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Shift Key with Robinson Meyer
Trump’s Most Self-Defeating Move on Rare Minerals
00:49:20
Rob digs deep on critical minerals with Full Tilt Strategies’ Nathaniel Horadam.
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This episode of Shift Key is brought to you by the Yale center for Business and the Environment. Want to accelerate your career in energy? Explore online certificate programs from our sponsor, the Yale center for Business and the Environment. Whether you're designing, policy unlocking, financing or developing impactful projects, Yale's online clean energy programs equip you with tangible skills and powerful networks and you can continue working while learning in just five hours a week. Propel your career, expand your network and make a difference. Learn more about their 10 month financing and deploying clean energy program or their 5 month clean and Equitable Energy Development Program by checking out the show Notes or heading to CBEY Yale.
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Edu to learn more.
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A
Listeners of Shift Key get an exclusive offer, use referral code HEATMAP26 and get your application in by the priority deadline for $500 off tuition to one of Yale's online certificate programs in clean energy. Transform your career, your and the energy landscape. Head to CBY Yale.edu to learn more CBey Yale edu that's CBey Yale edu. It is Wednesday, February 4, and there's been a lot of action lately around critical minerals and other rocks needed for decarbonization. On Monday, President Trump announced Project Vault. It's a $12 billion public and private effort to create a domestic stockpile of critical minerals. It's totally new and a bunch of American companies including ge, Vernova, Western Digital and Boeing have already expressed interest in being involved. Mary Barra, the CEO of General Motors, even attended the event where the President announced that they were going to put this stockpile together. And all in all, it's one more policy step the Trump administration has taken to shore up the country's supply of critical minerals. You might remember that back on day one of his second term, the President announced that critical minerals were part of the so called energy emergency the country was facing. Since then, Trump has established a price floor for rare earth elements and struck new deals, even taken ownership stakes in American mines and refinery operations. I should say before we go on that a critical mineral is kind of a funny thing to talk about. We're really just talking about any rock or any type of mineral that the US Government believes it would not be able to get in an emergency. It's more of a bureaucratic designation than anything else. The U.S. geological Survey, which is in charge of the list here, says There are now 60 different critical minerals. They include lithium, which is an EV, batteries, aluminum, as well as all the rare earth elements, stuff like dysprosium which is in electric vehicle motors or europium, which is in nuclear control rods. We'll get the full list in the show notes. And I should say that we at Shift Key have a relatively straightforward reason for caring about these critical minerals, which is they're essential for decarbonization. Many minerals on the list are, as we were just saying, key inputs to solar panels or wind turbines or electric vehicles. And if, say, America's access to these minerals ever got cut off, then American decarbonization would basically stop. The funny thing is Trump doesn't care about decarbonization at all. And while critical minerals are important to other economic activities, including making robotics or military equipment, their biggest end users really are EVs and batteries. And that makes these critical mineral policies potentially some of the most important things that Trump is doing to help decarbonization. I should add they're also some of the most unconventional economic policy to come out of this administration. And it wouldn't surprise me to see a future President AOC borrow some of the tactics that the President has deployed in, say, the lithium or rare earth markets. So we wanted to know how is it going? Are Trump's policies working, what's backfiring and what should be borrowed, maybe for a future administration? Today we're talking to someone who has worked on these issues up close. Our guest today is Nathaniel Horadam, and from 2022 to 2025 he worked on and eventually led critical minerals policy at the Loan Programs Office at the US Department of Energy. If you don't know, the Loan Programs office is basically the in house bank at doe. It's since been renamed the Energy Dominance.
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B
Financing Office, but we'll keep calling it.
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A
By its legal name. Nathaniel is now founder and president of former Full Tilt Strategies llc and he writes about these issues on the tailing substack. So since he left LPO last year, I wanted to have an exit interview with Nathaniel, talk about what's working at doe, what's not working, and why. Electric vehicles will probably be central to any eventual successful policy effort here, whether the Trump administration likes them or not. All that and more, it's all coming up this week on Shift Key. Nathaniel, it's so good to have you. Welcome to Shift Key.
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C
Thanks, Rob. Great to be here.
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A
So, Nathaniel, I want to start here. Depending on which list you use now.
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B
There are dozens of critical minerals. I think there's now like 60 of them.
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A
And just to get this out of.
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B
The way, a critical mineral is defined in the energy act of 2020 as a material or substance with A high risk of supply chain disruption that serves an essential function in energy technology or is defined as a critical mineral by the Secretary of Interior.
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A
But it's a very long list, right?
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B
Like now, copper is on it. Lithium has been on it. Lots of rare earth elements are on it.
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A
It's so long that I think it.
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B
Can be hard to wrap your head around what exactly is on this list. But we were having a conversation recently, and you kind of gave me a scheme to think about different parts of this list, different ways to categorize critical minerals. So I just wanted to start by asking you, like, obviously there's 60 critical minerals now. I think it's a lot of them. How should we think about them in practice? Can we chunk this list up into various groups?
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C
I'll just start by saying that, yes, it is a very long list. And as a disclaimer, I'm not an expert in all 60 of them. I'd like to think I'm an expert in at least a dozen or so of them. You know, many of them have similar characteristics. But a lot of the industrial end uses, whether it's in the defense supply chain or in commercial sectors, it varies from mineral to mineral. And that's how we assess criticality. Ultimately, it's something that we recognize there is some sort of threat from any exogenous shock, whether it's adversarial or geopolitical risks of other types of. And it would have a substantial impact on either the defense industrial base or the US economy writ large. So there are 60 critical minerals on the list. There were 50 until the most recent update.
- [07:01]
B
They added metallurgical coal, which I want to get to. Actually, they added 10 of these.
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C
They added copper, they added metallurgical coal, they added silver, lead, and a handful of others. But, you know, 60 different minerals, they all have these different characteristics, and they all represent different problems as you try to solve for their supply chains. So, like, if you look at the full list of 60 critical minerals and recognize that there are also certain critical materials in there designated by DOE, by Department of Defense that are.
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B
What's an example of a critical material? Just before we go, like, that's not a mineral.
- [07:38]
C
Electrical steel.
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B
Okay, okay. So like a high quality industrial product that might be made of relatively common materials but is very hard to produce.
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C
Or something hard to produce at the quality needed or, you know, not economic, in the US We've lost our ability to do it. Substrates for semiconductors. Silicon carbide is one that the Department of Energy designated. But you could Also look at maybe gallium arsenide or gallium nitride wafers that go into semiconductors, radioisotopes for medical end uses. So like those are the sorts of things that they're not called out as minerals, they're derivative of minerals. But it makes sense for an agency to actually go out and call them a critical material for their purposes. Of the 60 critical minerals, USGS, the US Geological Survey goes through and does a scientific assessment of impact to the US Economy for each of these things. And then at the end of that process, the Secretary of Interior can modify that final list, but including also going to other agencies and asking for their weigh in for things that they deem critical that should be on that list. So the Department of Energy has its own critical materials list that includes things that are not minerals. They're downstream of minerals like electrical steel and silicon carbide, which is a substrate or a wafer for semiconductor manufacturing. And those things get added to the list. So if you look at the full list of 60, they cover a wide range of different markets, some of which are very mature like aluminum. And now copper is on that list and now that metallurgical coal is on there same deal to very small volume, not liquid, not price transparent, highly concentrated markets where there may be only a handful of buyers in the US including typically the Department of Defense. A lot of the minor rare earths that don't go into magnets would fall into this category where there really aren't going to be any sort of market based interventions that you can take from a policy perspective to make this stuff in the US or secure additional supplies, it may just require going out and buying them. And then the middle you've got a lot of gray area for different materials that in theory could get with heavy government intervention, something resembling a market structure. And that's why you start to see starting with the Biden administration, but really leaning in from the Trump administration efforts to do things like global price floors or stockpiling mechanisms that are intended to create markets where they wouldn't otherwise exist.
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B
In some ways you can group these into three categories. Where it's like at the one end you have minerals like copper or lithium, I would imagine, where there's a lot of end users, the market's massive. The government's never going to be a huge player in these markets. But you need to support the markets, or at least you need enough depth in the markets that kind of these minerals or materials are available to American buyers when they need them. At the other end you have really niche minerals. There's never going to be a market for them. The government just has to directly pay for their production, basically. And then in the middle, big gray area. And what's in the middle, like gallium, like what else would be in the middle here?
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C
Gallium would be in the middle. Tungsten, vanadium, antimony would go into that middle category where you might be able to get pooled offtake structures that serve the commercial industrial base and allow for multiple competitors. Whereas again, on the far end of the spectrum, let's take samarium for example. It's a rare earth. It's used in magnets, not the magnets we normally think of. It's used in the most high performance magnets, supercars, fighter jets, things of that nature. There is never going to be enough demand in the US to support multiple samarium producers. Which is why the Department of Defense went out with MP Materials and struck a deal for what will effectively be a sole source or sole production arrangement. I don't see anybody else being able to stand up a competing facility. And that's okay for certain materials, but you need to be able, with clear eyes, sort these things so you can identify the right policy solutions and know where you actually want to foster some degree of competition and innovation.
- [12:15]
B
You've referenced a few different tools that the government could use to support these different industries. I want to zoom out before we kind of dive into different options here and just say, how is this effort broadly going? Because at this point, I think since the 2010s, the federal government has identified that there is a need to support American or American linked allied supply chains and value chains. It's been eight, 10 years now that we've been doing this. How is it going?
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C
Mixed results really, depending on the material. Point this back, Rob. Like thinking about every single one of these as different problems. They're not all going to move on the same trajectory. And a lot of them aren't even problems to quote unquote be solved. Right. You mitigate risks along the way and some things will fall off the list because us producers decide, you know what, this is too risky. We're going to find a way to weed this out of our supply chain and then it ceases to be a problem. It kind of solves itself. Other things will take sustained intervention over a generation probably to address. I think things like rare earths and graphite probably fit that category. You mentioned we have been working at this since really the mid 2010s. You also have to recognize we weren't doing A lot. Not just the federal government, but in terms of miners, you didn't have a lot of active development work for a lot of these materials back then. So Obama administration, they put the signal up, okay, we care about critical minerals. Trump 1 comes out and says, we care about critical minerals. And also finally started to fund projects through the Defense Production Act. But the real funding didn't start until the Biden term with the bipartisan infrastructure law. The Ukraine supplemental, which gave several hundred million dollars to dpa. Defense Reduction act, which funded a lot of feasibility work and helped get a lot of projects that the Trump administration is now picking up and doing commercial financing deals with. They wouldn't have got there. They wouldn't be ready to do that without that feasibility work having been done over the last few years. The Inflation Reduction act put a lot of money into this space through the 48C investment tax credit, through the 45X tax credit, the production tax credit, that covers a lot of different categories, but also created a permanent 10% production tax credit for critical minerals, which unfortunately now has been sunsetted by the one big beautiful Bill Act. We can talk more about that, maybe. And then also the 30d tax credit for electric vehicle purchases with the sourcing requirements, that really buoyed a lot of domestic producers of lithium, graphite, nickel, cobalt, to varying degrees of success. And some of that is dictated by market shifts. Right. So like we were working on trying to get nickel and cobalt producers stood up, but it was difficult for a lot of these companies to get offtake contracts from the major automakers. Because of the last few years, we've seen the big shift to lithium iron phosphate batteries. And since those don't need nickel or cobalt and automakers wanted to hedge their bets, they're not so certain that they want to commit long term to those kinds of volume supply agreements the same way they might be comfortable with lithium or even graphite. And so you see mixed progress across the board. Certainly one place the Trump administration has leaned in hardest is on rare earths. A lot of that coming off of Liberation Day and China's retaliatory actions and the crisis of needing to try and solve for this as quickly as possible. There have been a lot of signals there. There hasn't been as much substantive progress. It may be a situation where it takes a few years before we know if this stuff even works.
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A
That's a very helpful history.
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B
It gained a new chapter basically today, or it's gaining a new chapter today. And I want to talk about some of these tools that are available to support mineral supply chains or mineral production.
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A
So we're going to run through a few of them. But let's start with stockpiles.
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B
So today, Bloomberg reported that the Trump administration is going to launch a $12 billion stockpile of four critical minerals. It would be the first stockpile for civilian use, which makes it kind of analogous to the Strategic Petroleum Reserve like we there were previously, you know, Department of Defense had stockpiles for critical minerals for its own internal use. But there hasn't been a stockpile created previously that was, like, designed for general economic uses. And this would be that the prime agency here actually is not the loan program's office, the, you know, DOE in house bank, it's the Export Import bank, supporting this with a $10 billion loan, which is twice the size of any program they've ever entered into. So it's quite a significant big deal. The president reportedly is meeting with Mary Barra today on the day we're recording this February 2nd to discuss this plan. Mary Bera, being the CEO of GM, what do you think about this idea? Like, are how are stockpiles supposed to work to support mineral production?
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A
And then will they actually succeed in.
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B
Supporting mineral production like they're supposed to?
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C
There are three guiding principles that I believe all stockpiling efforts should follow. And I don't think a lot of the ideas we've seen put out there to date necessarily follow these principles. Principle one, put the customer first. A lot of these efforts over the last few years, and this goes back to the Biden administration, have been ideated out of a need to support producers and figure out a way to stabilize markets, to basically get them to a place where folks are willing to invest in their projects, that they can go out and actually get, you know, financing for their projects. And I just think that's the wrong way to think about things. You need to put the customer in their end uses first. And this ostensibly does that by bringing General Motors and I think some of the others mentioned Stellantis, Boeing, Corning, I think there were a couple others in there to the table right out of the gate. And if they're active participants that are defining the materials that get thrown in there, then this has a better chance of success. Principle number two, focus on actual risks of shortages. So going back to Econ 100, a shortage usually speaks to inelastic markets where supply gets cut off and there's no real other alternative. There's truly not enough of this stuff out there. It's not just that prices go up. It's that you can't get it. And so it's less of a market stabilization mechanism than a shock absorber in the event of some sort of exogenous shock. Not focusing on, can we modulate the price up and down similar to how this idea, I think, came about by the Biden administration's use of the Strategic Petroleum Reserve to put downward pressure on oil prices a few years ago? Ultimately, if you are stockpiling truly to stockpile things and provide an insurance policy versus trying to fix prices, you're in a better position. I've seen some things in that story. We'll wait to see the details that indicate they might be trying to do some price support or price stabilization, which gets really dicey.
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A
And why is that?
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B
Just because you would never be able to generate enough demand from a government stockpile to actually stabilize a new mine or a new refining facility and create the level of offtake that you need to actually create a long term enduring market for a domestic producer, presumably, or a foreign producer in an allied country.
- [20:15]
C
Yeah, I mean, a lot of these markets just simply aren't large enough and never will be. And also you start to get into specialized products, right? Not every ton of graphite is the same. Every automaker, every cell maker has their own specification for graphite. And so talking about a set market price for graphite gets really problematic because ultimately it's who do you trust to produce this stuff at volume and meet your special cell configuration, including natural graphite, synthetic graphite and some silicon, versus like, I'm going to go buy this stuff on the spot market. That kind of stuff kind of exists in China today, but in the US it's highly unlikely we're going to see that level of maturity evolve for at least some time. I mean, even magnets actually are a great example where every automaker makes their own motors. Right? So every magnet is built to a different specification to sell to those automakers. And while the Chinese producers are very good at supplying that stuff, our upstart magnet makers are going to have to work through customer by customer and ensure they can meet that specification and qualify it. So talking about a market price for this stuff gets really complicated. It also risks additional distortions. It risks diminishing the upside potential that certain investors might expect from a price sprite. So that's why I would be very careful about trying to make those kinds of interventions. And then last thing, my third cardinal rule here, losing money is, okay, like at the end of the day, you're.
- [21:54]
B
Providing an insurance policy, the government losing money Is okay.
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C
Yeah, yeah, yeah. I mean, at the end of the day, like, one of my biggest observational complaints with the way the Trump administration's approaching a lot of these deals right now is they're being structured to not lose money, even if they're taking risk. You're taking equity stakes, and you're looking to collateralize enough stuff. It's a private equity mindset. It's not necessarily setting up projects to succeed in the long term and mechanisms to succeed in the long term. And the same thing. I mean, the Export Import Bank, I applaud them for getting creative here and trying to find ways to extend its existing authorities as much as possible. But XM has a pretty strict loss cap that has traditionally constrained the amount of risk it can take. And between that and the fact that they were able to pull in outside investors to do this means it's being structured to make a profit. And that may run against the goals of actually trying to provide the shock absorbers that you need for actual critical materials. And I hope it doesn't end up steering deal flow toward things that are more lucrative to try and keep this in the green and meet investor expectations. Certainly the encouraging bit that I saw in the Bloomberg story is that they are letting the industrial end users dictate what they stockpile. But at the end of the day, it's still controlled by an administration that's getting a lot of pressure to fix various markets for different materials, and it may be inclined to intervene in places that are a little bit out of scope, let's put it that way.
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B
I want to come back to a few ideas here. I want to talk about a few other tools that could be used. But one theme I'm getting here is that basically, when possible, what the government should be trying to do is create deep markets for the minerals for which demand exists to turn it into a deep market. And a stockpile might work, but basically would be inferior to other policy tools that could create a market for these goods. Is that right? I mean, what tool should we be looking at instead?
- [24:00]
C
One of the things that I'd like to emphasize with the fact that we have 60 critical minerals is again, they're going to have lots of different solutions, but there are some things that can kind of raise multiple boats, maybe not all boats. So, you know, a 45x tax credit that serves domestic producers and refiners of various critical minerals and maybe even at some point, materials to incentivize that production might be helpful across the board. And then you layer on other incentives and I think this is probably the biggest credit to the Biden administration was thinking about markets from both ends. The Trump administration has been very skewed toward producers, and I think there are a variety of reasons for that. But there's been a lot less focus, at least in the commercial sectors, on downstream end users and needing to raise both producers and customers at the same time. So the 30D sourcing requirements, while imperfect, were I think, a good example of trying to do both things at the same time with carrots, right, not sticks to make sure both folks are incentivized to invest in those work streams. So tax credits is kind of a base layer. Obviously you can do deal making material by material, company by company, through the Department of Defense, through the Energy Dominance Financing Office at doe, you know, through xm, through dfc, through other financing mechanisms. But you know, broad strokes, certainly the tax credits are a good foundation layer. They're also things that companies really like because it indicates stability for the long term. And until they were pulled back in this last bill, they were seen as actually permanent.
- [25:45]
A
This week's episode of Shift Key is brought to you by the great Yale center for Business and the Environment. Are you ready to accelerate your career in energy? And Yale's Financing and Deploying Clean Energy Certificate Program is a transformative online certificate program that delivers real world skills and connections to drive immediate impact. It's offered by our sponsor, the Yale center for Business and the Environment, and this comprehensive 10 month program will build your expertise in clean energy policy, technology, project finance and innovation. The program's different because it's designed for working professionals, it's fully online, it uses just five hours a week and through it you'll gain advanced knowledge, build a powerful network and stay active in your career while you learn. I should add, I go to the CBY Annual Conference every year in New Haven. It's an awesome event. It's a great group of people and they're plugged in all across the sector. I'm always glad that I went and right now listeners of Shift Key can get an exclusive offer to this program. You can use referral code HEATMAP26. That's HEATMAP26 and get your application in by the priority deadline for $500 off tuition to one of Yale's online certificate programs in clean energy. You can transform your career, your community and the energy landscape and save $500.
- [27:03]
B
That's awesome.
- [27:03]
A
Head to Cbey Yale EDU to learn more. Check out the show notes CBEY Yale Edu that's Cbey Yale Edu let's talk about a few other tools that the.
- [27:20]
B
Government has used or is using to try to support mineral production. One of them is this tax credit. You've referred to it a few Times. It's called 45X. It was initially part of the inflation reduction act and it was a per kg subsidy basically for the refining of certain minerals. Can you just catch us up on what happened to this tax tax credit? Because it was in the ira, there was a lot of excitement about it. What did it apply to and what has been its fate?
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C
45X covered production of a lot of different things, right? Covered batteries, batteries, solar, wind. Right.
- [27:53]
B
Jesse and I have talked about like whenever we talk about the supply side subsidies for batteries. That's also covered under this 45x tax credit. But it also covered mineral refining. But.
- [28:02]
C
But separate from all of those other downstream categories, it created a permanent. Right. Everything else phased out. It created a permanent tax credit for critical minerals, which is really important. The permanence is really important because the project development timeline is so long for these things and the mine life or the asset life, depending on whether you're building a miner refinery is really long. And so you want to give investors the long term confidence. Transferability was a part of this. Companies that needed to raise equity or even build in those discounts into their offtake to get offtake agreements. Like it was a very effective tool for some materials. Not all 10% was a tiny bite of the apple for certain materials, but for things like lithium and graphite aluminum, it was hugely critical. And I think it was a gut punch to that sector to pull that. But basically it was a production tax credit or is a production tax credit that covers the cost of production. In the original draft rule it didn't cover feedstocks. The they were really trying to curb the potential for double dipping from vertically integrated miners and refiners. But in the final rule that came out actually right before the election in 2024, they allowed mining production to be part of that, provided you're not double dipping. So feedstock actually also became an eligible cost to make it a more generous credit. OBBA comes late last or late year? Last, middle of last summer.
- [29:32]
B
The one big beautiful bill act, the Republican tax and spending package passed on to partisan vote last summer.
- [29:38]
C
And to my bewilderment of all the things they stripped this one, they ended up sunsetting it starting in I think 2031, fully phasing out by 2034. And it renders the credit effectively worthless if you're not already in construction. Because if you started to build a mine today, you're in production by maybe 20, 28 and you get two years to full credit and then you've got a 20, 30 year mine life and it's gone after a few years. So it really was, I think, the most self defeating move we've seen, other than maybe like freezing a bunch of the DOE grants for commercial facilities. You know, it's something that I think there's a lot of interest in restoring. I would argue it might even go deeper. It should go deeper to provide more support for domestic producers. Just because it only pays out if you produce and it covers everything. You don't have to worry about bespoke solutions. Everything else we're talking about, whether it's stockpiling or company specific price floors or trade arrangements with tariffs, ultimately there are trade offs for each of those tools and you want to be very careful about how you apply them.
- [30:50]
B
So another policy that the Trump administration has discussed is price floors, basically. And what's interesting about the price floors the Trump administration has proposed is that they're, so far they only apply to, they're like single company deals. And so this company, MP Materials, has been the primary beneficiary of them so far. Can you just describe, like, what would a price floor do to support production? And has the administration structured it in a thoughtful way?
- [31:17]
C
So the NP Materials deal was in July. Subsequently US Antimony got a similar arrangement where they are guaranteeing a minimum price for every kilogram of product produced and sold and using a contracts for difference mechanism. So if you sell a product at $80 a kilogram and the price for that set is $115 a kilogram, the Department of Defense will pay that company MP Materials and, or at US Santimony the spread and, and make them whole. And so you're guaranteeing some degree of return, which investors want to see. Investors love to see it. Now the problem is when you start to do that, you start to set investor expectations that this is how the administration is going to go and that a project is not worth it to them unless they get that kind of treatment or some other commensurate show of support. You've also seen retail investors pile into mining stocks, you know, buying lottery tickets in a sense, like waiting for them to be the next MP or US Antimony, where they're effectively guaranteed profits at the expense of really everybody else in the space. So it's a hugely distortive tactic. And there's a reason, you know, this, this, you know, Reuters story that leaked.
- [32:39]
B
Last week which basically said the Trump administration is moving away from price floors. We'll stick it in the, in the show notes.
- [32:46]
C
Yeah, so they, they said they're going to move away from individual company price floors and try to replicate it. And I think there's a, there's a ministerial going on that the State Department's organizing this week with a bunch of other countries to try and figure out like what kind of tariff based mechanisms in a organized block format, you know, multilateral US, Japan, Korea, Australia, setting an effective minimum import price together via a tariff mechanism such that domestic producers aren't competing with unfair Chinese competition. Which if you're concerned for the US taxpayer, that's not a bad solution because ultimately it's tariff revenue coming in, not direct subsidy going out to the producer. If you are a manufacturer downstream who has to buy the more expensive product, you're not particularly happy with that. Moreover, and this is an important clarification I think folks really should understand. It is not just price that China is beating us on a lot of these materials, they are beating us on quality. Right. If you're an automaker and you need to source 10,000 tons of something and there is no domestic producer in the US that is capable of doing that reliably. At scale meeting your specification, the price is immaterial. You're going to go buy from the Chinese producer because you have to. And so, you know, unless the US can start to meet Chinese quality, which over time it can with the right degree of incubation of domestic producers or foreign producers that want to set up shop here, until you can solve for that, you're not actually setting a price floor for them. You're differentiating between what the superior product can come in at versus what domestic producers are fighting over for an inferior product that can maybe be sold to manufacturers that have lower specifications for magnets. It might be consumer electronics or power tools, not EV motors. Right. It's a differentiated market.
- [34:56]
A
One thing I'm hearing from you is.
- [34:57]
B
That basically you kind of actually need two sets of policy tools here because you need one set of tools just to get the scale going, just to make sure that American companies or allied country companies have enough throughput, have enough scale, have enough capacity so that they are able to supply whatever the mineral is such that they can like start exploiting economies of scale and start coming down technology, you know, learning curves and start like actually gaining some level of mastery over whatever the industrial process is. You need another set of policies here to push them down the quality curve too, or push them up the quality curve. Because otherwise you're going to wind up in a situation where American kind of second rate or commodity producers in the US or in a nearby country are willing to to buy American or allied products if they don't really care about the product or if they're making something a little down market. But all your upmarket companies are going to be looking to buy the Chinese product because it's going to be the higher quality, more reliable, more pure product. So you really need one set of policies to do scale and you need another set of policies to push American companies or allied companies more toward, let's say, Chinese industrial standards.
- [36:14]
C
So that's a really good point. And I've got two things I want to say here, the first of which is most of your listeners probably follow battery or EV news and are watching the rapid rate of improvement in this sector or these sectors. And it's new announcements every few months about new performance standards, whether it's charge rate or energy density or even cost.
- [36:39]
B
Right?
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C
Those things are coming in part from more sophisticated architectures of vehicles, but it's also coming from material improvements. So graphite of five years ago is not graphite of today in state of the art terms. And same thing with magnets, right? They're constantly innovating and pushing the frontier through process innovation, and we're just not there yet.
- [37:01]
B
And it's that familiarity with process innovation along all the steps of the value chain, from receiving the ore to producing the finished car, that I feel like there is very little American comparison to. It's not only that they are receiving a higher quality graphite, it's that engineers, along every step of the way, understand the quality of the graphite they're receiving. They're thinking about the specific impurities of the graphite, they're looking for ways to improve it. And it's that level of like textural familiarity with the product and the value chain that doesn't seem to exist anywhere in the US system. I realize there are good engineers in US battery companies, it's just they have to buy from abroad and there's no way you could get that process improvement as close to the metal as you could in China.
- [37:44]
C
And this speaks to what capitalism does best, right? Enforcing competition, enforcing rapid iteration, innovation. And the automotive market is traditionally been one of the best places to prove that out. And if you're not incentivizing electric vehicle production, it's very difficult to see the rapid gains in battery technology and in magnet technology and in Certain other areas, the Trump administration's approach has been very defense focused. Right. This is the second point I wanted to make, which is they believe that you can use drones and humanoid robotics and AI to replicate those sorts of gains and not need the more conventional consumer market to provide the testbed and the proving ground or the launch pad for scale that would customarily push major product innovation in these sectors.
- [38:49]
A
One arc we've seen from the Trump.
- [38:51]
B
Administration is that they got in. You might have been privy to this directly in ways you could share or not share.
- [38:57]
A
They got in.
- [38:58]
B
They were very antagonistic to battery projects. They seemed to see battery projects as one aspect of this complex of clean energy development that they really wanted to destabilize and not support at the federal level, if not actively hamper.
- [39:14]
A
And then time passed and they began.
- [39:17]
B
To realize, looking at drones, looking at humanoid robots, looking at what's happening in Ukraine, looking at Chinese industrial capacity, that.
- [39:24]
A
Actually batteries were like a pretty important general technology and that their goals around.
- [39:29]
B
Critical minerals and their goals around industrial competitiveness actually did need to support a battery project. And it's been reported that a lot of battery projects that might have initially received mixed signals from the Trump administration were ultimately saved and are now continuing to be supported at the Trump administration. What hasn't happened yet is that the Trump administration hasn't looked at electric vehicles, which are a massive end consumer of batteries, and said, actually, we need to support the electric vehicle industry because that is the only place we can get demand for critical minerals, for lithium, for battery minerals, or for battery midstream manufacturing at the level of the US Economy in a way that would matter? Do you ultimately think that an administration that wants to support batteries will need to support electric vehicles because they're the only economic scale user of batteries at a level that would actually be able to provide enduring demand and offtake to the industry in the long term?
- [40:28]
C
I think, inevitably, yes. The one thing you didn't mention that I think is factored into some of the administration's more recent support for batteries is AI and the hyperscalers recognizing that this is energy they can get today, they also need it for stabilization of, I guess, power flow. So the hyperscalers are telling them they need batteries too. And so that has made them interested in the commercial sector in a way that I don't think they otherwise would be. But the volume of demand is just not commensurate with what has been lost by throwing EV growth trajectory off. The lithium market is a good microcosm of this overall Dynamic where by last summer, by last June in the Chinese spot market, lithium had tracked all the way down to $8,000, $9,000 a ton. In early 23, it was like $80,000 a ton. So it was a huge fall in a span of just over two years. And then things rebounded a little bit and now it's back in a bull market because you've seen all these analyst notes coming out saying demand seems to be stronger than we expected based on demand from the storage market. And so that's buoyed the price of lithium a bit. But again, it's not, it's not anywhere close to the level of demand that, you know, we would have seen had EVs. Whether they got to 50% sales by 2030, as the Biden administration hoped to see, or even gotten to, you know, 30 or 40%, it's still a heck of a lot more than we're going to see now in terms of domestic battery demand, just relying on some of these either defense or AI oriented end uses.
- [42:18]
B
Yeah, just to be clear here, lithium was at 307,000 won in June 2023. Collapse over the course of 2024 and 2025, it is now peaking again at 220,000.
- [42:32]
C
But I mean, and Rob, this also gets back to kind of where folks want to play with stockpiling in terms of market stabilization because it doesn't take supply and demand to get that far out of whack to create dramatic volatility. And that's some of what we've seen with lithium. But that market actually is evolving in a constructive direction with futures contracts being developed on multiple exchanges outside of China. Obviously, volumes continue to grow, price transparency continues to grow. So, you know, over time that one probably self corrects or you know, ends up in a stabilized place on its own. It's just a question of how much support are you trying to throw to producers today or address acute supply concerns from consumers of it today. And do you want to get involved?
- [43:22]
B
We've talked about a number of tool sets here that could be used to support critical minerals. Can you just put them together for us? So let's say someone came to you tomorrow and was like, we're ready to put in a new version of a tax credit support mineral production. What would an ideal toolbox look like to actually take on these mineral shortages or mineral supply issues that we're facing?
- [43:44]
C
First and foremost, the tax credit on the production side is really important. So restoring 45x, potentially even steepening it, because again, it's a Foundation for everything beyond that. I do think a stockpile is really important. A commercial stockpile is really important if it is truly oriented around resilience and shock absorption. Just to potentially pull things off the table too. Right. It's not just about how do we solve for this material now. It's like maybe you can solve for the problem altogether just by having stuff in reserve. And China isn't going to try to mess with that material anymore because it's not worth their time. If I was writing legislation today, I think we've seen some of this and the congressional movement on the stockpiling front, the Secure Minerals act that I think Senators Shaheen and Young dropped a few weeks ago, it would build an entirely new agency based off of the Federal Reserve. But it would build in a lot of analytical capabilities to actually understand this stuff in real time and not be caught off guard. Based on China throws an export control on something and all of a sudden you feel it in real time and recognize now it's a problem. And then you just start to layer in like individual financing tools. And I think one of the biggest shortcomings of the Biden administration is it didn't have the flexibility. I know there are others within the administration that have opined on this stuff since things like other transaction authority to do more creative financing solutions a la what we've seen with Trump in the first year. You know, mixing grants, in some cases equity might be appropriate. There are a couple of instances where I think it actually makes sense. Certainly the low cost of financing, being able to move quicker on those tools, being less afraid, where there aren't going to be robust competitive markets, being able to pick winners probably makes sense. But I don't want to make this sound like there is any sort of silver bullet. It is a layering of lots of different tools across different materials at different stages of the value chain. And you need a lot of state capacity to make that work. Markets won't fix themselves well.
- [45:59]
B
And one question I was going to ask is when you describe the mineral problem as basically there are 60 items on this list and each of them requires a set of solutions and a set of policy tools, some of which might be as broad based as a tax credit, some of which might be a conversation between policymakers that we never hear about, but is able to resolve some snag in the system or is able to connect a producer to a refiner in a way that resolves some issue. One thought that comes at my here is like you are talking about a large bureaucracy that would exist to solve this problem. And I was going to ask is there anything close to that bureaucracy today? And it sounds like you're saying no. In fact, we might need a Federal Reserve for it.
- [46:41]
C
If you'd asked me the question two years ago, I would have said try to make the existing structure work, sharpen the tools, staff up in additional places, streamline the way that we organize this across federal agencies, because pieces of this existed all over the place. Some of it was at doe, some of it was at dod, some of it was at USGS as the inheritor of the Bureau of Mines. Some of it was at Interior, Commerce, the Federal Reserve. And a lot of those capabilities have been gutted over the last year. And so if you're thinking about this almost as starting from whole cloth, I do think standing up an independent agency that is really focused on serving US Industry, not the way the US Department of Commerce does today, but looks more like an industrial ministry that you would see at Japan or China or Germany. I mean, it's, you don't have to look to Communist China to figure, you know, state, state and post China to figure this out. A lot of other industrialized economies have bureaus or ministries of industry that really do this level of analysis under one roof rather than having to have all sorts of consultory relationships between different agencies and staff all over the place and duplicative roles. And now that we've had the forest fire come through, I would think long and hard, yeah, talking about doge, now that that has come through and done its work, and to be clear, there will be more attrition over the next three years. I would expect more, not less. There will be more capacity reduction than addition, I would say, over the next three years. Think about building from whole cloth what this ideal structure looks like.
- [48:30]
B
Well, we'll have to leave it there. And if policymakers are interested in building that ideal structure, we'll have to have you back on to talk about it. Nathaniel Hordam, thanks so much for joining us on ShiftKey. This was great.
- [48:40]
C
Thanks, Rob.
- [48:44]
A
And that will do it for Shiftkey this week. Thank you so much for listening. If you enjoyed this week's episode of Shift Key, please leave us a review on your favorite podcast app or send it to a friend, someone you think might enjoy the episode. You can follow me on X at obinsonmeyer or on bluesky or LinkedIn. Under my name, I should say. Chipske is a production of EMAV News. Our editors are Gillian Goodman and Nico Lauricella. Multimedia editing and audio engineering is by.
- [49:07]
B
Jacob Lambert and by Nick Woodburn.
- [49:09]
A
Our music is by Adam Komalow.
- [49:10]
B
Thanks so much for listening, as always, and see you next.