China’s Control of Critical Minerals Endangers U.S. Supply Chain Plans

Chinese companies dominate cobalt production in the DRC, managing two-thirds of the supply and presenting risks to U.S. supply chain strategies under the Inflation Reduction Act’s foreign entity clause. Approximately 60 percent of global cobalt supply by 2024 may also fall under this category, complicating U.S. de-risking efforts.

The dominance of China in the critical mineral sector presents significant challenges to the United States’ aspirations of establishing secure supply chains, particularly in the context of the Inflation Reduction Act (IRA). A recent study has unveiled that Chinese enterprises maintain control over approximately two-thirds of the cobalt sourced from the Democratic Republic of the Congo (DRC), a nation responsible for an estimated 74 percent of the global cobalt supply. This concentration of control raises concerns regarding compliance with the foreign entity clause outlined in the IRA. Among these companies, CMOC, formerly known as China Molybdenum, stands out as a leading producer of cobalt, primarily from its operations at the Tenke Fungurume mine and the Kisanfu project within the DRC. This positioning makes it a potential candidate for scrutiny under the IRA’s foreign entity of concern clause (FEOC), as highlighted by Benchmark Minerals. According to Benchmark’s analysis, an alarming 60 percent of the global mined cobalt supply by 2024 is anticipated to originate from assets identified as either FEOC or at significant risk of being classified as such. The FEOC clause encompasses entities that are owned, controlled, or subject to the jurisdictions of nations such as China, Russia, Iran, and North Korea.

In recent years, the geopolitical landscape surrounding critical minerals has evolved significantly, with countries striving to secure access to key resources essential for technology and renewable energy applications. The United States has aimed to reduce its reliance on foreign suppliers for such materials, implementing the Inflation Reduction Act to foster domestic supply chains. However, the heavy reliance on cobalt from the DRC, where Chinese companies hold substantial control, complicates these plans and poses potential regulatory issues that could impact U.S. businesses and their operations.

In summary, the control of cobalt resources by Chinese firms in the DRC poses considerable risks for U.S. supply chains, particularly under the regulatory scrutiny posed by the Inflation Reduction Act. With a large portion of the cobalt supply expected to fall under the foreign entity of concern classification, the challenges for the United States in achieving its de-risking objectives are amplified. It is imperative for policymakers to consider these dynamics as they seek to navigate the complexities of critical mineral dependencies.

Original Source: www.scmp.com