jordy lee calderon is a program manager at the Payne Institute for Public Policy at the Colorado School of Mines.
Published October 31, 2022
Critical minerals, as important as the label makes them sound, might actually need a more dramatic moniker soon. They are minerals and metals that are designated by governments as being “essential to economic or national security” – but also have supply chains vulnerable to interruption and play important roles in manufacturing everything from jet engines to fiber-optic cables. In short, they are the raw ingredients for dozens of engineering miracles that, while often unfamiliar to non-specialists, are vital to modern technologies.
Most governments maintain their own lists of the minerals they categorize as “critical,” which are usually put together by committees of scientists and engineers. Among the best known: the European Union’s list of Critical Raw Materials and the U.S. Geological Survey’s List of Critical Minerals. Canada and Australia also have their own, but they serve somewhat different purposes because they are linked to their strong domestic mining industries. Canada’s list focuses on helping partners and allies dependent on its exports, while Australia’s takes note of the need to “leverage growing global demand” — since many industrial powers (notably the U.S.) have neglected their mining industries.
However, what started out as compilations to inform policy and sustain economic efficiency has in recent years morphed into lists that are central to geopolitical strategy. For one thing, some of these minerals are as tightly bound to energy technologies in the 21st century as fossil fuels were in the 20th century. Electric vehicles, wind turbines, solar panels and batteries (among other technologies) are central to the net-zero transition and are all heavily dependent on critical minerals.
This alone wouldn’t be such a problem if the demand for many of them wasn’t expected to grow ten-fold in the foreseeable future. Or if the United States (and other governments) hadn’t spent decades inadvertently crippling its own ability to mine and refine these minerals. Indeed, over the next few years, the world is facing shortages that will at best undermine productivity growth and at worst exacerbate the tensions of a new type of Cold War.
How Did We Get Here?
In critical minerals, as in baseball, ya can’t tell the players without a scorecard. Many of them have unpronounceable names seemingly straight from Star Trek, including ytterbium (not to be confused with yttrium) and europium (which is almost exclusively produced in China). Their uses range from making stainless steel harder and tougher (chromium) to helping to control nuclear reactors (yes, europium) and making batteries last longer in electric vehicles (cobalt). And while the recipes typically don’t call for much of them, they are very difficult to work around in manufacturing. Indeed, many are considered critical because substitutes either don’t exist or are incredibly expensive.
This isn’t to say that Tesla would go out of business if supplies of cobalt vanished. But without it, the current generation of electric vehicles would not be able to drive as far between charges or remain in service as long without replacing the batteries. Cobalt shortages might also jack up the cost of producing e-vehicles sufficiently to delay the day they can compete in economic terms with your father’s Grand Cherokee. This is also why Tesla is always trying new battery cells in the different types of cars it produces — relying on cobalt for your entire business model is risky.
Consider, too, that since cobalt lengthens battery life, a lack of it could exacerbate environmental problems around recycling or disposing of the batteries. Then, there’s the damage to vulnerable groups: cobalt shortages might further incentivize risky mining operations in the Democratic Republic of the Congo, where hundreds of thousands of Congolese and as many as 40,000 children already work in hazardous conditions. As cobalt prices increase and as demand grows, many groups might stop asking questions about where their cobalt is coming from.
Often, the production of a critical mineral is problematic to scale up. For larger mining and metals companies, it may not be worth investing millions in the technology, equipment and expertise to produce minerals for niche markets when copper, iron or even gold can provide steady, reliable revenues. Environmental concerns also require producers to run a gauntlet of protocols before they can even consider opening a mine in many countries. Moreover, people living in the U.S. and other tech-focused economies often have very negative opinions of the mining industry despite relying on critical minerals the most. This makes it hard to incentivize critical mineral production or investment.
In the U.S., the tensions between public opinion of mining and attempts to jump-start critical mineral production are being played out in numerous locations. Some of the opposition to new mining projects stems from a lack of trust in the industry, but in many cases, the roadblocks are tied to complicated relationships with other stakeholders. Sometimes, of course, opponents of mining are correct that the societal costs of mining in a particular locale exceed the benefits and that fighting to preserve particular locations is in the public interest. But confrontation does make it difficult to achieve rational outcomes.
For example, the proposed Twin Metals mine in Minnesota would target one of the largest undeveloped mineral deposits (which includes critical cobalt, nickel and platinum) in the world. However, it is entrenched in legal, political and social battles because it is close to the Boundary Waters — one of the country’s most prized wilderness areas. The Biden administration’s latest call for more environmental studies could lead to a 20-year ban on new mining activity in the region, which (as opponents want) would doom development. While I won’t second-guess the assessment, it leaves open the question of “if not here, where?”
With a mining industry that is unpopular and a political system that has lost much of its limited capacity to play honest broker between interest groups, the U.S. is sharply limited in the minerals that can pass political and regulatory muster. Today, copper, gold, iron and zinc account for 80 to 90 percent of the country’s metal mining (by value), and, accordingly, the U.S. has become increasingly dependent on other countries to sell us critical minerals.
Indeed, the United States has doubled the number of minerals for which it is 100 percent import-reliant over the past 60 years, while also doubling the number of minerals for which it is at least 50 percent import-reliant. For example, the U.S. hasn’t mined manganese since the 1970s, but imports over 640,000 tons annually to support the domestic steel industry — the fourth largest in the world.
Many critical minerals are also geographically concentrated, which complicates their extraction and raises the risk of delivery interruptions. Perhaps the best-known example is the Democratic Republic of the Congo, which has 60 percent of the world’s cobalt reserves — and a history of corruption and armed conflict, as well as a transportation infrastructure vulnerable to weather events. Investors are leery of committing to mining in DRC for those reasons, but also because the global market price of cobalt is highly volatile and because mining executives fear the consequences of criticism back home. From 2018 to 2019, the price of cobalt fell by 70 percent after electric vehicle demand failed to live up to expectations and several horrific news stories broke about the child miners working in DRC. Soon after, major EV leaders — notably Tesla — announced plans (or ambitions, anyway) to use less cobalt per vehicle, and this year they have even started to use cobalt-free batteries for shorter-range vehicles. Meanwhile, they keep announcing deals to import more cobalt from China.
Adding to the woes of manufacturers dependent on critical minerals is that many can’t be mined or refined economically on their own. This means that many of them are only produced because they happen to be a byproduct of producing more abundant minerals. For example, cobalt, tellurium, rhenium and selenium can be found alongside copper, so sometimes a company will mine ore in significant quantities. But mining companies often discard the byproduct as waste because they lack economical processing and distribution capacity.
As a result, there are no proven reserves of indium (often found with zinc), and it’s often not clear where the metal that’s sold actually originates, or who is mining it. There are even large piles of mine wastes from U.S. mining operations that might contain salvageable critical minerals.
The U.S. Geological Survey has only recently started to create detailed critical minerals maps and to investigate the location of the aforementioned mining waste in hopes of understanding the viability of co-production with common metals. However, we do know that if the price of copper drops and less copper is mined, there will also be less cobalt, tellurium and rhenium available. And that suggests ironic scenarios in which critical minerals become scarcer because there is a glut in the markets for abundant metals.
The Tortuous Path Ahead
While there have been warning signs of scarcity on the horizon, the challenges associated with obtaining critical minerals have to date been manageable. Accordingly, there has been no limit on cell phone production because manufacturers were unable to obtain the raw ingredients. The Covid-19 pandemic did, of course, disrupt many important supply chains — microprocessors, for one — but the causes of the disruptions lay elsewhere. The era of adequate access to critical minerals is probably ending, though, thanks to the worldwide push to make the transition to renewable energy.
As the transition to wind and solar power (and battery storage) accelerates, it’s far from clear how we are going to source far larger quantities of even relatively common critical minerals. Countries that control critical minerals might be able to collude with other producers to reduce output and raise prices. Exit OPEC; enter OMEC.
The International Energy Agency estimates that the world will require six times more mineral inputs for renewable technologies in 2040 than today. Demand for lithium to manufacture rechargeable electricity storage, for example, is expected to increase at least 20-fold. Even the production of copper, which is one of the world’s most commonly produced metals and is not listed as a critical mineral by the USGS, might need to be increased by 50 percent annually to meet the demand created by the energy transition.
And the fact that China controls half of the world’s critical minerals (and much of the world’s other minerals and metals) has morphed from an expensive inconvenience to a threat to national security.
Finding and mining critical minerals is only half of the battle — refining is just as important. Unfortunately, the U.S. and other tech-focused economies have neglected the mining and metals industry for so long that few companies even have the facilities required to process many raw materials. The U.S., in particular, is scrambling to catch up to China, which currently controls 80 percent of the world’s raw material refining.
China’s dominance in both producing and processing critical minerals is so overwhelming that Beijing can credibly threaten to cut off the supply of some of them — notably the rare earths. This would be less embarrassing if the lack of rare earth production in the U.S. were dictated by geology. In fact, some rare earths are now mined in California. But the U.S. lacks the ability to fully process rare earths, so they are sent to China and then sold back to the U.S. at a markup. Adding irony to irony: the U.S. invented the complex industrial processes used for separating rare earth elements decades ago, then ceded production to China.
Trust Me, I’m a Critical Minerals Historian
The need to phase out fossil fuels in favor of renewables is hardly a new idea, and academics have been warning governments for decades to expect critical minerals shortages as the transition revs up. How is it that much of the industrialized world is now in such a precarious position and so reliant on unstable, povertystricken countries, along with China?
The simple explanation is myopia. Most who should have known better weren’t (and maybe still aren’t) aware of how important critical minerals are for renewable energy. And it is rarer still to find a strong supporter of renewable technologies who understands the need to engage the mineral mining and processing industries in getting us from here to there. This means there is often no honest broker mediating between the mining industry and environmental groups. And without the support needed to turn over a new leaf on matters environmental, it’s not surprising the industry has atrophied.
World War II left Washington aware of the value of control of geopolitically strategic minerals. And during the Korean War, Congress passed the Defense Production Act, which President Truman used to regulate steel and mining during the emergency. The law was used again during the Cold War to establish aluminum and titanium industries within the U.S., as reliance on foreigners was not considered a viable strategy. Washington’s authority to intervene was later reinforced with the Mining and Minerals Policy Act of 1970 and the National Critical Materials Act of 1984.
The U.S. and other high-income countries’ decisions to abandon their mining industries have already created geopolitical problems even though the materials crunch linked to the energy transition is still a few years away.
With strong government support through the 1980s, the sector thrived. Manufacturers found new applications for alloys and critical minerals. And the rare earth industry was developed (16 of the 17 rare earth elements are on the U.S. critical minerals list). On occasion, Washington even had the flexibility to enlist community help: in the 1950s, it offered a bounty ($95,000 in today’s dollars) on the discovery of new sources of uranium ore that led to “everyone with a jeep and a Geiger counter” trying to get rich as a uranium prospector. By the 1960s, the U.S. had more uranium than it knew what to do with.
The USGS was also decades ahead of its time when in 1973 it researched mineral resources that could “critically affect future events.” The geologists even warned that the “potential uses for lithium could someday cause a very great increase in demand,” particularly from makers of “storage batteries to power electric automobiles.” The first viable lithium-based battery hadn’t even been patented yet, and the first commercial lithiumion battery didn’t appear until 1991.
A variety of factors brought this golden age of mining and metals to an end. For one thing, the Soviet Union collapsed and the geopolitical imperative for near-self-sufficiency in strategic materials waned. For another, the glaring environmental sins of the mining industry belatedly came into focus. Even today, we don’t know the impact of mining and refining some minerals in the U.S. because we stopped mining them before the EPA could take note (to be fair, it had plenty on its plate).
As important, globalization captured the imagination of opinion makers in the West. The process of internationalizing industrial supply chains was lauded because it facilitated productivity growth through specialization, increased industrial competition (and thereby dampened the potential for inflation), and offered poor countries the opportunity to jumpstart growth with exports. China and many other developing economies began to support mining and sophisticated materials processing — and they found they were pushing on open doors in countries that were delighted to be rid of mining-related pollution.
The U.S. and other high-income countries’ decisions to abandon their mining industries have already created geopolitical problems even though the materials crunch linked to the energy transition is still a few years away. China in particular has proved that critical minerals can be an important tool of foreign policy.
In 2011, after China temporarily cut off Japan’s supply of rare earth elements as a warning in a territorial waters dispute, the U.S. drafted a Critical Minerals Strategy. It led to the multiple critical minerals lists now put out by a number of countries. The document identified the importance of critical minerals for renewable technologies, calling for more research and the need for systematic recycling. It also pointed to the need for the U.S. to start mining more of its own minerals, along with the imperative of building a workforce with technical expertise to mine and process them.
One former mining giant, Molycorp, even announced ambitious plans (Project Phoenix) to build rare earth processing plants to counter China’s dominance. But the best-laid corporate plans can’t really compete with an entire country — especially China. Molycorp went bankrupt in 2015, and U.S. dependence on China for rare earth elements never budged.
Washington hasn’t abandoned the effort, however. The Biden administration included critical minerals in its broader push to toughen the country’s supply chains in the wake of the pandemic disruptions. The White House also put in a plug for MP Materials, the company that bought the United States’ sole rare earth mine from bankrupt Molycorp. It noted that MP Materials plans to build processing facilities that would chip away at China’s dominance.
The U.S. keeps making plans that don’t go anywhere, in large part because the plans don’t come to grips with key issues. Currently, U.S. mining companies take 7-10 years on average to get permits to start operations.
But you’d be excused if you think you already saw this movie (hint: Groundhog Day). The United States keeps making plans that don’t go anywhere, in large part because the plans don’t come to grips with key issues. Currently, permit approvals for mining companies to start operations in the U.S. can take 7 to 10 years on average (and in many cases, double that time) in no small part because they have to spend so much time proving to local communities that they can operate responsibly.
This development period could be shortened if communities were treated less like targets and more like partners. To get from here to there at warp speed, however, Washington would need to get directly involved in supporting and guaranteeing the environmental safety of projects so that communities won’t be left holding the bag if the producer can’t deliver on promises.
Mining companies also wouldn’t have to worry so much about economic risks if the government used the statutory authority in the Defense Production Act to support companies that mined or processed critical minerals with a mix of interest-free loans, purchase agreements and workforce training. President Biden took the first step in April, directing the Defense Department to consider lithium, cobalt, graphite, nickel and manganese as essential to national security.
By any plausible reckoning, the U.S. remains light-years away from its goals. There is no way that U.S. critical minerals producers can be competitive with foreign companies that can turn a blind eye to worker health, that need not deal directly with environmentalists and that know they will be bailed out by the government if they stumble.
I don’t know what it would take to turn this ship around — perhaps a crisis in which China uses a critical minerals embargo to directly threaten the United States. Or perhaps enough shortages to make the average citizen directly feel the effects. But I do know that the failure to regenerate America’s critical minerals industries would make a dangerous world even more perilous.