Biden Administration Considers Supporting Prices for US Critical Minerals in Response to Chinese Influence
The initiative is a reaction to the numerous delays and cancellations affecting various U.S. minerals processing projects.
TroibNews 
The Biden administration is exploring the possibility of using federal funds to support U.S. critical minerals projects that are struggling against a surge of cheaper Chinese materials, an Energy Department official informed PMG.
Under this proposed policy, the department would establish a price floor and commit to covering the difference when market prices fall below this threshold for critical minerals sourced from select U.S. projects. This initiative has arisen in response to the delays and cancellations of numerous U.S. minerals processing endeavors, including those slated to receive a combined $1 billion in grants from the Biden administration.
This federal safety net would aim to fulfill a key objective of the Biden administration's climate and manufacturing agenda, which seeks to enhance domestic production of minerals essential for clean energy technologies such as electric vehicles—a sector that China currently dominates. It would also align with a growing trend of bipartisan support for government intervention in the economy, reflecting former President Donald Trump’s advocacy for extensive tariffs and Vice President Kamala Harris’ efforts to impose harsher penalties for price gouging.
The official, who holds a position in the department’s Manufacturing and Energy Supply Chains Office, spoke anonymously about the still-evolving policy.
The oversupply of Chinese minerals has driven down the prices of lithium, nickel, and other critical materials necessary for the clean energy transition, complicating financing for U.S. minerals project owners despite the grants and other forms of assistance provided by President Joe Biden’s administration. This situation has prompted industry stakeholders and government representatives to suggest that more robust government support is necessary beyond initial capital investments.
The goal of the developing policy would be to instill confidence in investors and customers regarding U.S. suppliers' ability to counteract China's influence in the critical minerals sector.
The financial implications of this initiative remain uncertain, with ongoing discussions about its specifics. However, the proposed backstop is expected to be temporary and restricted to projects deemed nearly competitive in pricing but adversely affected by foreign market manipulation.
“If we move forward on anything like this, the intent would be to give the nudge that is needed to set off the flywheel, versus create a permanent subsidy or cushion for a particular sector or company going forward,” stated the Energy Department official.
Even if mineral prices remain high enough that government funds are never disbursed, the commitment to support can help projects secure necessary purchase agreements from customers crucial for financing their construction.
According to the official, most actions taken by the Manufacturing and Energy Supply Chains Office have focused on funding construction. “But it feels warranted, given what we’re hearing from the market, to think through, are there more creative ways where we can support projects so that they can … have the financial certainty to actually scale up?” the official expressed.
In recent months, companies and industry organizations have quietly pushed for a financial backstop, yet some within the sector are skeptical about government involvement in the intricate commodities markets. There are also concerns about the Energy Department’s ability to establish and fund such an initiative without specific Congressional authorization, particularly after the Supreme Court curtailed federal agencies' discretion earlier this year by reversing a long-standing legal principle.
The DOE official indicated that the agency is evaluating what it can accomplish within its current authorities, which might encompass reallocating some grant funding designated for minerals projects, including unused funds from projects that withdrew from grant discussions.
The industry conveyed its challenges to the DOE in response to a request for information issued by the Manufacturing and Energy Supply Chains Office earlier this spring, seeking insights into the critical minerals market dynamics. Companies communicated “strong support” for the department to introduce “demand-side tools,” such as a price floor or contracts for differences, to alleviate market concerns, according to a summary of stakeholder feedback released by the agency on Friday.
To secure financing, owners of minerals projects typically need to establish agreements with potential buyers such as automakers or battery manufacturers, demonstrating their capability to generate sufficient revenue to reimburse investors.
However, these customers have been reluctant to commit to long-term purchasing agreements with U.S. suppliers due to ongoing price uncertainty and the fact that American-produced minerals generally command higher prices than their Chinese counterparts. For example, a last year’s estimate put North American graphite prices at more than double those of imported equivalents.
“You can’t have the facility built or the money to buy the equipment without having commitments from customers because you can’t get the financing without it,” remarked Chip Dunn, chair of Anovion Technologies, which is working on a $1 billion synthetic graphite plant in Georgia. “This is where the government needs to play a role.”
U.S. producers and government officials have accused China of subsidizing its producers to inundate the global market with inexpensive minerals produced under lower social and environmental standards. Jose Fernandez, a senior State Department official, revealed to PMG this month that China is engaging in “predatory pricing” to undermine U.S. endeavors to cultivate its own high-standard mineral sources.
Additionally, American projects encounter considerably longer timelines to reach market due to permitting delays. Some U.S. minerals suppliers argue that the Biden administration’s regulations implementing Inflation Reduction Act tax credits for electric vehicles and clean energy manufacturing have allowed upstream customers too much flexibility to continue sourcing minerals from China.
The Biden administration has already allocated billions of dollars to kickstart a domestic critical minerals industry, particularly in the processing sector largely controlled by Beijing.
In late 2022, as mineral prices reached near-record highs, DOE selected 21 processing and recycling projects to receive a total of $2.8 billion from the bipartisan infrastructure law. However, in 2023, during grant negotiations, lithium prices plummeted by 75%, while cobalt, nickel, and graphite prices each decreased by 30 to 45%, according to the International Energy Agency.
About one-third of the projects that were expected to receive $1 billion did not complete the negotiations for the awards, according to information on the Energy Department’s website.
The projects faced a “perfect storm” of pricing pressures, indicated Ben Steinberg, who represents several of the grant recipients as executive vice president at Venn Strategies and spokesperson for the Battery Materials and Technology Coalition.
“High interest rates, inflationary pressures and oversupply of minerals from China put a lot of additional burden on these companies, who have the monumental task of raising or finding private capital for three quarters of these investments,” Steinberg explained.
Several companies involved in the grant round have sought loans from the DOE’s Loan Programs Office, which is estimated to possess over $200 billion in loan authority and can offer a larger proportion of financing for projects. This office announced in May that critical minerals mining and extraction projects are now eligible for loans and indicated in a memo and webinar that month that it might permit projects to receive both a grant and a loan on a “project-specific” basis.
However, some companies assert that the Energy Department must implement a backstop mechanism beyond just supporting capital construction. This would ensure that specific producers can secure a minimum price for their minerals, even if market prices decline.
“Offtake backstops help derisk project development and enable developers to access project financing,” emphasized the think tank Federation of American Scientists, advocating for such a mechanism in a recent report.
This idea may garner support from both parties in Congress as well as in Europe, which is also attempting to reduce reliance on Chinese minerals.
In a bipartisan policy report last year, the House Select Committee on the Chinese Communist Party stated that the U.S. is “dangerously dependent” on Chinese minerals and recommended establishing a national mineral strategic reserve. This approach would involve the physical buying and selling of minerals to stabilize prices, similar to how the U.S. manages oil reserves.
The Paris-based International Energy Agency also announced plans in February for a critical minerals security initiative akin to an oil program requiring member nations to stockpile a minimum of 90 days' supply to counter market disruptions.
Nonetheless, some industry observers remain doubtful as to whether a government backstop is the appropriate strategy for supporting the industry.
Abigail Hunter, executive director of the Center for Critical Minerals Strategy at the think tank SAFE, expressed concerns about government intervention in commodity market pricing, which tends to be cyclical and complex.
“Policies need to be carefully calibrated to the specific commodity price dynamics, potentially peter off after projects reach economies of scale in production, and [be] coupled with other government support, all so taxpayers don’t end up supporting projects — especially unviable ones — indefinitely,” Hunter stated in an email.
Alex Fitzsimmons, head of government affairs at Sila Nanotechnologies, which is establishing a plant in Washington state to produce silicon anode material for EV batteries, suggested that a government backstop should be considered “as part of a suite of market signals,” while emphasizing the need for companies to enhance their products to maintain competitiveness.
“Especially in this funding environment, companies have to find ways to separate themselves from a technology standpoint and a performance standpoint if they’re expecting to have customers pay a premium,” Fitzsimmons concluded.
Emily Johnson contributed to this report for TROIB News
Under this proposed policy, the department would establish a price floor and commit to covering the difference when market prices fall below this threshold for critical minerals sourced from select U.S. projects. This initiative has arisen in response to the delays and cancellations of numerous U.S. minerals processing endeavors, including those slated to receive a combined $1 billion in grants from the Biden administration.
This federal safety net would aim to fulfill a key objective of the Biden administration's climate and manufacturing agenda, which seeks to enhance domestic production of minerals essential for clean energy technologies such as electric vehicles—a sector that China currently dominates. It would also align with a growing trend of bipartisan support for government intervention in the economy, reflecting former President Donald Trump’s advocacy for extensive tariffs and Vice President Kamala Harris’ efforts to impose harsher penalties for price gouging.
The official, who holds a position in the department’s Manufacturing and Energy Supply Chains Office, spoke anonymously about the still-evolving policy.
The oversupply of Chinese minerals has driven down the prices of lithium, nickel, and other critical materials necessary for the clean energy transition, complicating financing for U.S. minerals project owners despite the grants and other forms of assistance provided by President Joe Biden’s administration. This situation has prompted industry stakeholders and government representatives to suggest that more robust government support is necessary beyond initial capital investments.
The goal of the developing policy would be to instill confidence in investors and customers regarding U.S. suppliers' ability to counteract China's influence in the critical minerals sector.
The financial implications of this initiative remain uncertain, with ongoing discussions about its specifics. However, the proposed backstop is expected to be temporary and restricted to projects deemed nearly competitive in pricing but adversely affected by foreign market manipulation.
“If we move forward on anything like this, the intent would be to give the nudge that is needed to set off the flywheel, versus create a permanent subsidy or cushion for a particular sector or company going forward,” stated the Energy Department official.
Even if mineral prices remain high enough that government funds are never disbursed, the commitment to support can help projects secure necessary purchase agreements from customers crucial for financing their construction.
According to the official, most actions taken by the Manufacturing and Energy Supply Chains Office have focused on funding construction. “But it feels warranted, given what we’re hearing from the market, to think through, are there more creative ways where we can support projects so that they can … have the financial certainty to actually scale up?” the official expressed.
In recent months, companies and industry organizations have quietly pushed for a financial backstop, yet some within the sector are skeptical about government involvement in the intricate commodities markets. There are also concerns about the Energy Department’s ability to establish and fund such an initiative without specific Congressional authorization, particularly after the Supreme Court curtailed federal agencies' discretion earlier this year by reversing a long-standing legal principle.
The DOE official indicated that the agency is evaluating what it can accomplish within its current authorities, which might encompass reallocating some grant funding designated for minerals projects, including unused funds from projects that withdrew from grant discussions.
The industry conveyed its challenges to the DOE in response to a request for information issued by the Manufacturing and Energy Supply Chains Office earlier this spring, seeking insights into the critical minerals market dynamics. Companies communicated “strong support” for the department to introduce “demand-side tools,” such as a price floor or contracts for differences, to alleviate market concerns, according to a summary of stakeholder feedback released by the agency on Friday.
To secure financing, owners of minerals projects typically need to establish agreements with potential buyers such as automakers or battery manufacturers, demonstrating their capability to generate sufficient revenue to reimburse investors.
However, these customers have been reluctant to commit to long-term purchasing agreements with U.S. suppliers due to ongoing price uncertainty and the fact that American-produced minerals generally command higher prices than their Chinese counterparts. For example, a last year’s estimate put North American graphite prices at more than double those of imported equivalents.
“You can’t have the facility built or the money to buy the equipment without having commitments from customers because you can’t get the financing without it,” remarked Chip Dunn, chair of Anovion Technologies, which is working on a $1 billion synthetic graphite plant in Georgia. “This is where the government needs to play a role.”
U.S. producers and government officials have accused China of subsidizing its producers to inundate the global market with inexpensive minerals produced under lower social and environmental standards. Jose Fernandez, a senior State Department official, revealed to PMG this month that China is engaging in “predatory pricing” to undermine U.S. endeavors to cultivate its own high-standard mineral sources.
Additionally, American projects encounter considerably longer timelines to reach market due to permitting delays. Some U.S. minerals suppliers argue that the Biden administration’s regulations implementing Inflation Reduction Act tax credits for electric vehicles and clean energy manufacturing have allowed upstream customers too much flexibility to continue sourcing minerals from China.
The Biden administration has already allocated billions of dollars to kickstart a domestic critical minerals industry, particularly in the processing sector largely controlled by Beijing.
In late 2022, as mineral prices reached near-record highs, DOE selected 21 processing and recycling projects to receive a total of $2.8 billion from the bipartisan infrastructure law. However, in 2023, during grant negotiations, lithium prices plummeted by 75%, while cobalt, nickel, and graphite prices each decreased by 30 to 45%, according to the International Energy Agency.
About one-third of the projects that were expected to receive $1 billion did not complete the negotiations for the awards, according to information on the Energy Department’s website.
The projects faced a “perfect storm” of pricing pressures, indicated Ben Steinberg, who represents several of the grant recipients as executive vice president at Venn Strategies and spokesperson for the Battery Materials and Technology Coalition.
“High interest rates, inflationary pressures and oversupply of minerals from China put a lot of additional burden on these companies, who have the monumental task of raising or finding private capital for three quarters of these investments,” Steinberg explained.
Several companies involved in the grant round have sought loans from the DOE’s Loan Programs Office, which is estimated to possess over $200 billion in loan authority and can offer a larger proportion of financing for projects. This office announced in May that critical minerals mining and extraction projects are now eligible for loans and indicated in a memo and webinar that month that it might permit projects to receive both a grant and a loan on a “project-specific” basis.
However, some companies assert that the Energy Department must implement a backstop mechanism beyond just supporting capital construction. This would ensure that specific producers can secure a minimum price for their minerals, even if market prices decline.
“Offtake backstops help derisk project development and enable developers to access project financing,” emphasized the think tank Federation of American Scientists, advocating for such a mechanism in a recent report.
This idea may garner support from both parties in Congress as well as in Europe, which is also attempting to reduce reliance on Chinese minerals.
In a bipartisan policy report last year, the House Select Committee on the Chinese Communist Party stated that the U.S. is “dangerously dependent” on Chinese minerals and recommended establishing a national mineral strategic reserve. This approach would involve the physical buying and selling of minerals to stabilize prices, similar to how the U.S. manages oil reserves.
The Paris-based International Energy Agency also announced plans in February for a critical minerals security initiative akin to an oil program requiring member nations to stockpile a minimum of 90 days' supply to counter market disruptions.
Nonetheless, some industry observers remain doubtful as to whether a government backstop is the appropriate strategy for supporting the industry.
Abigail Hunter, executive director of the Center for Critical Minerals Strategy at the think tank SAFE, expressed concerns about government intervention in commodity market pricing, which tends to be cyclical and complex.
“Policies need to be carefully calibrated to the specific commodity price dynamics, potentially peter off after projects reach economies of scale in production, and [be] coupled with other government support, all so taxpayers don’t end up supporting projects — especially unviable ones — indefinitely,” Hunter stated in an email.
Alex Fitzsimmons, head of government affairs at Sila Nanotechnologies, which is establishing a plant in Washington state to produce silicon anode material for EV batteries, suggested that a government backstop should be considered “as part of a suite of market signals,” while emphasizing the need for companies to enhance their products to maintain competitiveness.
“Especially in this funding environment, companies have to find ways to separate themselves from a technology standpoint and a performance standpoint if they’re expecting to have customers pay a premium,” Fitzsimmons concluded.
Emily Johnson contributed to this report for TROIB News
