US Redefines Critical Minerals: Copper and Potash in the Spotlight
The US government is contemplating substantial revisions to its critical minerals list, potentially adding copper and potash, in what would be the most significant adjustment since the list's inception in 2018. This update responds to the Energy Act of 2020, mandating a review every three years.
Following the 2022 update, the list currently includes 54 minerals. The proposed additions encompass six minerals: copper, potash, silicon, silver, lead, and rhenium. Conversely, tellurium and arsenic are slated for removal.
Motivations Behind Additions and Removals
Kendra Russell, office director of the US Geological Survey (USGS), clarified that the inclusion of copper and silicon aims to avert potentially severe economic repercussions should supply disruptions occur. Lead and rhenium are being added this time after review using a new methodology, having narrowly missed inclusion in 2022.
The inclusion of potash is attributed to recent modeling indicating potential risks stemming from trade barriers possibly imposed by major supplier countries, primarily Canada. Meanwhile, the addition of silver targets addressing a potential supply disruption scenario from Mexico, albeit a low-probability event with substantial impact.
As for the removal of tellurium, it stems from the US transitioning from an importing nation to an exporting one, driven by increased domestic production. Arsenic's removal is due to a reduced risk of supply disruption, as Peru is now the primary producer.
Risk Classification and New Assessment Methodology
For the first time, critical minerals will be categorized into three risk levels: high, relatively high, and medium. The new assessment methodology considers the economic consequences resulting from supply shocks and highlights instances of "single point of failure," i.e., reliance on a single domestic producer, heightening fragility.
Impact of Including Copper and Potash
The copper industry has long advocated for copper's inclusion on the critical minerals list to underscore its significance for the economy and national security. Once included, related exploration, extraction, and processing projects would receive financial incentives and streamlined approval processes.
The National Mining Association has welcomed the inclusion of minerals crucial for infrastructure, national security, and technological leadership, but emphasized that all minerals should be considered critical.
Juan Ignacio Diaz, head of the International Copper Association, affirmed that "Copper perfectly fits this description: it supports electrification, defense, and clean energy, while its supply chain faces increasing pressure." He added that "Recognizing copper as a critical mineral benefits the US, as it reinforces its competitiveness and the foundation of the energy transition."
The Fertilizer Institute, a lobbying group in the fertilizer sector, has also pushed for potash to be included on the critical minerals list to pursue tariff exemptions. The Trump administration had issued an executive order in March of this year to support achieving higher levels of domestic mineral production in the US, including potash, which is considered an essential agricultural fertilizer.
The US currently imports most of its potash from Canada, which accounts for approximately 80% of US potash imports. As part of the trade exemptions under the North American Free Trade Agreement, these supplies have been exempt from tariffs until now.
Implications for Stock Markets
Following the announcement, fertilizer company stock prices rose, with Mosaic shares increasing by 4.5% and Nutrien Limited shares increasing by 2.9% before partially retreating.
According to a statement from the Department of the Interior, 50 minerals in the draft list were selected based on the results of an economic impact assessment, zircon was included due to the risk of a single point of failure in the domestic supply chain, and three other minerals were retained based on a qualitative assessment.
The department stated that "Losing a single vital mineral could cause chain reactions throughout the industry, from semiconductors to defense systems, weakening production capacity, technological leadership, and US jobs."
Broader Impact on Industry and the Economy
The inclusion of copper and potash on the critical minerals list is likely to have a significant impact on related industries, leading to increased investment in domestic production and diversification of supply chains. Furthermore, it could lead to the development of new technologies for extracting and processing these minerals, enhancing the competitiveness of the United States in the global market.
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