In itself, building a stockpile of rare earths and other critical minerals is not going to remedy the dangerously dominant position that China holds in this area, but it is a sensible precautionary step, and, to the extent that (at least to a degree) it brings another buyer into the market may offer some underpinning to efforts to increase U.S. production of these resources.
President Donald Trump is set to launch a strategic critical-minerals stockpile with $12 billion in seed money, a bid to insulate manufacturers from supply shocks as the US works to slash its reliance on Chinese rare earths and other metals.
The venture — dubbed Project Vault — is set to marry $1.67 billion in private capital with a $10 billion loan from the US Export-Import Bank to procure and store the minerals for automakers, tech firms and other manufacturers.
How dominant is dominant?
China is the leading producer of 20 critical raw materials, as measured by its share of global mined or refined production. In the case of the rare earth element dysprosium, used in lighting and lasers, China is responsible for 84% of mined supply and 100% of refined production, according to an EU analysis.
The country is also the largest producer of refined forms of cobalt and nickel, and Chinese companies have been investing heavily in cobalt and nickel mines in nations such as Congo and Indonesia.
According to the White House, the US is “100% import-reliant” for at least 15 critical minerals and 70% of its rare-earth shipments come from China.
The “vault” would be somewhat akin to the Strategic Oil Reserve, although it is to be hoped that it is used only to cover shortages rather than inconvenient price moves (to the extent that the two can be separated).
As is noted in the first Bloomberg report, the U.S. already operates a stockpile of critical minerals to serve the needs of the military and its industrial adjuncts, but this reserve is designed for civilian needs, a good move. The disruption caused by major shortages in materials used in a wide range of high(ish) tech “civilian” products could cause significant economic and thus, quite possibly, political disruption, just what an adversary might want.
In its February 2 report, Bloomberg lists the companies that have so far committed to this scheme. They include General Motors, Stellantis, Boeing, Corning, GE Vernova and Google, as well as some commodities trading houses.
The EU and India are also planning similar stockpiles, but on a smaller scale.
Planning stockpiles is one thing; however, filling them is quite another. It will be interesting to see how China reacts. Beijing will not let its advantage slip without some pushback. Back in August it was already warning of retaliation against buyers who appeared to be stockpiling.
According to Bloomberg, markets in some critical minerals are so small that it will not take much to increase capacity to a level that can make up for any shortfalls, but this will not be so straightforward in other areas. For example, “China’s near-total dominance in heavy rare earths and magnets is a challenge due to the relative lack of viable raw materials, processing capacity and established industrial expertise.”
Not only that, but Beijing has also built supply chains for basic raw materials with partners that have found China to be a reliable counterparty, relationships that may be difficult to pry apart. And in some cases, Beijing has ownership positions in those suppliers. For example, Chinese companies own or control more than half the cobalt mines in the Democratic Republic of the Congo, currently the source of around 75 percent of that metal. For a look at cobalt’s applications, please check here. There are a lot of them.