As part of plans for a green transition, the U.S. is developing a strong critical minerals sector, which includes developing domestic mining projects and strengthening regional supply chains.
Critical minerals, such as lithium, nickel, cobalt, manganese and graphite, are viewed as vital components of a green transition, needed for clean technologies and renewable energy projects worldwide. They are crucial to battery performance and support the running of a range of components in clean energy projects.
Critical Minerals Market Outlook
The International Energy Agency’s (IEA) Global Critical Minerals Outlook 2024 showed that despite demand growth, the market size for energy transition minerals contracted by 10% to $325 billion in 2023. This was mainly due to a reversal in the price inflation seen in the critical minerals market in recent years, as the world began to significantly expand its renewable energy capacity in support of a global green transition.
The IEA predicts that the combined market value of key energy transition minerals, which include copper, lithium, nickel, cobalt, graphite and rare earth elements, will more than double to reach $770 billion by 2040 under its Net Zero Emissions (NZE) by 2050 Scenario.
Federal funding
In the U.S., the Biden administration has sought to strengthen and secure the country’s critical mineral supply chains in support of green transition ambitions. This has also been a geopolitical move to counter China’s dominance in the international minerals market.
In Biden’s first weeks in office, he signed Executive Order 14017, America’s Supply Chains, mandating a 100-day review of U.S. critical mineral supply chains. The report’s recommendations guided the federal government’s funding decisions for critical minerals. By September this year, the Biden administration had announced over $120 billion in investments in battery and critical mineral supply chains, with significant funding coming from the 2022 Inflation Reduction Act (IRA) and 2021 Bipartisan Infrastructure Law (BIL).
In April, the Department of Energy (DoE) announced an investment of $17.5 million for four projects aiming to reduce the costs and environmental impacts of the onshore production of rare earths and critical minerals. Funded by the BIL, the initiative aims to increase the domestic supply of critical minerals. In July, the DoE announced an additional $10 million in funding for the project.
U.S. Secretary of Energy Jennifer Granholm stated, “The investments announced today will increase our national security while helping rebuild America’s manufacturing sector and revitalize energy and mining communities across the country.”
Latin American Supply Chains to Support Critical Mineral Security
As well as developing the domestic critical mineral mining sector, the Biden administration has focused on strengthening regional supply chains. Following the Covid-19 pandemic, the need to shift from a globalized to a more local approach to supply chains became evident as the U.S. and other countries experienced significant supply chain disruptions and severe delays to projects across various industries.
Latin America is home to an abundant supply of critical minerals. The ‘lithium triangle’, the world’s largest supply of lithium – needed for electric vehicle (EV) and electronics batteries, is situated in Chile, Bolivia, and Argentina. Meanwhile, Chile, Peru, and Mexico are rich in copper, and Brazil is thought to hold 17% of the world’s nickel.
The U.S. dependence on critical mineral imports is expected to continue under President-elect Donald Trump, following his inauguration in January. Latin America will likely play a major role in the supply of minerals and rare earths to the U.S. in the coming decades, due to its close proximity and abundant supply.
The House of Representatives approved a Republican-sponsored bill in November that would link the Department of Energy’s identification of basic materials with the U.S. Geological Survey’s (USGS) list of critical minerals. The Critical Mineral Consistency Act would grant all products the same benefits as the existing USGS list, thereby making them eligible for clean energy tax credits and financial support, pending Senate approval.
The director of compliance and business intelligence at consultancy Control Risks Rodrigo Russo explained that “strengthening strategic alliances with Latin American countries that have mining” could help Trump in his strategic aim to counter China’s growing global role in certain industries.
Greater support is Still Needed
Nevertheless, as the global demand for critical minerals continues to grow, in line with the expansion of renewable energy capacity and the uptake of EVs, many energy and mining experts are asking for greater support for the industry.
Several key players in the American critical minerals industry wrote an open letter to Congress on Price Support for U.S. Critical Minerals in December calling for the government to introduce “Federal price support for critical minerals and materials as a key part of its strategy to secure supply chains”.
The letter also requested that “lawmakers include in future critical mineral legislation the authority for programs to utilize flexible financing tools, such as those described above, and ‘other transactions’ to provide projects with price support. This authority is key to mobilizing private sector investment and catalyzing the American critical minerals industry.”
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