USA, Canada And Other Countries Establish Minerals Security Partnership
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The United States, along with partner countries including Australia, Canada, Germany and the UK, this week announced the formation of the Minerals Security Partnership (MSP), a pact that will focus on securing a steady supply of rare earth material for its members.
The MSP, which was announced during the Prospectors and Developers Association of Canada convention in downtown Toronto this week, will help member countries ensure they have a reliable supply of rare earth material in the years to come, which are used to manufacture electric vehicle batteries, as well as batteries for consumer electronics.
Jose W. Fernandez, the Under Secretary of State for Economic Growth, Energy and the Environment, told The Globe and Mail the pact will “deal with the supply chain vulnerabilities that many countries have,” at the moment. As much of the globe’s finite rare earth materials are located in just a handful of countries, the pact will help streamline and simplify the supply chain for these products.
MSP members include Australia, Canada, Finland, France, Germany, Japan, the Republic of Korea, Sweden, the United Kingdom, the United States, and the European Commission. Australia is among the world’s top producers of rare earth materials, exporting roughly 17,000 metric tons in 2020 – accounting for seven percent of all rare earth production that year. China leads the way in rare earth material production, exporting 140,000 metric tons in 2020.
Many countries have large rare earth reserves, but producing these materials can require complex separation and refining processes. In addition to vehicle batteries, rare earth material is also used to produce permanent magnets, including those used in electric vehicle motors, as well as catalysts, ceramics, alloys and more.
Canada is another major exporter of rare earth materials and has large deposits of in-demand materials needed for EVs, including cobalt, lithium, aluminum, tungsten and magnesium, among more. GM has partnered with a Quebec-based company called MP Materials to ensure it has a steady supply of permanent magnets for its EV motors.
“The goal of the MSP is to ensure that critical minerals are produced, processed, and recycled in a manner that supports the ability of countries to realize the full economic development benefit of their geological endowments,” the U.S. State Department said in a release this week. “Demand for critical minerals, which are essential for clean energy and other technologies, is projected to expand significantly in the coming decades.”
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The auto companies and now nations are jockeying for the ability to purchase the large quantities of these semi-precious metals that are essential to EV production. Most of this production capacity does not exist yet and/or is not in places friendly to Western nations. Current EV production is a fraction of future objectives so the pricing pressure on these commodities will be tremendous worldwide. How much additional cost can the automakers absorb and still be able to sell large volumes of EVs at a profit?
That’s exactly why they’re starting the consortium. Band together now, and ward off future uncertainties.
Forming a consortium will not affect the laws of supply and demand, it will only organize the market place. As an example, the petroleum market has all sorts of organizations in place but worldwide supply and demand dictate price.
So, an unorganized marketplace is preferable?
As for oil, OPEC, for example, certainly does control price. As you stated, supply and demand control price, and OPEC exists primarily as a means of controlling supply.
I just don’t understand how this partnership can be seen as anything but a good thing. Unless, of course, your objective is to see certain things (the Biden administration) negatively.
My point is that an organized market might be preferable but in any event it will not be able to keep prices down if supply exceeds demand. That leads back to the question of how much additional cost can automakers absorb and still sell large volumes of EVs at a profit. If they have to raise prices that will reduce the competitiveness of EVs as a transportation device and reduce EV volume. Regarding Biden, I don’t see how the comments above relate to him or his administration.
If supply exceeds demand, that means lower prices.
Oscoda Bill – Regarding Biden you want tonnes of EV minerals from Quebec to build EV’s and you get most of the hydro electric power for the north eastern US from Canada too ,but when it comes to Oil another natural resource you would rather buy from .Saudi Arabia who killed and chopped up a U.S. reporter ,than complete the Keystone pipeline for US independence from the Middle East ,now Biden has to go to the Saudi Prince hat in hand to increase production to stop inflation in the world and US !
Esko, you are absolutely right, I misspoke. I should have said, if demand exceeds supply, that means higher prices.
Gary L – Whoa!! I did not say anything about wanting tons of EV minerals or hydro power from Canada. I also did not indicate a preference for where U. S. oil comes from. I also was not trying to make a political statement for or against EVs or for or against the Biden administration. I WAS making the point that both major corporations and countries have recognized that the large quantities of semi-precious materials required to produce EVs worldwide will significantly increase competition (and therefore price) for these commodities. Consortiums will not be able to reduce prices. These higher material prices will affect the profitability of EVs for automakers and will require vehicle price increases to maintain profitability. If the market won’t pay these price increases the EV volume increases will be delayed or stalled. This is not a political statement, it is just basic economics and is not for or against EVs
Yup, I figured it was a mistake. Still, if the consortium works as planned, the idea will be to maintain a steady supply, smoothing out the ups a downs one finds in an unregulated market.
Anyway, I can’t see how this is anything but a good idea.
I totally agree with you Oscoda ,you did not say anything negative ,I was speaking in generalities about certain commodities ,it is great that the EV minerals from Quebec will be processed and sent to Michigan and Canadian battery plants for our mutual future .The free market system in Canada and the US doesn’t seem to work normally in regard to petrol .Every gas station has lots of gas with no shortages or no long line up to get yet gas in their underground tanks rise mostly and fall occasionally hourly like the stock (commodities) market so why haven’t gas prices fallen as supply has been maintained or supplemented from the oil reserves like other products in the free market system ,I don’t believe there is a free market system among the big oil and gas companies that even exists to treat consumers fairly as they rack up huge profits month after month !
We are not talking about an unorganized market place but a fair one .Not totally specifying many countries battery component natural resources to mainly feed and build EV in the U.S. which this latest agreement enhances to the Main benefit of the US vehicle manufacturers ,when the Texas, mid west ,and western U.S. electrical grid will never stand up to all the battery charging in summer heat waves and winter extreme cold when the EV markets dominates production and general auto usage !
Why could any country not break away from OPEC and set its own prices? Why could Canada or the USA or both not tell OPEC to “stuff it” … Venezuala used to have its own pricing and the country did very well until the communist (socialists) got into power… Now that country is a sh!tbowl, the same way the USA will be if current political policies are kept in place.
Wow during the Trump years Canada was belittled and virtually snubbed ,our aluminum and some steel was banned under some U.S. defense act even though it was allowed under NAFTA now under Biden he cancels The Keestone Pipe line for your U.S. energy security from middle eastern killer nations .Signing agreements means.nothing ,it all comes down to political pressure and arm twisting in national interests for natural resources ,the same as it’s always been for smaller nations as Allies !
I read that China has thrown a major hissy fit over this partnership. If this gets China’s panties in a bunch, this can not be a bad thing for the world…