It may seem odd from the vantage point of our anemic economy, but there are signs that America is at the edge of a manufacturing renaissance. Proof is evident in a number of factors: The emergence of cheap energy, the trend towards equalization of Chinese wage rates, the re-shoring and near-sourcing of manufacturing operations in states across the country.
There’s just one snag: critical metals supply.
The problem is what one witness, Mark Fellows of SNL Metals and Mining, termed the “gross structural mismatch between mineral supply and demand:” a United States that ranks first in the world in manufacturing, but is slipping further down the ranks as a mining country, commanding a steadily shrinking percentage of the world’s resource exploration expenditures.
It turns out that even in our wireless world – perhaps especially in our wireless world -- metals matter. GE’s Anthony Ku testified that his company utilizes 75 of the first 83 elements on the Periodic Table, spending $40 billion a year on materials. As the pace of technological change accelerates, and several billion people on the planet migrate from subsistence living to some semblance of a middle-class lifestyle, mineral and metal demand will rise – for arcane elements and familiar metals as well.
We see it in old standbys like copper. Don’t be fooled by the shift from copper pipes to PVC tubes in our household plumbing; copper continues to be a critical element in everything from solar panels, geo-thermal conducting coils, to wind turbines – requiring more than three tons of copper per turbine -- and electric cars, which require three times as much copper as their gas-guzzling grandpas.
And yet, U.S. copper production is stagnating at precisely the time demand is rising. Currently, our copper shortfall is around 600,000 metric tons a year. According to an MIT materials science study, “the risk of copper disruption is significantly greater than for other major metals…, and is at or near to a historical high.”
Elements may be arrayed in separate boxes on the Periodic Table, but nature is less given to neat lines. Shortages in certain mainstay metals like copper can trigger shortfalls in more arcane metals experiencing increased demand in our tech-intensive economy. One international research group calls these primary elements “hitch-hiker metals:” a group that includes aluminum, nickel, lead, tin and copper – each of which is frequently found with two or more additional elements present.
Take rhenium, one of copper’s hitch-hiker metals. Produced in vanishingly small amounts – total annual rhenium production of 52 tons equals the combined weight of less than 20 Cadillac Escalades – the vast majority of it is recovered during the copper smelting process. In 2013, U.S. manufacturers imported 80% of the rhenium they used. U.S. production? 4 tons. That’s worrisome news for the U.S. military, which depends on rhenium its in our high-performance jet fighter turbines. Fail to mine copper, and access to rhenium – and molybdenum, selenium, tellurium and cobalt – will also be curtailed.
Meanwhile in the manufacturing world, American companies face two choices: either buy more copper from foreign producers, deepening U.S. import dependency –- or move their factories and fab plants outside the U.S., to where the metals are. Neither option improves U.S. competitiveness, or meets the urgent need to generate jobs and GDP in this country.
There are signs that the private sector is making the connection between metals and manufacturing. Case in point: Albemarle’s $6-billion purchase of Rockwood’s lithium mining assets earlier this month. With the challenge thrown down by Tesla Motors founder Elon Musk to churn out double the number of EV batteries by 2020 -- in a “GigaFactory” he plans to build in the American southwest -- that’s going to put a premium not only on developing new sources of lithium (U.S. presently 70 percent import-dependent), but also cobalt, graphite and manganese. In the case of the latter two, U.S. import dependency is 100 percent -- even though known U.S. resources exist.
But for every Albemarle example, there are more than a few tales of the decline in American mining. Jerry Pyatt told the House committee the story of Missouri’s Doe Run lead smelter, which closed in 2013, pursuant to an agreement with EPA – even though it operated to higher lead emissions standards than those found in any other lead-producing country. Lead concentrate produced at the Doe Run mine is now shipped to Asia for smelting, and comes back to the U.S. in the form of finished products like batteries. As Pyatt notes: “By shutting down the last primary lead metal production facility in the U.S. we have placed the country on a course where lead dependent manufacturing will be motivated to relocate to China or India, and the U.S. will be dependent on imports for finished products containing lead metal.”
And Doe Run may be the rule rather than the exception. It’s time for Washington to consider whether the labyrinthine mine permitting process is driving U.S. companies – along with jobs and GDP – to the very countries we’re competing with in the 21st Century economy.
The market seems to be showing signs that there is a growing need for metal and mineral resources. Based on what happens after this week’s hearings end, will Washington do the same?
McGroarty is president of American Resources Policy Network, a nonprofit, nonpartisan education and public policy research organization in Washington, D.C.