Going into the 70s, America was self-sufficient for just about everything it needed. From base metals to cutting-edge equipment.
What happened and where did we go wrong?
Manufacturing’s decline is well documented. But what about those commodities?
The U.S. quadrupled its minerals trade deficit between 1973 and 1980.
It has only gotten worse. The U.S. Geological Survey tracks 88 commodities. The U.S. is at least 25% dependent on imports for 62 of them. Of the top 50, 28 come from China and Russia.
It is no coincidence that the rise on foreign dependence for commodities coincided with the environmental movement.
I certainly don’t want to trash talk a movement that improved health and brought an end to things like the Cuyahoga River fires — all 13 or more of them.
However, what ultimately happened was one of the first major NIMBY pushes in globalization.
While we might not have trashed the environment here, we paid dirt-cheap prices for goods and services from around the world where standards of safety, mitigation, and clean-up weren’t as high — if they existed at all.
This is the case for everything from dirty manufacturing practices, to ship scrapping, to mineral extraction and refining.
Rare earth minerals are a prime example. They’re everywhere but even locally high concentrations are still plagued by very low grades. That makes extraction damaging to the environment by default as large volumes of earth are ripped up and sifted through.
To make matters worse, the refining process is energy intensive and uses incredibly toxic chemicals. China had no problem with this while we did. And so it cornered the market with lower prices.
In fact, there is a privately held rare earths mine in the U.S. today. However, it ships everything to China to be refined and purified.
This push to externalize the costs, monetary, and otherwise, has left a world-class source of minerals virtually untapped in the last half century.
There is a roughly 1,000-mile-wide swath of some of the largest reserves of critical minerals in the world between the Rockies and the Pacific Ocean.
According to the National Mining Association, it holds about $6 trillion in some critical minerals like chromium, cobalt, graphite, indium, lithium, manganese, iron, gold, silver, zinc, tin, rare earth minerals, and more.
The times are changing though. As the U.S. takes a well-deserved second look at the vulnerabilities we face from globalization, there is also a renewed look at the benefits of domestic production.
One of the most obvious examples is the advantage of operating in a safe and well-regulated jurisdiction. By well-regulated, I specifically mean to include having transparent rules that also work to limit corruption and the whims of local, regional, and national government.
Not too long ago, a mining giant made an unprecedented move. Glencore, a leviathan that has thrived on high-risk mineral production in questionable areas, just bought and took developmental control of a potential copper and nickel deposit owned by PolyMet Mining.
Never before has Glencore controlled a major mining operation in the U.S. and it probably won’t be the last. Glencore shares have been underperforming its more conservative peers like BHP and Rio Tinto over the last year.
The company has also invested in Canada’s First Cobalt Corp as well to restart a refinery and is openly searching for non-Russian sources of aluminum.
While Glencore’s interest pulls headlines, in reality this push to move mining interests and capital back into the U.S. or other safe jurisdictions has been a strengthening trend for some time.
We’re seeing it in everything from rare earth minerals and lithium to some of the best gold miners in the market today.
Exploration budgets are increasing, long-stalled projects like the Pebble mine in Alaska are seeing new life and progress, and the manufacturers dependent on refined minerals are showing intense interest in securing supplies from western countries — be it from ethical concerns, shareholder pressure, or just dodging geopolitical threats.
The fact that even Glencore — a company famous for being in bed with questionable figures in high-risk jurisdictions — is now throwing money at a U.S. mine shows exactly how far that interest has evolved.
A lot more deals will be on the way, and a lot more potential mines are going to be bought out at a premium. A premium paid straight to shareholders.
Don’t sleep on this. It’ll be a trend that will continue for years, if not decades, to come.
