Among President Joe Biden’s plans at the moment are the potential use of Cold War powers to achieve increased domestic production of essential minerals for batteries and electric vehicles.
Throughout history, the Defense Production Act of 1950 has been used rarely. Today, the White House is preparing to add battery materials to the list of items covered by this Act. Just as Harry Truman used it to manufacture steel for the Korean War and Donald Trump to encourage the production of facemasks to deal with the coronavirus pandemic.
Shares of MP Materials Corp., being the only U.S. company that produces metals needed for the production of electric vehicles, rose 4.7% on the day of the news. Lithium Americas Corp. which heads a project in Nevada posted its biggest gain in several weeks. And Piedmont Lithium Inc. rebounded from losses in recent weeks by gaining as much as 8.7% on the day of the announcement.
Huge Funding Available
If minerals such as lithium, nickel, cobalt, cobalt, manganese and cobalt are added to the list mining companies could be boosted and have access to $750 million for production under the fund titled III Defense Production Act. This could also help the recycling of materials needed for batteries.
The funding from the directive would be encouraging improvements to current production such as productivity and safety improvements as well as funding reliability studies in order to avoid loans or outright purchases. It would also encourage the manufacture of high-capacity batteries.
It would also be ensuring that operations are carried out under strict environmental and labour guidelines. The necessary steps have been taken to ensure that actions coming from the presidency do not circumvent environmental reviews and regulatory permits.
“The president’s signature is a big signal, but it’s incumbent on Congress to appropriate dollars that are commensurate with the challenge,” said Ben Steinberg, co-chair of the critical infrastructure group at the D.C. lobbying firm Venn Strategies in an interview. He added that the funding obtained through the DPA is a “small piggy bank” because it must cover sectors from space and defense to the automotive industry.
It was the bipartisan group of U.S. Senators, Democrat Joe Manchin of West Virginia and Republicans Lisa Murkowski of Alaska, James Risch of Idaho and Bill Cassidy of Louisiana who asked the Biden administration to accelerate battery production through the DPA.
In response to the instance, the Biden administration was reportedly drafting an executive order to invoke the DPA to increase the supply of essential metals for electric car manufacturing.
The Infrastructure Bill and More Driving Demand
Energy independence advocates have lobbied the Biden administration for a major boost in mining and metals production arguing that these are key materials for building electric vehicles. More than $6 billion has already been allocated for the infrastructure bill for this purpose.
The growing demand for electric cars, bottlenecks for supply, and the Russian invasion of Ukraine have caused the prices of metals such as lithium and cobalt to rise and nickel to skyrocket. The price swings have helped drive inflation and point to the vulnerability of U.S. industry as it transitions to clean energy.
The mining industry has been pushed back on the priorities list despite pressure from the Biden administration to embrace the green energy transition so this measure would serve as a support for the industry. Even though the DPA will provide funding to increase the production of metals for batteries, it would not help speed up the permitting necessary for mine approvals.
Issues with mine approvals and investment for new projects have placed the administration on the other side of the industry’s goals in some cases. However, this announcement signals a shift in tone.