December 16, 2010

DOE on Minerals

Yesterday morning at CSIS, Assistant Secretary of Energy for Policy & International Affairs David Sandalow officially revealed DOE’s new “Critical Materials Strategy.”

The news here isn’t in the content. The report (which I’ve not read in its entirety yet, at 171 pages) seems to recommend exactly what we’d expect: better information collection so we know what may be on the horizon; diversification of suppliers; development of substitutes where possible; and others. The highlight is that the report identifies six minerals (five of them rare earths) that exhibit the potential for a supply/demand mismatch in the next five years: dysprosium, neodymium, terbium, europium, yttrium, and indium.

The biggest news is that DOE has done this report at all, albeit focused only on minerals needed in the clean energy sector. The cause for concern beginning around 2007 was that the U.S. government was asleep at the wheel when petroleum refiners became concerned that China was cutting off rare earth minerals supplies. More recently, the question has not been "what's the nature of the problem" but rather where in the U.S. government we should house informaiton collection and monitoring of minerals trends (if not the USGS). At least as it pertains to energy, DOE seems to have really stepped up to the plate....though its new report states its intentional narrow focus. Let's hope DOD's Industrial Policy folks continue to keep an eye on the weapons system side of the house.

I would cast a tinge of doubt on the reports claim that in the long
term, supply and demand will even out and proceed in tandem forevermore.
I've exhaustively gone through USGS info indicating that we have many
decades of supplies of most minerals important to the economy. This is
true, but it is a little naive to think that suppliers will always be
friendly, that the markets won't ever again drive dependence on single
suppliers, and that none of the issues we've had with rare earths lately
will happen again in the future. Several of the problems we have with
certain minerals today are a result of the massive efficiencies in
transport and logistics driven by the private sector - a good thing on
whole, though we need to be vigilant regarding these kinds of negative
side effects.

As we read through the report in full...perhaps after vacation in early 2011...we'll highlight any further observations we have. In the meantime, a big pat on the back to DOE.