Critical minerals, Europe cornered by US plan for strategic stocks

Even in the case of lithium and copper - key metals of which there are mineral deposits in many countries of the world - China controls over 60% and about 50% of the refining capacity respectively, creating a formidable bottleneck in the supply chains.

Dependence on China does not spare the US. The US Geological Survey (USGS), which examines data from 2024, finds that Washington is 100 per cent dependent on foreign sources for 12 out of 50 minerals it considers critical, while for 28 others, imports meet at least 50 per cent of national needs.

Among the suppliers, China plays a leading role, comparable in importance only to that of Canada: the two countries are the origin of more than half of US imports at 21 minerals each. Also on the podium are Germany (11) and Brazil (10), followed by Japan, Mexico and South Africa, all at 7.

"For years, American companies have risked running out of critical minerals during phases of market disruption," said President Donald Trump on Monday 2, announcing the launch of Project Vault. "Just as we have long had a strategic reserve of oil, we are now creating another reserve for American industry so that we don't have any more problems.

The development of production

The Trump administration is also moving on other fronts. It has already invested hundreds of millions of dollars in support of mining and metals companies, in several becoming shareholders.

The most recent transaction - dated 26 January - concerns USA Rare Earth, in which the Department of Commerce invested $1.6 million to accelerate the start-up of a heavy rare earth mine in Texas and a magnet factory in Oklahoma.

Previously, equity stakes had been taken in MP Materials, Vulcan Elements, ReElement Technology, as well as in Canada's Lithium Americas and Trilogy Metals. And the list of public holdings is likely to grow longer.

The axis with the allies

In order to stimulate the development of non-Chinese supplies, the Trump administration is also seeking forms of cooperation with some allied countries. On Wednesday 4 he convened a summit in Washington with ministers from 55 different countries, which concluded with an agreement to 'explore a plurilateral initiative with like-minded partners on trade in critical minerals'.

The final document, signed by the EU and Japan, mentions coordination to impose minimum prices at borders (to avoid Chinese dumping) and agreements for 'free zones' in which critical minerals can be traded on favourable terms.

Nothing concrete so far. Although there is an immediate reaction from Beijing, with a Foreign Ministry note deploring any initiative 'that undermines the international economic and trade order by establishing rules for a closed circle'.

Beijing also responded to Project Vault, albeit indirectly, by signalling that it wants to intensify the accumulation of copper in its strategic reserves (which it has possessed for years, but about which it is usually very sparse on information) .

The leap in size that the US intends to take has made many people's antennae perk up. Washington already has stockpiles of strategic materials for military purposes, kept - since 1939 - in the National Defence Stockpile (Nds): the latest official figures speak of 53 different raw materials, stored in nine warehouses, for which Bmo Capital estimates a value of 13 billion dollars. Just recently, the Pentagon procured 400 tonnes of indium in three years through a 125 million contract with two companies (AIM Products and Indium Corporation).

Use of the

With Project Vault, the purchases will become much more intense: the allocation of almost USD 12 billion - of which USD 10 billion from the Ex-Im Bank, increasingly central to the Trump administration's policies - is huge, even compared to actual storage needs, reflects David Fickling, a Bloomberg analyst, who says that such a large sum is 'amply sufficient to purchase every single gram of critical minerals consumed in a year outside China'.

The IEA estimates that $800,000 would be enough to set aside a gallium stockpile equal to six months' worth of imports from all OECD countries (albeit with some care in storage, as gallium melts at just 30 degrees Celsius). The cost of a similar stockpile of rare earths and magnets is around 90 million, according to the same study, and around 300 million in the case of lithium hydroxide (again, a bit tricky, as it tends to evaporate and suffers from moisture).

Purchases such as those proposed by the US risk leaving all other countries high and dry, or forcing them to develop a further form of dependence on Washington as the only way to diversify away from China.

Something similar happened with gas, when we replaced Russian supplies with LNG 'made in the USA'. And we are also going in this direction with Venezuelan oil: again available to anyone, but only if they buy it from US intermediaries.

Europe, moreover, does not have its own strategic stockpile of minerals, unlike Japan and South Korea. And according to a study by the ECB it already buys rare earths mainly through US intermediaries: only a very few large companies, including Airbus and BASF, source directly from China. Competition for purchases in the future is likely to become increasingly fierce, forcing compromises (on prices or otherwise).

The comparison with oil stocks invoked by Trump does not hold up: within the OECD these are accumulated with common rules and in the event of emergencies coordinated management is triggered, entrusted to the IEA since the 1970s: the Paris-based agency was set up precisely for this purpose, after the shock of the Arab embargo, and is now a candidate to assume a similar role for critical minerals. But the United States today is not what it once was.