Biden Administration Weighs Federal Price Support to Protect US Mineral Supply Chain
Critical minerals like lithium, cobalt, and nickel have become essential in the clean energy transition, powering electric vehicles (EVs), wind turbines, and solar panels. These minerals are vital to battery production, the backbone of renewable energy storage. Yet, the United States faces a significant hurdle: China dominates the global supply of these minerals, controlling vast portions of both extraction and processing.
The Biden administration has recognized this vulnerability and is seeking ways to reduce reliance on Chinese imports. Despite efforts to invest billions into domestic production and processing, US projects struggle against cheaper Chinese imports. The administration is now considering establishing a price floor, a measure that would ensure US producers receive a guaranteed minimum price, shielding them from market volatility caused by Chinese oversupply.
The Role of Critical Minerals in the Clean Energy Transition
Critical minerals are the linchpin for many emerging technologies. Lithium powers batteries for electric vehicles, while cobalt and nickel are used in energy storage systems. As demand for clean energy technologies accelerates, so too does the need for these materials.
China’s dominance in this sector poses a direct challenge to US ambitions. Currently, China controls over 60% of global lithium processing and 70% of cobalt refining, placing the US in a vulnerable position as it aims to build a greener economy. Although the Biden administration has launched initiatives to increase domestic production, US-made minerals are significantly more expensive due to strict labour and environmental regulations, further complicating the effort.
The Biden Administration’s Strategic Price Floor Proposal
To address these challenges, the Biden administration is considering a strategic price floor for critical minerals. This mechanism would guarantee a minimum price for US mineral producers, effectively creating a financial backstop. Should market prices fall below the floor, the federal government would cover the difference.
This measure aims to provide stability to US producers, ensuring they can secure long-term contracts with buyers and attract investment despite fluctuating market prices. The price floor is seen as a way to mitigate China’s ‘predatory pricing’ practices, which have driven global prices for lithium and other minerals down significantly. With a price floor, US companies could be more competitive, despite their higher production costs.
Challenges in Scaling Domestic Production
Despite potential government intervention, scaling domestic mineral production remains a challenge. US projects face long permitting delays and regulatory barriers, which contrast sharply with China’s streamlined processes. These delays, combined with the high cost of production in the US, have made it difficult for American companies to compete.
For example, North American graphite is estimated to cost more than double the price of Chinese imports. Falling global prices—exacerbated by Chinese oversupply—have discouraged investment in US minerals processing, making it harder for projects to get off the ground.
Strategic Alternatives and Bipartisan Support for Federal Action
In addition to the price floor, some lawmakers have proposed creating a national mineral reserve, similar to the US Strategic Petroleum Reserve. This would allow the government to purchase and stockpile critical minerals, stabilising prices and providing a safety net for domestic producers.
This idea has gained bipartisan traction, with both Republicans and Democrats recognising the strategic importance of securing domestic supplies of critical minerals. Legislative proposals that aim to fund such reserves or support price floors are gaining momentum, though the upcoming election year could complicate progress. Nevertheless, the push for increased federal involvement in securing critical minerals appears to be a key element in the US strategy to reduce its reliance on China.
The Biden administration’s proposed price support mechanism represents a critical step in stabilising US mineral production and reducing dependence on Chinese imports. As global demand for clean energy technologies rises, control over critical minerals will shape the future of industrial and technological dominance. By securing domestic production, the US can position itself as a leader in the clean energy revolution, ensuring both economic resilience and geopolitical security.
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