Critical Materials and their Global Hunt

There is currently no unified definition of crucial materials and therefore nations have come up with individual lists identifying critical materials, which often reflect the most recent technological advancements, the present global dynamics of supply and demand, and the environment in which the assessments are made. Therefore, the criteria for judging the criticality of these materials continue to be arbitrary and site-specific.

As per the Energy Act of 2020 enacted in the United States of America (USA), a critical material can be understood as any non-fuel substance or element that is a key functionary in energy technologies that produce, transmit, store, or conserve energy and stands prone to the risk of supply chain disruptions [1]. These resources are also critical in the production of technologies involved in the process of energy transition [2]

Critical materials also include critical minerals i.e., minerals that are officially designated classified to be ‘critical’ by the Secretary of the Interior, USA, and enacted by the Director of the US Geological Survey (USGS) [3]. In 2022, the USGS released the revised version of the 2018 final list of critical minerals which named the 50 minerals deemed critical [4]. Magnets, batteries, catalysts, alloys, electric vehicles, communication systems, household electronics, lighting, etc are just a few examples of the many items that incorporate these materials. But some of these minerals are scarce, and the methods used to obtain them are expensive both financially and environmentally hence there are concerns over whether supply will be sufficient to fulfill the needs of the economy in the future given their necessity in a wide range of technological applications.

Energy Critical Elements:

Energy Critical Elements (ECEs) are essential to sustainable energy resources and are likely to encounter disruptions in the supply chain as their importance is derived from the linkages between abundance, demand in markets, and geopolitical circumstances that regulates their supply. In this regard, a concern has been noted that scientific decision-makers are developing policies to reduce supply risk to ensure the supply of renewable energy technologies, sometimes without taking consideration of the complexity of key factors like unexpected market responses to policy, society's needs for these components during basic research, and a lack of substitutes for utterly unique physical properties [5]. 

When concentrated in a limited number of mines, enterprises, or countries, the discovery of these minerals leads to increasing hardship and political unrest rather than an improvement in the general population's level of living [6]. Furthermore, countries that depend on an ECE become exposed to deceptive market tactics when well-established foreign governments own a significant portion of the supply. When supply is concentrated, customers are vulnerable to unanticipated supply disruptions caused by labor or civil unrest and/or technical issues at extraction mines or processing facilities, even in the absence of a foreign government's express policy.

The production, transmission, and storage of advanced energy all depend on ECEs and the materials in this category include lithium, cobalt, selenium, silicon, tellurium, and indium. Due to their scarcity in the Earth's crust, the lack of economically viable ore deposits, or both, these materials are categorized as energy crucial [7].

Rare Earth Elements:

Contrary to popular belief, Rare Earth Elements (REEs) or at least the majority of REEs are not as uncommon as their name suggest. They were referred to as "rare-earth elements" because they were very uncommon compared to other "earths," like lime or magnesia, and because most of them were recognized as "earths" during the 18th and 19th centuries [8]. Due to their peculiar chemical and physical characteristics, REEs have long been regarded as useful. Their availability in sufficient quantity, concentration, in the right form and environment in addition to their economically viable extraction are all naturally limited to a few select places. This is primarily because their natural occurrence is highly dependent on geological conditions.

The diversity of high-tech uses for REEs has expanded recently, particularly in low-carbon technologies which have led to their demand increasing quickly [9]. This growth in demand is predicted to continue while at the same time, global anxiety regarding the reliability of their future supply, their costs, and any potential effects persists.

The market for neodymium oxide, which is used to make the magnets used in automobiles, airplanes, wind turbines, and electrical devices like headphones, microphones, and computer discs, is expected to rise significantly [10].

Critical materials for the energy transition:

Thorium and uranium, which pose significant radiation risks are found in some REE deposits. Although thorium and uranium can be utilized to produce nuclear energy, they are typically not commercially recoverable in this situation and are therefore left in the tailings, where they can be hazardous to the environment and people's health [11].

Mineral and metal consumption will be significant during the transition to renewables. Most of the demand for these materials currently is for purposes unrelated to the energy transition, but, as the transition advances, it is anticipated that demand for several materials will increase.

The idea of energy security, as it exists now, centers on the ongoing availability of energy sources and is primarily motivated by worries about the supply of fossil fuels. In contrast, available renewable energy systems might function for decades even if vital material input supplies were interrupted. As a result, the risk posed by interruptions in the supply of essential materials has less to do with energy security and more to do with the possibility of a slower-than-expected pace of energy transitions [12].

Global Competition for Critical Materials:

Security of the supply chains for these materials required by clean energy technologies has emerged as a strategic concern, not only because it may slow down the global deployment of these technologies but also because they represent the newest front in the geoeconomic competition sparked by China's fiercely efficient manufacturing industry. China has risen as a stakeholder exercising a certain dominance in the global supply chains of these materials.

Since 2016, the price of cobalt has increased globally due to a spike in demand from downstream industries like smartphones and electric vehicles (EVs). Cobalt ore and refined cobalt are the sources of cobalt metal. The Democratic Republic of the Congo, which in March 2018 published a new mining law designating cobalt as a strategic commodity and proposing to levy windfall profits tax and royalties on businesses, contributes close to 60% of the world's cobalt ore. The actions will have an impact on both the price trend and the global cobalt supply. In China, cobalt must be imported in amounts close to 98% and therefore to secure reliable cobalt supplies, Chinese businesses invest in cobalt mines and take part in cobalt smelting operations in the Democratic Republic of the Congo. By purchasing Freeport's cobalt ore deposits, China Molybdenum, for instance, has surpassed Glencore to become the second-largest producer of cobalt ore in the world [13].

The concern regarding Chinese control over these resources is further amplified by the fact that more rare-earth patents have been submitted in China than in the rest of the world. Numerous foreign businesses relocated to China due to the country's abundant and low-cost raw materials and minerals, which not only gave them access to the expanding Chinese market but also helped the Chinese economy by transferring technology to the country and boosting China's downstream manufacturing capacity [14]. The fact that China seems to understand the power of its vital mineral supply lines as geopolitical leverage is another crucial aspect. For instance, in Jiangxi Province, which is renowned for its rare-earth wealth, President Xi Jinping of China and his top trade negotiator visited a rare-earth processing facility during one of the more intense episodes of the U.S.-China trade war in 2019 [15].

The strategic significance of protecting crucial mineral supply chains has increased as a result of an overlap of contemporary geopolitical challenges, particularly for a group of economies that are home to manufacturers and inventors. Additionally, the Covid-19 pandemic revealed the vulnerabilities of the global supply chains. To address the issue, some governments have updated or broadened current strategies, while others have developed action plans or expressed their viewpoints, particularly on supply chain segments.

Strategies adopted by different countries:

The Australian government revised its Critical Minerals Strategy in March 2022 with the promotion of R&D and infrastructure development, as well as investment assistance for the local mining industry and crucial mineral processing, as focal points. Additionally, the government recently passed new FDI restrictions that have an impact on foreign investments in this sector. The Canadian government has lately expanded financial support and tightened limits on foreign investment in order to support domestic supply and control over essential minerals [16].

In July 2022, the UK government unveiled its Critical Minerals Strategy which established three main goals to safeguard the nation's supply chains for important minerals: boost domestic production of certain minerals, enhance foreign markets by encouraging ethical firms and finance alongside new FDI guidelines to regulate foreign funding of its domestic projects [17].

The European Commission (EC) released its most recent plan for protecting the Critical Raw Material (CRM) supply chains on September 3, 2020. The statement outlined methods by which the European Union (EU) seeks to reduce the risk of supply chain disruption, including financial assistance and smart management of foreign direct investment [18]. The promotion of investment in the area of crucial materials is one element of the strategy. Here, the EU uses the European Investment Bank (EIB) along with other state aid instruments to finance several CRM-related initiatives in various EU member states.

In September 2020, Japan revised its international resource policy with the focal point being to enhance the robustness of domestic supply chains that depend on these inputs and lessen import dependence related to CMs. The policy also altered the goals of domestic critical material stockpiles, particularly, to expand the public strategic reserves for all of the metals and minerals designated as critical. Concretely, instead of mixing public and private stocks, the minimum public stockpile reserve levels will henceforth be determined solely on public stockpiles. In addition to this policy, the Japanese government implemented a rare earths-related corporate sector screening mechanism in 2021 [19].

In the USA, former President Trump issued Executive Order 13817, “A Federal Strategy to Ensure Secure and Reliable Supplies of Critical Minerals”, on December 20, 2017, outlining actions to lessen our nation's reliance on imports, maintain our leadership in technological innovation, promote job creation, and enhance national security and the trade balance. On June 4, 2019, the Department of Commerce released a report mandated by the order that laid out a coordinated strategy to address significant challenges in the industrial supply chain for minerals and materials. The report included calls to action and detailed recommendations centered on R&D, mapping advancements, permitting, and workforce development. Later, the Executive Order 13953, “Addressing the Threat to the Domestic Supply Chain from Reliance on Critical Minerals from Foreign Adversaries and Supporting the Domestic Mining and Processing Industries” was issued on September 30, 2020, to advance further action on mitigating the national critical minerals and materials challenge. This order directed agencies to examine potential authorities and prepare agency-specific plans to improve the mining, processing, and manufacturing sectors.

The Department of Energy (DOE) created a strategy paper to comply with this Order that outlined the mission, objectives, and organizational strategies DOE will use throughout the entire company. Diversifying supply, creating alternatives, and enhancing reuse and recycling are the three main pillars of DOE's cross-cutting approach to addressing important minerals and materials [20].

The Critical Minerals report from India was released on 28 June 2023 [21]. It considers two very important strategic factors. First, India's security depends on a number of important industries, including defence, space, telecommunications, and high-tech electronics. Second, India wants to guarantee inclusive, resilient, and sustainable growth that directly contributes to increased economic prosperity which is closely related to its goal of reaching net-zero emissions by 2070. India is concentrating on essential minerals as a result of realizing that the next chapter in its economic growth story must involve two simultaneous processes. One involves raising living standards and creating manufacturing in key industries; the other involves increasing investment in sustainable models of lifestyle, energy, and economic development with a focus on decarbonization [22].

Conclusion:

The international community is becoming increasingly divided and polarized as a result of the current geopolitical climate. Industrial policies have so far prioritized two goals when reconfiguring supply chains. First is reducing reliance on geopolitical rivals and second is restoring or maintaining manufacturing advantages in important areas, particularly clean energy, and advanced electronics [23]. The forces at work upstream in the supply chain—the exploration, mining, and processing of vital commodities that serve as the foundation of the global economy—will be crucial to the accomplishment of these aims.

Today, countries are able to employ economic and budgetary resources in coercive ways as economies have become increasingly entwined. Several nations, particularly the US and China, have applied pressure on one another or outside parties using trade and financial networks. Here, it should be noted that the global hunt for these materials is the result of the overlapping of multiple aspects like supply chain vulnerabilities, energy transition, energy security, industrial growth, etc. This overlap has altogether transformed into a large-scale phenomenon that poses risks to both governments and industries worldwide.

Endnotes:

1.       What are Critical Materials and Critical Minerals, Critical Minerals and Materials Program, Department of Energy, US Government https://www.energy.gov/cmm/what-are-critical-materials-and-critical-minerals

2..      Critical Materials, International Renewable Energy Agency, https://www.irena.org/Energy-Transition/Technology/Critical-materials

3.      What are Critical Materials and Critical Minerals, Critical Minerals and Materials Program, Department of Energy, US Government https://www.energy.gov/cmm/what-are-critical-materials-and-critical-minerals

4.     2022 Final List of Critical Minerals, A Notice by the Geological Survey, Federal Register, 24 February 2022 https://www.federalregister.gov/documents/2022/02/24/2022-04027/2022-final-list-of-critical-minerals

5.      Alan J. Hurd, Ronald L. Kelley, Roderick G. Eggert & Min-Ha Lee, Energy-critical elements for sustainable development, Cambridge University Press, 09 April 2012 https://www.cambridge.org/core/journals/mrs-bulletin/article/energycritical-elements-for-sustainable-development/11A2560476E3D847D4F77A7EF1C97D09

6.     Securing Materials for Emerging Technologies, American Physical Society, https://www.aps.org/policy/reports/popa-reports/upload/elementsreport.pdf

7.      Critical Materials: Factsheet, Center for Sustainable Systems, University of Michigan, September 2022 https://css.umich.edu/sites/default/files/2022-09/Critical%20Materials_CSS14-15.pdf

8.     The Rare-Earth Elements – Vital to Modern Technologies and Lifestyles, US Geological Survey, November 2014 https://pubs.usgs.gov/fs/2014/3078/pdf/fs2014-3078.pdf

9.     Rare Earth Elements, The Geological Society, December 2011 https://www.geolsoc.org.uk/~/media/shared/documents/policy/Rare%20Earth%20Elements%20briefing%20note%20final%20%20%20new%20format.pdf

 10.   Agnieszka Drobniak & Maria Mastalerz, Rare Earth Elements – A brief Overview, Indiana Journal of Earth Sciences, January 2022 https://www.researchgate.net/publication/357602526_Rare_Earth_Elements_-_A_brief_overview

 11.    Critical Materials: Factsheet, Center for Sustainable Systems, University of Michigan, September 2022 https://css.umich.edu/sites/default/files/2022-09/Critical%20Materials_CSS14-15.pdf

12.   Geopolitics of The Energy Transition: Critical Materials, International Renewable Energy Agency, 2023, available at http://www.indiaenvironmentportal.org.in/files/file/Geopolitics%20of%20the%20Energy%20Transition.pdf

13.   Reportlinker, Global and China Cobalt Industry Report, 2018-2023, Cision, PR Newswire, 26 March 2019 https://www.prnewswire.com/news-releases/global-and-china-cobalt-industry-report-2018-2023-300818715.html

14.   Jane Nakano, The Geopolitics of Critical Minerals Supply Chains, Center for Strategic and International Studies, 11 March 2021 https://www.csis.org/analysis/geopolitics-critical-minerals-supply-chains

15.   Jane Nakano, The Geopolitics of Critical Minerals Supply Chains, Center for Strategic and International Studies, 11 March 2021 https://www.csis.org/analysis/geopolitics-critical-minerals-supply-chains

16.   Ana Elena Sancho Calvino, What policies have governments adopted to secure critical materials? Global Trade Alert, 30 November 2022 https://www.globaltradealert.org/reports/103

17.   Resilience for the Future: The UK’s Critical Minerals Strategy, UK Government, 13 March 2023 https://www.gov.uk/government/publications/uk-critical-mineral-strategy/resilience-for-the-future-the-uks-critical-minerals-strategy

18.   Critical Raw Materials Resilience: Charting a Path towards greater Security and Sustainability, European Commission, 2020 https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52020DC0474&from=EN

19.   Japan’s new international resource strategy to secure rare metals, METI Agency for Natural resources and Energy, 30 September 2020 https://www.enecho.meti.go.jp/en/category/special/article/detail_158.html

20.  Critical Minerals and Materials: US Department of Energy’s Strategy to Support Domestic Critical Mineral and Material Supply Chains (FY2021-FY2031), US Department of Energy, 2021 https://www.energy.gov/sites/prod/files/2021/01/f82/DOE%20Critical%20Minerals%20and%20Materials%20Strategy_0.pdf

21.   Press release, Union Minister Pralhad Joshi unveils List of “Critical Minerals for India”, Press Information Bureau, 28 June 2023 https://www.pib.gov.in/PressReleasePage.aspx?PRID=1936083

22.  Abhishek Sharma, India Unveils New Critical Minerals Strategy, The Diplomat, 01 July 2023 https://thediplomat.com/2023/06/india-unveils-new-critical-minerals-strategy/

23.  Lazard’s Geopolitical Advisory, Critical Materials: Geopolitics, Interdependence, and Strategic Competition, Lazard, 23 May 2023 https://www.lazard.com/research-insights/critical-materials-geopolitics-interdependence-and-strategic-competition/

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(The views expressed are those of the author and do not represent views of CESCUBE.)