 40%.
In response, miners from Australia to Canada are being forced to cut production, scrap investment plans and begin cutting jobs.Even larger producers such as Rare Earth Mining Company, based in Las Vegas, Nevada; MP material (NYSE:MP) and its Australian peers linus rare earth (OTCPK:LYSCF) (OTCPK:LYSDY) was barely holding on, and its stock price crashed spectacularly.
And the Chinese government is doing everything in its power to thwart any attempts at independence by Western governments. Since 2006, the Chinese government has controlled rare earth supplies through a quota system.
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Last year, China issued rare earth production quotas in three parts, but this is the first time since the start of the quota system that it has issued three quotas in one year. The total quota for 2023 reached a record high of 255,000 tons, a significant increase of 21.4% compared to the previous year. The Chinese government has also significantly tightened rules governing the export of some important metals and minerals. Last year, the government banned the export of technology to produce rare earth magnets, expanding on an earlier ban on the export of critical materials extraction and separation technology.
Back in 2022, China’s Ministry of Commerce announced a possible export ban on technology for manufacturing neodymium-iron-boron magnets, samarium-cobalt magnets, and cerium magnets, ostensibly to protect national security and the public interest. sought public opinion.
”China is trying to maintain its market dominance. This is already a race.” Don Swartz CEO rare earths in america (ARR.AX) told Reuters.
“The global nickel situation is dire and, in my view, an extreme threat not only to the environment but also to national/international security. It would be great to see many of WA’s nickel assets closed down. That’s sad (First quantum mineral, Wailoo, BHP, Panoramic Resources Limited) and a review of the NiWest business by BHP. This is a very negative development for supply chain security and the environment. It will only strengthen the grip of (dirty) Indonesian nickel on the market and further concentrate vital metal supplies into FEOC’s hands.” Ashley Zumwalt Forbes, deputy director of the Department of Energy’s Batteries and Critical Materials Division, lamented on LinkedIn.
And even the Biden administration has acknowledged that decoupling from China will be a difficult task.
”This is not a China story. We are completely happy to work with them on this matter and are currently purchasing a number of our minerals from Chinese companies. It’s about diversification. The world needs China’s involvement. The broader picture is climate change, and we cannot solve the climate crisis without China’s involvement.,” Jose Fernandez, the U.S. undersecretary for economic growth and the environment, said at a news conference in New York last year.
Nordic cooperation may be the answer
Thankfully, all is not lost. The Nordic countries and allies of the United States, particularly Greenland, Norway, Sweden, and Finland, are rich in nickel, cobalt, lithium, and graphite, which remain largely untapped. According to the Nordic Council of Ministers, there are more than 43 million tonnes of economically viable rare earth mineral deposits in Scandinavian rock. Bloomberg New Energy Finance ranks Finland, Sweden and Norway among the top eight countries favorable to developing supply chains for critical minerals and batteries.
Even better, the United States and its allies have laid the groundwork for future supply agreements. In June 2022, the United States and its G7 partners launched the Global Partnership for Infrastructure Investment (PGII), which aims to build clean energy supply chains through friend-shoring of clean energy supply chains.
Partnerships among democracies could help the world produce enough minerals to limit warming to 1.5 degrees Celsius, according to Johns Hopkins University’s Net Zero Industrial Policy Institute. However, achieving these goals will require extraordinary technical and financial cooperation.
Written by Alex Kimani, Oilprice.com
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