CEOs warn US president’s push to build $12bn stockpile threatens distortions and ‘massive overhang’
Standing in the Oval Office in February for the launch of “Project Vault”, mining billionaire Robert Friedland told Donald Trump the $12bn US minerals stockpile would be nothing short of transformational.
“I’m telling you on behalf of every miner I know, they are elated at the breakthroughs achieved here,” he said. “This is the first administration, with your support, where we’ve got hope.”
However, some mining companies are quietly concerned about the venture, warning it risks distortions and a “massive overhang” in commodities markets.
Their worries come at a time when the Iran war has highlighted vulnerabilities in broader natural resource supply chains and the ease with which the industry can be disrupted by geopolitical events.
The strategic minerals reserve, the biggest in the US for civilian purposes, has fiercely divided opinion in the mining community on which it relies.
The programme, led by the US Export-Import Bank, is designed to counter China’s dominance of supply chains by creating a stockpile of 60 critical minerals that manufacturers will pay to access.
It will operate on a demand-driven model based on the needs of end users such as carmakers, according to one person with knowledge of the plans, who added that manufacturers joining Vault will lock in a price for specific metals that they will pay when they withdraw them from the stockpile.
“The free market works for a reason, and I always get concerned about interventions,” said Randy Smallwood, chair of Wheaton Precious Metals, one of the world’s largest companies buying gold and silver.
Stockpiling programmes are “not based on sound economic principles, they are based on protectionism”, he added. “I find that governments are so inefficient when it comes to managing that.”
Iván Arriagada, chief executive of Antofagasta, told the FT that stockpiling efforts “do introduce some distortions in the market”, which was something the Chilean copper miner needed “to look at carefully”. Chile is the largest supplier of the metal to the US.
With copper prices having recently hit record levels, additional demand from stockpiling could further push up prices.
Anglo American CEO Duncan Wanblad is also cautious. “Such mechanisms can create overhangs and distort commodity markets so it will be important to understand the details,” he said.
Another mining executive told the FT the Vault was likely to drive up prices and trigger a “hoarding” mentality, and that nationalistic trade policies that created barriers to free trade could weigh on global development.
Traders and executives warned the effort was likely to put the US in direct competition for the metals with other nations, particularly for some with small markets such as germanium that are in short supply outside China.
The US is not alone in looking to stockpile minerals, with the EU and Australia among others that have signalled their intention to build national reserves to protect domestic industries.
While details of how Vault will work are scant, companies including Lockheed Martin, General Motors, Alphabet’s Google and battery maker Clarios have signed up, which involves paying a fee to participate.
Trading groups will procure the metals that will be stored in the US for manufacturers to draw on during supply shocks or emergencies.
While a defence stockpile for national security was launched in 1939, “the US has never had an economic security stockpile”, said Gracelin Baskaran, director of the critical minerals security programme at the Center for Strategic and International Studies think-tank.
“The beauty of the Project Vault model is it is more fiscally sustainable — companies are paying for it,” she said. The Iran war underscored the importance of securing minerals supply chains, and “Vault only works if those materials are held domestically and can be delivered quickly”, she added.
But one trader said brand-name manufacturers often did not know the precise and complex specifications of each metal needed by their suppliers, a supply chain that some were now trying to understand better.
The trading houses that will procure the material include Mercuria, Traxys, Hartree Partners and Glencore — whose chief executive Gary Nagle has become an enthusiastic supporter.
“It’s a great opportunity for us to assist the US government in setting up and operating this project well,” he said on a call with journalists. “We’re very happy to be part of it.”
Details of how Project Vault will work are still being finalised, so no purchases have been made, said one person familiar with the matter.
For mining executives, the stockpile plan is the latest in a series of policies that have made Washington an unlikely focal point for the industry, and many say they are spending more time in the US capital as a result.
“We are all running around Washington trying to advocate for what we’re advocating for,” Nagle said. “Every mining company is trying to get on to the radar in the US.”
Among the companies front and centre has been Friedland’s Ivanhoe Mines. Just a day after Project Vault was announced, it revealed that its Kipushi zinc mine in the Democratic Republic of Congo, which produces gallium and germanium as byproducts, was in talks with trading partners Mercuria and Gécamines to supply minerals to the programme.
Since the start of Trump’s second term as president in January 2024, his administration has taken direct stakes in several mining companies, announced a multibillion-dollar mining fund and forged critical minerals partnerships with key producer countries.
Many of those have been welcomed by the industry — but some worry that, in a sector in which free trade is a near-sacred virtue, the stockpiling programme may be going too far.
“A much better approach would be to open up permitting,” Smallwood said. “When I look at North America — assuming friendly relations between the US and Canada — there is absolutely no reason we need to go outside of this continent . . . We’ve got everything we need right here.”
Source: www.ft.com
Aleksei Andrievskii is the founder of the ANDRIEVSKII SEA WEALTH family office in Cyprus, a member of the advisory board at Bendura Bank AG, Liechtenstein