Trump's controversial plan to price minerals is met with skepticism from the G7 and a divided industry
According to diplomatic sources, and an analysis of corporate policies, the Trump administration's plan to increase critical?minerals by regulating prices has been met with skepticism from G7 allies, and a divided industry. Negotiations for a Western Trading bloc have stalled over concerns regarding cost and governance. The trading bloc was first proposed by U.S. vice president JD Vance back in February. It aims to wean the West off China which has become the world's biggest minerals producer through operating at a deficit and dampening the prices of the?building block for semiconductors, computers servers, military equipment, and a myriad of other products. Artificially low prices of cobalt and lithium have made it difficult for Western mining competitors to compete. This has inhibited new development, and driven some companies out. Beijing has used this tactic in other industries. As envisioned, the trade bloc would look at price supports, market standard, subsidies, and guaranteed purchases in order to financially support production across several countries. Vance stated that the measures could be enforced through "adjustable duties to maintain pricing integrity." Currently, many niche minerals that are critical to tech and defence are traded without transparency, and they're linked to Chinese prices. This is because China dominates the market. Three sources said that since Vance's announcement G7 members have been pushing back against U.S. trade representative Jamieson Greer and cooled the idea of a price scheme derived by a Pentagon AI model.
According to European officials, the main concerns are who will pay for premiums on minerals, where these subsidies should be placed in the supply chain, and how the governance system would work.
More than 230 submissions from miners, refiners, and customers to Greer's Office show that the U.S. Mining Industry is divided over what Greer should do to encourage allies.
Concerns from allied and corporate groups highlight the difficulty of reinventing how minerals are purchased and sold. More than a dozen consultants and analysts said that the final shape of the trade bloc could have a long-term impact on minerals markets.
Ashley Zumwalt Forbes, an investor in minerals who managed the U.S. Department of Energy’s portfolio of?batteries? and critical minerals under former president Joe Biden, said: "It's very difficult to do. I'm glad I'm not doing it." This topic will dominate the discussion when G7 members gather in France this week. Western countries are faced with the challenge of diversifying away from China by building up an entire supply chain, from mine to final product. A draft U.S. plan, created using a Pentagon AI pricing program, has been delivered to the White House. The National Security Council, and U.S. officials are expected to brief G7 ally countries on its content at the next meeting.
European officials and representatives of the industry said that they would rather study the long-term impact of price support than make a quick deal, which is in contrast to the American's more rapid pace. Sources say that the Trump administration is reluctant to accept the French proposal for a permanent administrative'secretariat' within the International Energy Agency or OECD, to track G7 initiatives regarding critical minerals, as the presidency rotates. Three sources said that the United States and Canada, which are currently holding the G7 presidency, want to avoid multilateral discussions and instead forge quick concrete bilateral agreements, later expanding them.
Washington's push for a bi-lateral approach?appearances to be a change in strategy from Vance's plan, first laid out earlier this year.
Greer, who spoke to reporters at the Organisation for Economic Co-operation and Development's (OECD) Ministerial Meeting in Paris in early June, said: "We are trying to take some of these ideas and turn them into a deal."
Greer stated that the United States would use price support "to protect the production of critical mineral and derivative products". We would like to introduce it gradually. ... If other countries wish to join us, they are welcome to do so." Washington wants to make a proposal to Japan and to the European Union for bilateral agreements that are legally binding before the end June, according to two sources who have been in touch with the issue. This proposal will be the first step in implementing the action plans that were announced earlier this summer, with Japan and with the EU. Sources said that the first binding agreement may cover five to ten minerals. Minerals under consideration include graphite, tungsten and antimony. All are subject to Chinese export restrictions or bans.
PRICE SETTING The Trump Administration aims at setting prices by using the U.S. Department of Defense’s Open Price Exploration for National Security AI metals program. This was created by DARPA, and is designed to calculate how much a metal ought to be priced when labor, processing, and other costs are taken into account, and Chinese market manipulation alleged is excluded. One source stated that European allies are against the idea of using a AI pricing system created by Washington. They cite concerns over the U.S. exerting too much influence on the pricing in the EU. One person said that Europeans are looking for a wide range of tools, as well as "agile governance," to determine the best way to implement these measures in relation with any mineral or its value chain. It would be best for Europe to have a price-index based on actual deals on the European market. Nicola Beer who is in charge of minerals financing at the EU's European Investment Bank asked: "Can we make these opaque pricing systems more transparent, market-driven and less prone for manipulation?"
Different parts of supply chain and products in different sectors are shaped differently by pricing mechanisms. This adds to 'complexity.' A possible alternative to OPEN is an EU-funded agency, EIT RawMaterials?which works with the digital platform Metalshub in order to create indexes that are not based on Chinese government pricing. This will give foreign investors a clearer signal of profitability. Indexes that are broader than Europe could include the United States of America, Australia, Canada, or Britain.
The fact that Western nations import so few minerals in raw or lightly processed forms could complicate the enforcement of any trading bloc. For example, lithium carbonate is not regularly imported into the U.S. but cell phones that are made of it are.
James Willoughby is a metals consultant at WoodMac.
Greer said he would use the comments from miners and clients in a statement to "help guide policies for continued negotiations with Washington's allies." The responses show that respondents are generally in agreement that the bloc should concentrate on niche minerals instead of copper or other widely-traded metals, and should also focus downstream products such as cell phones and laptops.
They disagree, however, on the best way to regulate minerals prices. Several prominent mining companies and trade associations have recommended against setting prices.
Blake Harden is a managing director at EY who focuses on trade policy. He said that there was a lot of nervousness about the different options and how they could impact different parts in the supply chain. General Motors, who is building North America’s largest lithium mine, with Lithium Americas; Umicore; platinum miner Sibanye Stillwater; the U.S. Chamber of Commerce and rare 'earths' company MP Materials, all of whom made different proposals. Last July, MP Materials became the first company to be granted a financial guarantee for its rare earths. Washington would fund the company in the event that prices fell below a set level. Lynas Rare Earths, Serra Verde and other companies have received a fixed price for a part of their rare-earths production. However, they didn't receive the financial backing. The National Mining Association (US industry trade group) advised Greer to avoid price fixing and focus instead on tax credits and incentives.
Rich Nolan, CEO of the trade group, said that while market interventions, such as pricing mechanisms, may play a part in certain circumstances. However, incentive-based methods are more suited to address challenges facing the mining industry. (Reporting from Julia Payne and Ernest Scheyder, in Evians les Bains and Houston respectively; additional reporting from Leigh Thomas and Jarrett Renshaw, in Washington and David Lawder in Paris; editing by Veronica Brown & Claudia Parsons).
(source: Reuters)
