Rare earth resources Photo: VCG

US President Donald Trump is set to launch a strategic critical-minerals stockpile with $12 billion in seed money, a move described in some foreign media reports as US’ attempt to slash its reliance on Chinese rare earths and other metals. A Chinese expert said that the US move is unlikely to achieve its goals in the short term, as the real challenges—acquiring advanced technology and scaling up production capacity—cannot be resolved through simple or straightforward actions.

According to Bloomberg, the venture — dubbed Project Vault — is set to marry $1.67 billion in private capital with a $10 billion loan from the US Export-Import Bank to procure and store the minerals for automakers, tech firms and other manufacturers.

The initiative would represent a first-of-its-kind stockpile for the US private sector. The stockpile is expected to include both rare earths and critical minerals as well as other strategically important elements that are subject to volatile prices, according to the report.

“The US has long harbored concerns regarding the security of supply for critical minerals. On one hand, it seeks to maintain stable imports of these essential critical minerals from China; on the other hand, it is actively pursuing diversification and independence for its supply chain. To this end, the US has allocated relevant funds to increase investment in storing critical minerals, with the aim to ensure the stability of its critical mineral supply chain,” Zhou Mi, a senior researcher at the Chinese Academy of International Trade and Economic Cooperation, told the Global Times on Tuesday.

Independent rare earth analyst Wu Chenhui told the Global Times on Tuesday that for the US, this would represent a new attempt, but it also raises doubts about whether it can truly achieve the goal of achieve its goal. “The project is essentially about stockpiling rather than production. It functions more as a short-term buffer than a fundamental solution,” Wu said.

Under the arrangement, companies that make an initial commitment to purchase materials at a specified inventory price later — and pay some up-front fees — will be able to present Project Vault with a shopping list of preferred materials they need, Bloomberg reported.

The project, in turn, will seek to procure and store the materials, with the manufacturers charged a carrying cost for the expenses associated with interest on the loan and holding the elements. A key element in the venture’s design is that manufacturers who commit to buy a specified amount of materials at a set price also commit to repurchase the same amount at that same cost in the future. The administration sees that acting as a stabilizing mechanism, helping suppress volatility, said the report.

Zhou noted that beyond the issue of funding shortages, the supply of critical minerals is more fundamentally constrained by whether companies have adequate real-world production capacity and execution capability. “This structural challenge remains largely unaddressed in the US today,” the expert said.

The current US efforts remain at the preliminary stage of “throwing money at exploration and mining,” yet funding and prospecting are merely the easiest and most straightforward components of rebuilding the supply chain. At this stage, the real challenges in reconstructing America’s rare earth supply chain lie in acquiring advanced technology and scaling up production capacity — two fundamental issues that cannot be resolved through simple or superficial measures, Wu noted.

John Helveston from the department of engineering management and systems engineering at George Washington University was quoted in a South China Morning Post report that a strategic reserve would do “little to combat China’s dominance on the actual supply chain,” 

According to the report, Helveston added that the length of time needed to develop an alternative supply is on the order of years if not decades.

Over the long term, China’s advantages in resource reserves and processing capabilities mean it will not be readily replaced or overtaken, Zhou said.

The US has been taking frequent measures in the field of rare earths and other critical minerals. According to Bloomberg, the US administration has already inked cooperation agreements with Australia, Japan, Malaysia and other countries on the issue. It will press even more nations to pursue such pacts during a summit of dozens of countries set to take place in Washington on Wednesday.

In January, finance ministers from G7 countries reportedly agreed to accelerate the reduction of rare earth imports from China. In response, Mao Ning, spokesperson from China’s Foreign Ministry, told a press conference that on keeping the global industrial and supply chains of critical minerals safe and stable, China’s position has not changed. All parties have the responsibility to do so.