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Biden’s materials security aims depend on allies, emerging market spending

China 2897 European Union 774 Indonesia 87 Materials - Metals/Mining 708 Russia 99 Trade Deals 976 U.S. 5197

The Biden administration’s 100 day review of critical supply chains has yielded detailed policy recommendations across four major sectors including key minerals, large-capacity batteries, semiconductors and pharmaceutical ingredients. 

As noted in Panjiva’s research of June 10, the sourcing of critical minerals could prove to be among the less tractable. The report flags 189 potential locations for producing critical minerals. However, developing these further as well as new resources face formidable hurdles. One example of the wide range of challenges can be seen in the delay to a new lithium mine being initiated by Lithium Americas due to environmental concerns, Reuters reports.

As a result of the domestic concerns, one of the many policy options expressed in the policy recommendations includes plans to  “secure supplies of critical goods that we will not make in sufficient quantities at home” with Australia, Canada, selected EU states (G7), India, Japan and the U.K. all flagged as being potential allies. That could include using the U.S. International Development Finance Corporation to directly invest in new projects.

Panjiva’s data shows that the allied nations mentioned accounted for 28.7% of U.S. imports of all critical minerals in the 12 months to April 30 while key adversaries China and Russia represented 17.7% over the same period. The picture for individual minerals is very different of course.

Imports of strategic minerals starting to recover, helped by allies

Chart segments U.S. imports of strategic minerals by origin on a monthly and three-month average basis. Identified allies include: Australia, Canada, India, Japan, U.K., France, Germany and Italy. Source: Panjiva

Rare earths are particularly susceptible with China having accounted for 31.2% of raw global exports in 2019 while Australia represented 18.5%. When including processed materials, Chinese suppliers accounted for 48.7% of U.S. imports in the 12 months to April 30 after dropping by 40.4% in the three months to April 30 versus the same period of 2019. 

Shipments from Japan and the EU accounted for 28.4% and 21.4% of U.S. rare earth raw and processed materials respectively in the past 12 months. Yet, the supplies from Japan and Europe will in turn likely depend on shipments from China, raising the importance of securing supplies either domestically or from Australia.

China still leads rare earth supplies after extended downturn

Chart segments U.S. imports of rare earths by origin on a three-month trailing average basis. Source: Panjiva

The prospect in investing outside G7 / Quad countries is also held out by recommendations from the Department of Defense that the government invest in projects “in emerging markets with its debt, equity and political risk insurance products” though defense has raised concerns regarding armed conflict, transparency and sustainability for sourcing outside allied nations.

That may be particularly useful for the more mundane minerals such as unwrought tin, where suppliers from Peru and Indonesia accounted for 28.8% and 26.5% of U.S. imports in 2020 respectively. 

There may be room for U.S. suppliers to take a significantly increased share of Indonesian supplies given they represented just 9.1% of Indonesia’s tin exports in the 12 months to March 31 after a 38.5% year-over-year slide in shipments.

Supplies more broadly remain highly fragmented with the next largest customer markets being the EU and Singapore with shares of 17.1% and 14.0% respectively. Total shipments though have been in a steady decline with total Indonesian exports down by 27.7% year over year in Q1’21.

U.S. receives a small and shrinking share of Indonesian tin

Chart segments Indonesian exports of unwrought tin by destination. Source: Panjiva

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