Commentary
The U.S. and Canadian governments are funding mineral mining and processing in Canada, including through two pieces of
U.S. legislation and the Critical Mineral Research, Development, and Demonstration program of Natural Resources Canada.
The unusual U.S. funding of a Canadian industry, through the Defense Production Act of 1950 and the Inflation Reduction Act of 2022, seeks to decrease reliance on China in the production and refinement of key metals used in the electric vehicle, aerospace, and defence industries. China currently produces approximately
98 percent of the world’s finished graphite and
77 percent of the finished cobalt necessary for battery anodes, for example.
As explained in a Canadian government
press release on May 16, “The development of secure, sustainable North American supply chains requires close collaboration among like-minded partners.” Canada and the United States are therefore “co-investing in strategically important Canadian critical minerals projects and working to strengthen our supply chains through the Canada-U.S. Energy Transformation Task Force.” The two countries are developing “the critical minerals essential for continental security and our clean energy future.”
The EV industry is expected to employ millions of workers in the coming years, and the United States and Canada want to secure as many of these jobs as possible. In addition to supplying aerospace-defence industries, a strong North American economy will have national security benefits in that U.S. and Canadian military forces depend on the tax base for our expensive and technologically unparalleled weapons systems.
Two Canadian companies submitted the winning bids.
Lomiko Metals plans to produce graphite in Quebec, and
Fortune Minerals will produce approximately 1,800 tons of cobalt, 1,700 tons of bismuth, 300 tons of copper, and 47,000 ounces of gold annually at the NICO mine in the Northwest Territories.
Cobalt is a byproduct of copper and nickel mining. Both graphite and cobalt are critical to the production of EV batteries. According to the Canadian government, “Both investments will support defence applications and the growing demand for long-duration energy storage and electric vehicles.”
The last time the U.S. government funded mineral production in Canada was during
World War II. The United States military needed more aluminum to build tanks and planes, and the government subsidized the necessary mining and processing in Quebec.
In 2022, China dramatically increased production and refinement of graphite, which led to a drop in prices that made it difficult for non-Chinese companies to acquire the necessary investments and loans to compete. Then in June 2023, graphite shortages were predicted due to massive future demand for EVs.
In October,
China announced export controls on graphite. After the controls went into effect in
December, China’s exports of various graphite products suddenly decreased by as much as 77 percent. Beijing claimed the move was for reasons of national security and national interest. China’s dominance of graphite, the largest component of EV batteries by weight, would give its EV industry a major advantage just as global demand for EVs was increasing.
The Chinese Communist Party’s aggressive approach spooked global automakers, including
Tesla and Mercedes, which for at least a year have been seeking alternative raw graphite sources.
If not countered by the new initiative’s raw materials supply and processing, and other similar new sources, EV battery production will be difficult in the United States, Canada, and allied countries. The United Kingdom and Australia have recently joined the historical U.S.-Canada defence-industrial agreement that serves as the new production’s basis.
While
Africa is expected to substantially increase its supply of the minerals in the coming decades, including exceeding China’s graphite production as soon as 2026, a secure supply of North American minerals will be especially important to U.S. and Canadian manufacturing.
The United States has stated that it would facilitate the purchase of U.S.-subsidized Canadian minerals at market prices. Canadian law allows for its government to prioritize buyers in NATO countries, which will also help ensure that the new minerals go to auto makers in allied countries.
Total funding of the Canadian mines by the U.S. and Canadian governments is miniscule so far, at just tens of millions of dollars compared to the billions of dollars in future growth and jobs from having a secure supply chain. Without it, the EV industry in North America and among our allies would be at risk.
Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.
