In the middle of the US-Chinese trade war, the US hopes to forge Canada for a commodity alliance
Canada has a lot to offer the United States when it comes to supplying critical minerals.
The offer of President Donald Trump to buy Greenland did not appeal well to the inhabitants of the world's largest island or to Denmark, which manages it as an autonomous area.
Danish Prime Minister Mette Frederiksen called the idea "absurd", which led to a diplomatic rift as Trump decided to cancel a planned visit to Denmark.
The basic idea may not be perfect, but from an American point of view it is not "absurd". There are two perfectly rational reasons for developing Greenland - its strategic location for North Atlantic shipping and its undeveloped mineral reserves. "You have a lot of valuable minerals," said White House economic advisor Larry Kudlow of Trump's latest real estate ambitions.
As it stands, the United States must settle for a rather earthly letter of intent, signed in June, to jointly promote and conduct an aerial survey of the Greenlandic province of Gardar.
Gardar "has great potential for new discoveries of a number of mineral resources, including rare earth elements," according to the US State Department.
And that's the whole point. Greenland has flashed on the president's radar as the United States rushes to build new critical minerals supply chains to break their dependence on China.
USA are in direct dependence on China
The Pentagon has been concerned for years about the United States' growing reliance on China and what other "unreliable" countries think of a variety of minerals.
These concerns were clearly expressed in May, when Chinese President Xi Jinping sent a thinly veiled warning of the potential costs to the United States of escalating trade barriers on a visit to a rare earth factory.
These costs are potentially very high as the United States and the rest of the world depend on nearly 100 percent of China's rare earth production and export.
Even the only operating US rare earth mine, Mountain Pass in California, has shipped their product to China for processing.
At least until now, China has not yet used its "rare earth weapon".
Exports in the country are stable, albeit slightly below last year's level, while supplies of rare earth magnets to the United States reached a three-year high in August.
But China's saber-rattling has prompted the United States to find potential new suppliers for both rare earths and the other 34 minerals identified as "critical" by the Home Office.
All are "critical" to both their military uses and to the US's import dependency, especially when that reliance on countries that are classified as potentially hostile.
The United States is now on an accelerated path to building more reliable and sustainable supply chains.
An important part of this process, as outlined in the Department of Commerce's Critical Minerals Strategy released in June this year, is to form alliances with “friendly” suppliers.
Raw materials alliances with Canada and Australia
At the top of the list are Canada and Australia. High-level talks have already been held with both countries.
President Trump and Canadian Prime Minister Justin Trudeau met in June to discuss “Ways to Improve Mineral Safety and Work Closer to Ensure Safe and Reliable Supply Chains”.
The official Canadian press release also noted that Trudeau "highlighted the importance of Canadian uranium to North American energy security," a reference to an ongoing US study on dependence on uranium imports.
The two countries also talked about US import duties on Canadian aluminum until it was exempted from the Customs hit list in May.
Such diplomatic urgency is not self-evident, however, because Canada has much to offer the United States when it comes to delivering critical minerals.
Canada is already a leading producer of nickel and cobalt and has other 70 advanced projects for both metals, as Hilary Morgan, Director of International Affairs at Natural Resources Canada, said in July.
Also on the wish list of the US metal industry are Canada's 16 advanced rare earth projects and its 17 advanced lithium projects.
Australia is already a growing lithium manufacturing site, and Lynas Corp is the only vertically integrated rare earth producer outside of China.
"The US increasingly needs critical minerals to service its growing high-tech industry, and Australia has the raw materials to meet this need," reports the Australian government.
The US is looking in all directions
But as Trump's interest in Greenland shows, the United States is looking everywhere for a diversification of its critical mineral imports.
At the end of September, Secretary of State Mike Pompeo met with representatives of nine other countries at the United Nations Assembly under the newly established Energy Resource Governance Initiative (ERGI).
As the name suggests, the focus is on new energy minerals like lithium, cobalt, and copper. The aim is to share “best practices on minerals management and governance” to promote “integrated and resilient supply chains” as the electric vehicle revolution gains momentum.
The list of participating countries includes important existing producer countries such as Peru, the Democratic Republic of the Congo and Zambia, but also potential future suppliers such as Botswana, Namibia and the Philippines.
At the heart of US minerals strategic thinking is the need not to rely on a single country, even if it is a "friendly" country.
“We're looking for any source outside of China. We want diversity. We don't want a single-handed producer, ”Jason Nie, a materials engineer for Pentagon's Defense Logistics Agency (DLA) told Reuters on the sidelines of the Argus US Specialty Metals Conference in Chicago.
The DLA is charged not only with managing the stock of Pentagon material, but also with the effort to facilitate the financing and acceptance of potential new projects.
It is another part of a multi-level US mineral strategy that will redraw the world map.
Greenland may not be up for sale, as President Trump has discovered. But its minerals are.
And it will not be the last resource-rich country to shoulder a US slash in the coming weeks and months.
ISE - October 2019
