Ticha Paper 2 Draft

Addressing the Concentrated Supply and Geopolitical Risks in Critical Mineral Markets

This memo identifies the five most demanded critical minerals—cobalt, copper, lithium, nickel, and rare earth elements—and addresses the challenges related to their concentrated deposits and geopolitical risks, incorporating insights from the “A Critical Minerals Policy for the United States” report. The steep growth in demand for these minerals, driven by the rapid deployment of clean energy technologies, presents a substantial challenge for U.S. economic and climate interests due to the risk of supply shortages and the geopolitical concentration of mineral production and processing​​. It is critical to implement policies that will ensure a stable, ethical, and diversified supply of these minerals.

Mineral Deposits and Geopolitical Concentration:

  1. Cobalt: Cobalt demand could increase by up to thirty times between 2020 and 2040, but supply uncertainties are heightened by geopolitical risks in countries like the Democratic Republic of Congo, which produced 68% of global cobalt in 2022​​.

  2. Copper: Copper demand is projected to nearly double by 2035. The U.S. reliance on imports (76% of cobalt consumption) and potential supply deficits, such as a projected shortage of 4.7 million tons by 2030, underscore the vulnerability of relying on a few countries for supply​​.

  3. Lithium: With a forecasted deficit of 12.5% by 2030 and 100% of U.S. consumption currently imported, lithium is another mineral at risk due to its concentrated production​​​​.

  4. Nickel: No domestic production of nickel in the U.S. to meet its consumption needs presents a substantial risk, especially with Indonesia banning exports of nickel concentrate​​.

  5. Rare Earth Elements: China effectively monopolizes the global processing of rare earth elements, essential for a multitude of technologies, posing a significant strategic and security risk for the U.S. and its allies​​.

Policy Recommendations:

  1. Diversification of Supply Chains: Incentivize the development of mining and processing capacities in politically stable regions, and bolster domestic mining and processing through targeted policy intervention to reduce the vulnerability to external risks.

  2. Strategic Partnerships and Trade Agreements: Forge multilateral trade agreements and partnerships that ensure the U.S. and its allies have access to critical minerals from diversified, ethical, and stable sources.

  3. Investment in Recycling and Innovation: Expand research and development funding for alternative mineral sources, recycling capabilities, and innovative technologies to decrease reliance on imports and mitigate long mine development timelines.

  4. Environmental and Social Governance (ESG) Compliance: Promote ESG standards in mining practices to mitigate environmental risks and social conflicts that can disrupt supply chains.

  5. Strategic and Emergency Reserves: Establish and maintain national reserves of critical minerals to mitigate against market volatility and supply disruptions due to geopolitical tensions or other unforeseen events.

Conclusion: The projected demand for critical minerals presents both an opportunity and a challenge. The U.S. must strengthen its policy framework to address the supply risks associated with the concentrated production of these minerals. Diversifying supply, fostering international cooperation, and enhancing domestic production and processing capabilities are vital to mitigating geopolitical risks and securing a reliable supply chain. Failure to act may result in supply shortfalls that could impede economic security and the clean energy transition. The recommendations herein offer strategic pathways to support a resilient, responsible, and diversified critical mineral supply essential for national security and economic prosperity.