Seven Recommendations for the New Administration and Congress: Building U.S. Critical Minerals Security

Commentary by Gracelin Baskaran

Published November 14, 2024

Building minerals security is one of the most bipartisan goals in Washington. The United States first opened its Bureau of Mines in 1910 to coordinate minerals security needs. It was closed in 1996. In many ways, the U.S. government rapidly decelerated its efforts over the subsequent two decades. However, over the last seven years, the United States realized its reliance on China for critical minerals posed serious risks to its national and energy security alongside its economic competitiveness and prosperity.

In 2017, President Donald Trump issued Executive Order 13817, intending to improve the management of critical minerals needed for economic prosperity and energy security. In 2021, President Biden issued Executive Order 14017, which led to a review of U.S. critical mineral and material supply chain vulnerabilities. The assessment released by the Biden administration discovered that the overreliance on adversarial countries posed a threat to national and economic security.

The Biden administration and Congress advanced important efforts to address these vulnerabilities, including through the Inflation Reduction Act (IRA), the CHIPS and Science Act, the Infrastructure Investment and Jobs Act, the Minerals Security Partnership, and increased capitalization of the Defense Production Act. However, the United States remains highly reliant on China given its decades-long advantage.

With a new administration and Congress taking office in January 2025, the Critical Minerals Security Program at CSIS has created seven recommendations for accelerating efforts to create resilient minerals supply chains and safeguard U.S. interests.

The current focus of both the U.S. government and industry is on the extent to which tariffs will be used to achieve the overarching objective. The reality is that a combination of sticks and carrots will be required. Permitting reform and subsidies can help build domestic production and processing capabilities. Overusing tariffs can have a negative impact. For commodities that the United States has limited or no supply of or is at early-stage development, imposing high tariffs can have two consequences: (1) it can make goods too expensive for end users to purchase, leading to a chokehold on important U.S. industries and jobs central to economic prosperity and national security, and (2) high tariffs on mineral imports can drive producing countries to export elsewhere (likely China)-which could strengthen China's dominant position in minerals supply chains. Incentives to invest domestically and in allied countries will be an important carrot to stimulate mineral production and processing. Without this investment, building resilient supply chains will be nearly impossible.

Recommendation 1: Create a Renewed Bureau of Mines to Expand Domestic Mining Capabilities

Building a new mine in the United States takes an average of 29 years-the second longest in the world. Obtaining permission to operate a mine in the United States today involves securing federal, state, and local permits, as well as ensuring compliance with redundant regulations. A project can require up to 30 permits, many of which are duplicative.

The specific permits needed vary depending on the mine's location and its proposed operations. Streamlining permits has received bipartisan federal support in both the Trump and Biden administrations. President Trump's Executive Order 13953 directed agency heads: "As appropriate and consistent with applicable law, use all available authorities to accelerate the issuance of permits and the completion of projects in connection with expanding and protecting the domestic supply chain for minerals." The Biden administration kept this executive order.

The U.S. Government Accountability Office noted that ineffective government coordination can delay federal permitting by up to three years. Centralizing government support for permitting the creation of a mine through a Bureau of Mines can accelerate permitting and incentivize domestic mine development. Canada and Australia have agencies that oversee mine development. Establishing a bureau could be done through an executive order or Congress.

There has been bipartisan congressional support for streamlining permitting. In 2024, Senators John Barrasso (R-WY) and Joe Manchin (D-WV) introduced the Energy Permitting Reform Act of 2024 to streamline permitting. The legislation would simplify the long and expensive process of building mines, while still protecting the environment and surrounding communities.

Recommendation 2: Develop Incentives to Safeguard U.S. Industries

Building mining and processing capabilities is capital-intensive. Current market conditions are a deterrent to building capabilities-lithium, cobalt, and nickel prices are at multi-year lows. The IRA sought to provide incentives for the electric vehicle (EV) industry, through provisions such as the Section 30D New Clean Vehicle Credit, which established mineral sourcing requirements from the United States and countries it has a free trade agreement with (FTA).

However, not all mineral-intensive industries received incentives. The CHIPS and Science Act of 2022 provided $280 billion for advanced chip manufacturing. Yet, it only included support for chip manufacturing, packaging, and workforce development and provided no support for securing mineral inputs. This poses a significant threat. The United States is highly reliant and dependent on China and Russia for four minerals vital to semiconductor production-germanium, gallium, palladium, and polysilicon.

Incentives are also needed for the minerals required for the defense industry, including aluminum, antimony, bismuth, cadmium, chromium, cobalt, indium, manganese, nickel, rare earths, tantalum, titanium, and tungsten. The United States is highly reliant on Chinese firms for sourcing a number of these commodities.

Incentives for the automotive industry remain important to protect domestic firms and U.S. jobs. In June 2024, automotive manufacturing jobs reached a 34-year high in the United States-the highest since 1990. The IRA drove the development of a labor-intensive "Battery Belt" of factories in the Southeast. It also mobilized $114 billion in private-sector EV-related investments that are forecasted to create 99,600 jobs. Terminating incentives to the domestic automotive sector will generate negative economic consequences-including China further outpacing the United States by creating a cost-competitive EV industry that it can export worldwide, falling behind on research and development, and job losses.

Recommendation 3: Expand Domestic Capabilities while Bolstering Strategic International Partnerships

At a recent CSIS Critical Minerals Security Program roundtable, a former U.S. ambassador noted, "Processing is often commercially stupid but strategically important for U.S. interests." Processing profit margins are often quite low and sometimes even unprofitable. However, without financial support to the private sector to build domestic capabilities, China will continue its processing dominance, leaving the United States vulnerable to China's more frequent use of export restrictions. Although China produces just 10 percent of the world's cobalt, lithium, and nickel, it imports vast quantities allowing it to process 60-90 percent of the global supply of these base metals. These processing capabilities were built using state support.

The United States has made noteworthy progress in building domestic midstream capacity-over the last four years, it has disbursed over $300 million to build domestic rare earth processing capabilities through the Defense Production Act. However, given that the United States has roughly 1.3 percent of the world's rare earths, deploying incentives for rare earth mining projects in Brazil and Vietnam, which cumulatively hold 37 percent of the world's reserves, will be vital to provide feedstock for separation facilities and manufacturing magnets in the United States.

The recently published final rules for Section 45X of the IRA seek to do just this-mineral processors that use both domestic and imported ore from abroad qualify for the credit if, and only if, the processing is done in the United States to create end projects.

The joint domestic-international approach will be vital to building U.S. nuclear power capabilities, which is a bipartisan priority. Historically, it has been highly reliant on Russia and Kazakhstan. In 2022, the United States imported nearly 25 percent of its domestic enriched uranium consumption from Russia. To reduce this national security vulnerability, the United States is building domestic uranium enrichment capabilities for the first time in decades. Most recently, in September 2024, Orano announced that it would build a multibillion-dollar centrifuge uranium enrichment facility in Oak Ridge, Tennessee. However, the United States has less than 1 percent of the world's uranium. While it can mine this, in the long-term, expanding support to production in Australia, Canada, and Namibia, which cumulatively hold 46 percent of the world's uranium, will be important to feed domestic enrichment facilities and increase nuclear power capacity.

Recommendation 4: Expand the Beneficiaries List for Current and Future Minerals Incentives

The only beneficiaries of the IRA are those that the United States has a FTA with. This is counterproductive, given the large mineral reserves in countries like Argentina, Brazil, India, Saudi Arabia, South Africa, and Tanzania.

If the United States is to catch up, deploying investment incentives in a wider range of countries to source minerals for domestic processing and manufacturing is key. Tariffs can disincentivize resource-rich countries from exporting their resources to the United States and allied countries and instead encourage exporting to China. In 2022, countries that sent the largest shares of minerals to China for processing and/or manufacturing included Australia ($96.4 million), Brazil ($27.6 million), Chile ($20.4 million), Peru ($19.6 million), South Africa ($11.4 million), Guinea ($4.5 million), Indonesia ($4 million) and Kazakhstan ($3.9 million).

The lack of U.S. incentives has enabled China to gain control of many African natural resources-a continent well-endowed with rare earths, palladium, manganese, cobalt, copper, graphite, nickel, and uranium. China's foreign direct investment in Africa increased from $75 million in 2003 to $4.2 billion in 2020, much of which was concentrated in the extractive sector. The value of trade jumped from $10 billion in 2000 to $25 billion in 2021-over four times the increase between the United States and Africa. Yet, there is little incentive for Western firms to mine in Africa. Morocco is the only country in Africa eligible for IRA benefits even though it has very small mineral reserves.

Recommendation 5: Reform the U.S. International Development Finance Corporation to Better Fund Minerals Projects

The Development Finance Corporation (DFC) was created during the first Trump administration through the Better Utilization of Investments Leading to Development Act of 2018, also known as the BUILD Act. The U.S. government has turned to the DFC for financing its mineral security needs abroad. The BUILD Act is up for congressional reauthorization in 2025-creating room for necessary reforms to better finance strategic minerals projects.

The DFC has financed a small number of important projects over the last five years that have directly reduced U.S. vulnerability to Chinese export restrictions. This included a $150 million loan to Syrah Resources for a graphite project in Mozambique. The graphite is then sent to Syrah's processing facilities in Louisiana. It became particularly important after China imposed restrictions on graphite exports in 2023-a significant blow given it processes roughly 90 percent of the world's graphite.

There are two actions that can significantly improve the DFC's capacity to support minerals security interests. First, the White House's Office of Budget Management should revise its rules to make it easier for the DFC to make equity investments in critical minerals projects. Equity offers an important signal to both companies and countries. Government investment can help attract additional private capital and facilitate government-to-government cooperation and negotiations.

Second, enabling the DFC to invest in high-income resource-rich countries is important. At present the DFC is unable to finance projects in high-income countries such as Chile and Canada, that could provide mineral inputs for vital industries. This can be addressed in the same way that Congress did during the last Trump administration to strengthen Europe's energy security. The European Energy Security and Diversification Act of 2019 authorized the DFC to provide financing to energy projects in high-income European countries, including Poland where it provided a $500 million loan guarantee for a liquified natural gas project.

Recommendation 6: Quickly Appoint Effective Ambassadors in Mineral-Rich Jurisdictions

For too long, nominees at the ambassador level have not been properly equipped to facilitate minerals diplomacy. Appointees in mineral-rich countries have lacked the necessary expertise, resources, and interest necessary to advance mineral security goals. The next administration should take greater care to appoint ambassadors who will provide the support needed to advance minerals diplomacy efforts and prioritize mining objectives. These appointments should be filled quickly-a long delay can negatively impact the bilateral relationship. Ambassadors play a key role in everything from negotiating contracts to engaging in dispute resolution. Industry resounded that a strong U.S. ambassador can de-risk investments in jurisdictions around the world. In Zambia, the appointment of Ambassador Michael Gonzales came after a long period without an ambassador. His appointment ushered in significant advancements in U.S.-Zambia minerals cooperation, including opening the first-ever Commercial Service Office at the U.S. Embassy in Lusaka; entering into a Tripartite Alliance with the United States, Zambia, and the Democratic Republic of Congo for the raw material extraction, processing, and manufacturing for batteries; and providing support to KoBold, a U.S. firm building one of the largest copper projects in Zambia.

Recommendation 7: Add Copper to the Department of the Interior's Critical Minerals List

Copper is not identified as a critical mineral by the U.S. Department of Interior, although there is bipartisan consensus that it should be. The department's list is only revised every three years. This will require changing the methodology for how criticality is calculated can be done through an executive order. In 2022, the United States consumed 1.8 million metric tons of copper, making it the second largest consumer in the world after China. But the United States is facing an impending shortage.

Copper is vital for national security, economic competitiveness, and energy security. It is a necessary material for many of the advanced technologies that make up the modern global economy from infrastructure and clean energy technologies to defense technologies, electronics, and automotives. Copper is the second most widely used material in weapon platforms by weight. Copper wires connect electrical grids, integrated circuits, and telecommunications systems. The artificial intelligence (AI) industry is putting further pressure on copper demand. The data centers that process AI applications could demand up to 200,000 metric tons of copper per year between 2025 and 2028, adding another 2.6 million metric tons to the copper deficit in 2030.

Adding copper to the Department of Interior's critical minerals list is an important signal to the private sector. Importantly, it makes copper eligible for existing and future critical minerals incentives, which is vital for encouraging investments in a capital-intensive sector. These incentives can also encourage building domestic refining capabilities. Currently, the United States only has three smelters.

Conclusion

The United States urgently needs to reduce its reliance on China for the critical minerals that are the bedrock of national energy security and economic competitiveness and prosperity. Ultimately, while tariffs are protectionist, they can create a chokehold for vital industries and undermine U.S. interests. Innovative instruments are necessary. These recommendations are centered on enhancing the security of key minerals supply chains by addressing domestic bottlenecks, developing new incentives to safeguard U.S. interests, and leveraging commercial diplomacy with allies.

Gracelin Baskaran is the director of the Critical Minerals Security Program at the Center for Strategic and International Studies in Washington, D.C.

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