Western Countries Examine Critical Mineral Supply Options

Wealthy countries are examining several minerals and battery projects around the world as they seek to establish supply chains outside of China’s reach.

The countries making up the 13-member Minerals Security Partnership (MSP) are looking over a group of 12-15 investments the group is considering supporting, the US official working on the arrangement, State Department’s Under Secretary for Economic Growth, Energy and the Environment Jose Fernandez, told Energy Intelligence in an interview earlier this month.

That’s narrowed down from some 200 initial proposals, Fernandez said. The projects under consideration include midstream processing in Africa and Latin America, and a battery materials plant in the Pacific, he added. “They go around different aspects of the industry.”

The group — whose members include Australia, Canada, Finland, France, Germany, Italy, Japan, the Republic of Korea, Norway, Sweden, the UK, US and European Commission — hopes to announce several projects it is advancing by the end of the year.

Partners agree to work together on investments, financing and offtake agreements, Fernandez said. Eventually the group also plans to work on recycling, but it’s still early days.

Supply Security

The lessons of European dependency on Russian gas and China’s dominance of solar photovoltaic manufacturing hang over the effort. US diplomats are generally polite when they talk about the need to build up new minerals supplies — pinpointing the outsized role a single country plays in minerals without directly naming China.

“The US and many of our allies are not even in the in the picture when you look at mining or processing. So we've got an extreme vulnerability, which we we've known for a while we needed to address,” Fernandez said.

Other Biden administration officials are less circumspect.

“We for too long let our supply chains drift overseas particularly to China,” White House climate adviser John Podesta said earlier this month at CERAWeek by S&P Global conference in Houston. “They have a stranglehold particularly on processing of critical minerals.”

ESG in Focus

Last year the MSP outlined environment, social and governance standards it will abide by in making investments.

“In order for our partner countries to compete in this field, we've got to change the terms of the competition,” Fernandez said. “We can't compete in a race to the bottom. We've got to advocate for higher standards, greater transparency, local benefits as we go around the world and talk to producing countries.”

“We are mindful that the cynics out there will scoff at our pointing out that we're going to do it with high ESG standards. So we have published our standards,” he said.

Funding at Home

The MSP isn’t the only effort member countries are making at building out battery supply chains at home.

The US Inflation Reduction Act contains incentives for energy storage manufactured in the US, as well as incentives for EVs containing batteries made with components produced in North America and minerals from the US or free trade agreement countries. The EU has followed suit, with support for minerals in its own Green Industrial plan.

The US provisions in particular have created consternation with some of the same allies working together on establishing supply chains in other third-party countries, although signs are pointing to eased tensions as the US looks for some flexibility in implementing the more irksome provisions in the IRA legislation.

The IRA “is by far the biggest investment that the US has made in the clean energy future, it's putting our money where our mouth is,” Fernandez said. “That was never intended to be done and the President has been clear on this on the back of our allies.”