During Xi Jinping’s late-September visit to Washington, the U.S. and China extended their trade truce — but more than a month later, there’s still no Federal Register notice or amended MofCom announcement formalizing it.
Jessica DiCarlo, an assistant professor of geography at the University of Utah, calls this “managed interdependence,” not de-escalation.
And she says the idea that Beijing can simply flip an on-off switch on minerals processing and shipments underappreciates the complexity of the sector’s regulation in China.
On this latest episode of the Trivium China Podcast, host Andrew Polk and special co-host Cory Combs (Trivium’s Head of Supply Chain and Critical Minerals Research) sit down with Jess (a scholar and co-founder of the Second Cold War Observatory) to unpack:
Why China’s rare earth sector is regulatorily “fractured,” and how local officials, provinces, and firms – not just Beijing – shape what actually gets mined and shipped
Why processing, not mining, is China’s genuine chokepoint
How cobalt underscores the deep interconnection between China and other countries (e.g. the DRC) in the minerals space: about 96% of Congolese cobalt goes to China for processing
Why China’s real edge may be guaranteed buyers up and down the supply chain, and why price swings keep sinking Western projects like Idaho’s cobalt mine
The “minerals at the margins” — like hafnium, zirconium, boron, and beryllium — that may become strategically important, and why definitions of “critical minerals” keep changing
Why the idea of a “just transition” for mineral mining belongs in the security debate, not on the sidelines
Give it a listen and let us know what you think.
Transcript
Andrew Polk: Hi, everybody. Welcome to the latest Trivium China Podcast, a proud member of the Sinica Podcast Network. I’m your host, Trivium co-founder, Andrew Polk. And today, I’m joined by two great folks. First, we’ve got a familiar voice to listeners, which is Cory Combs, our Head of Supply Chain and Critical Minerals Research at Trivium, who’s going to be co-hosting with me today. And then secondly, we have a special guest that I’m very excited to have on.
She is an assistant professor of geography at the University of Utah. She’s also a co-founder of the Second Cold War Lab Observatory and an editorial board member at the Global China Lab, which advances open access, grounded analyses of China’s global engagements. That’s Jessica DiCarlo. Jessica, welcome to the pod.
Jessica DiCarlo: Thanks so much, Andrew. I’m so excited to be on here with you both, and I feel like we have so much to catch up on.
Andrew: Yeah, it’s going to be a great, wide-ranging conversation, so, very pumped to have you on. Just for a little bit more background for listeners, Jess and Cory have done quite a bit of work together, largely relating to various developments globally in the critical mineral space. So, we’re going to talk a lot about critical minerals and rare earths and the geopolitics of all of that. Cory and I have talked a lot about all of that on the pod in sort of relation to sort of ongoing news developments. But Jess is going to take us a little bit deeper and talk about things really more from a global perspective.
Of course, that will relate to China and what the U.S. and the West are doing in response to kind of China’s approach to critical minerals and rare earths, but it’s going to be a really great conversation. I forgot to say, Cory, how are you doing today? Welcome to the pod as well.
Cory Combs: Cheers. It’s good to be back on, as always.
Andrew: All right. Well, I’m pumped for this conversation today. But of course, before we get into the meat of it, we have to start with the customary vibe check. So Jess, I’m going to start with you. How’s your vibe today?
Jess: Well, it’s an honor to be a part of the vibe check. Thank you. I think despite the constant background noise of U.S. and world politics, I’d say my vibes are generally high. It’s a really lovely autumn afternoon in Utah. We’re on fall break. And I’m really focused on a few writing projects and kind of finding reasons to stay curious in my research and for my students. So yeah, vibes are in the A range.
Andrew: That’s awesome. I love it. I love it. I think, Jess, we can put you in the fellow China nerd category. I don’t know if I’m allowed to call you that.
Jess: Big time.
Andrew: Okay, cool. So, Trivium is just a bunch of China nerds who work together, basically. And so, it’s good to have another nerd in the nerdery with us. And glad to hear that you’re bringing positive energy today. Cory, how’s your vibe?
Cory Combs: You know, I’m going to follow suit. I’m feeling pretty positive, partly because a bunch of stuff that’s now off my plate for the last couple months. But also, it’s close to Halloween. And I know that’s polarizing, but I’m a huge fan. Probably not for the reason people expect. For me, it’s concert season. If you like music, and specifically the minor keynote, now is the time. I’ve got a concert coming up. I’m going to see Nobuo Uematsu as a composer, for any nerds of other forms, a Final Fantasy composer. He’s legendary.
So, I’m going to get to see one of my heroes in action orchestrating in the next couple weeks. So, my vibes are very positive.
Andrew: That’s awesome. Okay, I love the music in the minor keynote, spooky music. And mine’s sort of related, actually. My vibe, so, as soon as we get off this pod, I’m driving with my wife and two kids to New York. My daughters are obsessed with Hamilton. So we’re going to see Hamilton for the first time as a family and very excited about that. So, I’m not going to let that excitement to go to New York make us rush through the pod, but I am bringing kind of that vacation energy. So, I’m pumped to get into it.
Last thing, of course, we also have to quickly do housekeeping. Just a quick reminder to folks that we’re not just a podcast here. Trivium China is a strategic advisory firm that helps businesses and investors navigate the China policy landscape that, of course, includes domestic policy in China, a long a range of issues, including critical minerals and rare earths and industrial policy, some of which we’ll touch on today, and policy towards China out of Western capitals like D.C., London, Brussels, and others, which we will also touch on today.
So, if you need any help on that front, please reach out to us at hq@triviumchina.com. We’d love to have a conversation about how we can support your business or your fund. Otherwise, I always say this, but we really do appreciate the word of mouth recommendations from our listeners and our clients. So if you like the podcast, please tell somebody about it so that we can both grow our business and grow our listenership. And I feel confident that after today’s episode, you are definitely going to want to tell some colleagues about this discussion. So, with that, Jess, you ready to get into it?
Jess: Let’s do it.
Andrew: All right. Okay.
So we’ll start with sort of the most recent developments on this front, which are, of course, Xi Jinping recently being in Washington, D.C. for the state visit with Donald Trump. And also, we’re sort of in the middle of EU-China talks on trade, which obviously have a rarest element, critical minerals element to them. So, I just want to start by kind of getting your lay of the land. You’re an expert in this field. You look at it from not just China’s point of view and the West point of view, but sort of a broader global South point of view, I would say. Just talk to us about your broad thinking on the critical mineral space and some of the key trends you’re watching of the space at the moment.
Cory: Yeah, thanks, Andrew. And that’s a great question to kick us off with. So, I think the summit really reinforced how central various forms of leverage around critical minerals have become to trade negotiations. So, the two sides extended their trade truce, but reliable access to critical minerals remains unresolved in many cases. So, the White House said that discussions are continuing around U.S. concerns over things like rare earths and other minerals and ensuring shipments return to appropriate levels, as they say, on their site.
So, I expect the upcoming EU-China talks to focus similarly on making exports and licensing more predictable rather than really resolving any structural dependencies with China. And in some ways, I appreciate how this acknowledges the fantasy of complete decoupling. There’s so much talk about reducing dependence on China, but the Western ideal of this globalized world economy and offshoring, often polluting industries to places with cheaper labor has, in part, shaped today’s global production networks. And these have been built over years, and you can’t quickly undo that.
So, I think these meetings and their outcomes are really signaling that. In terms of these summits, China’s position is also about more than resource access. And I know we’re going to talk a lot about this, but it’s about these big industrial ecosystems built around them. So, the processing capacity, technical expertise, infrastructure, manufacturing, that allows us to turn minerals into materials that industries depend on. So, what we’ve seen is that this industrial position can also translate into geopolitical leverage, export controls, licensing delays, and disrupt manufacturers beyond China. So, that’s really what I see as what’s made critical minerals such an important issue in these kind of higher level summits.
Andrew: Yeah, I really appreciate the comment on the fantasy of full decoupling. And I know we’re going to get into that and specifically like some of the West’s view on China’s leverage, the way it uses its leverage. So, I’m excited to talk about that. But I think you had one more point to make.
Jess: Sure. I mean, on that, we’re obviously not going to reverse decades of globalization by simply redirecting supply chains. So, I guess I’ll be watching for whether policymakers recognize this complexity in negotiations in any way. And I would say my final, final point here, and something I keep coming back to in multiple projects, is what does it actually mean to build more secure, resilient mineral supply chains and for who? So, if we simply relocate extraction or processing while maintaining the same kind of underlying modes of resource extraction or environmental harm or unequal distribution of benefits, then we may change that geography of production without addressing a lot of the deeper problems.
So, I think that needs to be a part of these conversations about mineral security as well, rather than a separate issue.
Andrew: Yeah, that’s great. Cory, I want to bring you in for thoughts as well. I will just say, I know you’ve also been doing some of your most recent work on this idea of sort of as we rejigger supply chains, how do we do so in an equitable way in ways that also take climate into account? And I mean, let’s be honest, the whole reason that we offshore the rare earths industry to begin with was because we didn’t want the climate degradation in our own countries, right? So now we’re just going to invite that back? That doesn’t seem like necessarily the right answer. So I don’t know. Thoughts on that?
Jess: Yeah, absolutely. And there’s the climate argument to this. And also so much of this reshoring, friendshoring that the U.S., EU, other countries are trying to do also has a lot to do with other industries. So critical minerals are no longer just about climate and low carbon technology, right? It’s very military defense focused as well, digital technologies. So, it’s an increasingly complicated field.
Andrew: Yeah. Well, we’re going to dig into all of this as we go along this discussion. Cory, your thoughts and kind of where we are and any kind of up top additional questions for Jess to kick off with?
Cory: Yeah, no, I think a lot of different threads to pull on here, but one is that, just following up on the EU China piece, it’s very explicit what Jess was talking about. I mean, Maroš Šefčovič and Wang Wentao spoke recently, October 9th, 8th to 9th. And they have a list of deliverables that focus on moderating Chinese exports of hybrids and plug-in hybrids through the EU, the U.S. trying to get more market access.
But in the center of that was the rare earth licensing. That is not the same type of problem as the trade and investment issues we’re talking about, and yet it’s the centerpiece of those talks. I think that that is very specifically talking to. And in that set of talks, Maroš Šefčovič was very, very clear as well. The phrase I’m going to, I think it’s more or less verbatim, I don’t have it in front of me, but it was basically the EU is interested in basically reconfiguring, but not interested in decoupling from China. “The EU is committed to de-risking, not decoupling from China,” direct quote, right? And that’s to Jess’s point about handling the myth.
And I think a reasonable response has to recognize not just what we can and can’t do, and can we replace all of Chinese supplies for the entire electronics chain and not just for defense? That’s one question. The question that EU is grappling with, I think much more meaningfully is, To what extent do we want to? Obviously, you don’t want to be beholden to any particular supplier of 80%, 90% of your goods that can sway your whole trade negotiation, right? That’s obviously too much. But there’s also a real conversation around what degree of de-risking, not decoupling is actually acceptable. And I think having a clear vision of that is a prerequisite for a lot of further action.
But yeah, that and then I would just flag, hopefully we’ll talk about this more later in the episode, but the notion of a just transition, and you talk about the climate impacts, environmental impacts, one of the policy, just to toss it out on the table, one of the policy issues I see right now, or one of the issues with policy discourse I see right now, especially in D.C., but also elsewhere, is that, on one hand, a lot of folks talking about these issues, rare earths and other critical minerals, it’s the question of just literal access, just as fast as you can do it.
Any supply you can get is good. That’s the goal. And then you have the other group that’s very, very intently focused on this is more about the people who recognize that extractive industry has a lot of harm associated with it, a lot of historical issues. And apart from that, anything that doesn’t take into account local stakeholders and actual impacts beyond the financial, they tend to fail by their actual real risks to not having a properly what you might call a just transition from an ethical and moral perspective, from a climate perspective, but also from a very practical perspective.
And I want to talk about that later because Jess has done a ton of great work on this as well. But yeah, there’s two big pieces of the conversation. One is how rare earths end up in conversations that really are not about rare earths, but they’re just so much of leverage that they’re at the center. And then separately, that’s only one of the policy conversations around critical minerals. And Jess has a lot on the other piece as well.
Andrew: Yeah. I don’t want to get too much off of our roadmap here, Jess, but I do want to, following your point and then Cory’s point, I feel like the EU, they introduced the idea of de-risking, right? And trying to emphasize, we’re not decoupling, we’re de-risking. And then the U.S., I think, kind of increasingly started saying that, “Yeah, yeah, yeah, we just don’t want to de-risk. We don’t want to decouple.” I don’t know. I feel like that’s kind of politicians just trying to get the words right. But is there more to that in your mind? How do you think of the de-risking versus decoupling idea?
Jess: It’s a great question. I think my gut reaction would be that it has a lot more to do with discourse and rhetoric than it does actually shifting policies. I think decoupling so quickly became unpopular and there was a lot of pushback against it. And I think de-risking just sounds like a much more reasonable approach to say, well, you know, of course we’re going to stay connected in some ways. And I do think governments and companies realize that actually fully decoupling from major global supply chains would just be a bad decision for them. So the shift in language has to be a part of that as well.
Andrew: Yeah. Well, and I mean, to be fair, we work with companies at Trivium a lot. They’ve always known that coupling wasn’t going to happen, and I think the policymakers are starting to catch up. But I did also want to follow up on the agreement between Xi and Trump. It looks like they’ve punted on the Busan agreement from last year for at least a couple of months. And the thinking is, although it seems like China hasn’t officially confirmed it, but has kind of hinted that this is correct, that they’re, of course, going to extend the licensing regime in various critical minerals and rare earths that were part of that Busan agreement.
Do you feel like this is a fundamental de-escalation between U.S. and China and China and the world? Or are we just kind of on a pause from your point of view?
Jess: Yeah, I think there are really important ways that the U.S. and China are coming together and talking. And I think these summits are very important. In terms of this particular issue, I see it as more of a pause than a real de-escalation or solution. I think the extension, of course, matters because it gives companies and governments some breathing room and reduces the immediate risks of supply disruption. But the underlying issues haven’t gone away.
So, you have China’s position. It’s about the leverage that comes from its supply chain positions. And from Beijing’s perspective, export controls are a way of signaling that it has options when it does face pressure from the U.S. So, I don’t see that suspension as China giving up that leverage. I think it’s more that China can be selective about when it uses that leverage. And the regulatory tools are all still there. So its supply chain positions are significant. It can tighten restrictions if negotiations break down. So, I guess I’d describe it more as kind of a managed interdependence or some sort of diplomatic interdependence rather than any fundamental de-escalation.
I do think both sides recognize the costs of full-blown confrontation, as we were just saying. So they have incentives to keep at least things the short-term stable. But I also don’t think either side has abandoned strategies of reducing their own vulnerabilities or building leverage over the other. So, in general, the immediate risk of disruption may have declined, but the underlying competition hasn’t. Cory, maybe you can speak more to the specifics here, but my understanding is that the extension of the trade truce runs through January 2027, but the formal suspension of the October 2025 controls haven’t necessarily been amended the same way.
So, should we be careful not to treat a diplomatic understanding as settled or implementable or legal? Yeah. What are your thoughts on that?
Cory: Yeah, it’s a great thing to flag because when we say the truce has been extended, that is, as you say, a diplomatic agreement. We have not seen any federal register confirmation. We have not seen any MOFCON announcement that formalizes it. Now, I also think, I mean, given both systems are very kind of centralized right now, and if a leader says something, it happens. We’re 95% confident the truce is the truce, but it is true that there’s still a little concern, but more importantly, I think, than just this instance is, there is, not to use decoupling in more contexts, even than it already is used.
But there is a distinction between the legal and political sides that is increasingly frustrating. Because half the time, like if it’s January 8th and we haven’t seen the formal language changed, everyone’s going to b, well, the truce should end in two days. We should be…” you know. Anyway, so I think it’ll be fine, but it is definitely one of those things that can creep up. And it’s more broadly indicative of a problem that rhetoric and policy and law are not necessarily fully in unison at all times at this point. Not worried about this case, but yeah.
Jess: Not at all.
Andrew: Yeah, I was going to say, I don’t think for a legal counsel, general counsel of a major company going to them and saying, “I think it will be fine,” is really the answer they want to hear. They want, “Okay, was it legally extended? We need to see the paper.” That’s a great question, Jess. We will be on the lookout for that because it’s going to matter to how all this stuff gets implemented.
I wanted to pivot now to some of the deeper research that you do, Jess, and some of which you have done with Cory, and start with some really interesting work you all have done on domestic governance of China’s own critical minerals industry. So you wrote a paper with Cory and another colleague, Raphael Deberdt?
Jess: Deberdt.
Andrew: Deberdt. Okay. Yeah. See, yeah, I’m from Texas. We don’t know how to pronounce these names. So, but in it, you described China’s rare earths sector, characterized as fractured extraction. I love that name. Can you kind of introduce our listeners to that topic and what you mean by that? And then we’ll talk about kind of how that’s applicable to what’s going on.
Jess: Sure. Yeah. This was such a pleasure to work on with Coey. He’s a fantastic thinker and writer. So thank you for that, Cory. I guess I view, and I’m curious if you think about this differently, but I view fractured extraction as a way of capturing kind of the gap between China’s centralized ambitions for the rare earth sector and the more uneven contested ways those ambitions play out on the ground. So fractured extraction as a concept builds on a very long tradition in China’s scholarship on fragmented governance and central local relations in China.
The term itself also builds on Lee Jones and Shahar Hameiri’s excellent book, Fractured China. So, we’re using that perspective to understand how extraction is shaped by kind of overlapping, sometimes conflicting agendas domestically in China. So, in terms of rare earth production, the Chinese central government has pretty clear objectives – wants to consolidate the industry, strengthen environmental regulation, move the sector toward higher value production, among other things. But those goals obviously don’t automatically translate into uniform outcomes across the country.
So, what we found is that provincial and local governments, as well as firms, obviously have their own priorities. Local governments, for example, may support tighter environmental controls in principle, but when they’re thinking more about employment or local revenue or maintaining production, maybe some of those concerns go out the window or have less of a bar to reach. So, you end up having these tensions between what the center wants and what different actors are incentivized to do.
And what’s important for us, I think here, is that China’s dominance in the rare earth sector can sometimes be portrayed as highly coordinated. So, a centrally controlled system. They can turn supply on and off around the world. But in practice, all of the policies domestically are interpreted, negotiated, and resisted at different levels of government. And that’s why I think environmental and regulatory problems persist even when the central government has made those problems a central priority.
So, I hope this concept helps us think about kind of the limits of thinking about top-down efforts to reorganize the sector. And as many of us China nerds have been saying for a very long time, China is not a monolith and we can’t treat it that way if we really want to understand how various sectors work. So an aim of fractured extraction is to encourage us to look beyond these national strategies or production figures to understand those internal tensions of how power is actually exercised and then how that in turn affects global supply chains.
Andrew: Totally. Yeah. That’s all ringing very true in the areas where I watch China as well, in terms of the center making policy from a macroeconomic standpoint and local officials, you know, choosing how to interpret and implementing to various degrees. But one of the key, I think, implications here that I really want to dig in on is because of this fractured extraction idea, it really kind of undercuts this narrative in the West that we have that Beijing just kind of can turn the taps on and off at will when it comes to kind of anything but rare arts and critical minerals in particular.
So, how does this finding and thinking about the fractured extraction idea, how has that informed how you think about the central government’s ability to actually wield exports as a sort of economic coercion tool vis-a-vis Western countries?
Jess: Yeah, that’s a great question. I think that narrative sometimes gets a little overblown, the turning the tap on and off. China obviously has enormous leverage and it controls about 90% of rare earth processing, but a dominant position doesn’t necessarily always equal control. So, Beijing has spent decades trying to centralize control further. And I think that in itself is a signal that it doesn’t feel like it has that control all the time. I also think there’s an interesting historical dimension to this that we lightly touch on in our paper. And it comes up in a recent foreign affairs article by Gloria Shang and Jessica Chen Weiss.
And China’s rare earth dominance, of course, we all argue it’s developed through this history of domestic industrial policies, technological change, Western offshoring efforts. But something they point out that supports our fractured extraction argument is the 2010 dispute with Japan. And Gloria and Jessica note that while rare earth export restrictions were widely seen as retaliatory for a diplomatic dispute with Beijing, local customs officials and other actors may have withheld shipments without a clear directive from Beijing.
So, we’ve been seeing these sort of local moves for a long time. And I think that episode helped, on one hand, the Japan episode helped cement rare earth’s reputation as a geopolitical weapon. But looking at it from this view, you see that it really does raise questions about control. So when we’re asking questions about leverage, it feels impossible to look at these just high-level statements and actions without trying to dig into, well, why did it happen? And who did it? And where did that come from?
So, the idea that Beijing can cut off critical mineral supplies at any moment, I think when we’re talking about that in a Western context, that can also be a really powerful rhetorical tool for Washington or Brussels. I think it helps generate a sense of urgency around dependence on China and it’s building support for things like reshoring, friendshoring, etc. So, you have this historical dimension of domestic politics, but then also the rhetorical power of something like China being all powerful that we need to think about.
So, China obviously has leverage in terms of export controls and licensing, but a simple on-off switch is really overly simplistic and it misses kind of these histories, domestic politic, discursive uses of this kind of narrative.
Andrew: Totally. Cory, do you have thoughts?
Cory: Yeah, I’ll add it. It also is to Beijing’s advantage. Beijing wants to project an image of being able to cut off the taps. And so the West in many ways has reinforced the narrative that Beijing loves because Beijing, as you said, has worked decades in many cases to be able to do kind of the things it’s doing. So as well to add to that point, one other kind of practical note for companies who might be like, “Okay, well maybe…” and I’ve heard this a lot, right? Including for folks who’ve read the rest of your work as well.
And they’ll say things like, which is reasonable, I think, to say like, okay, we see how historically, maybe it was like a local effort in 2010, but then Beijing learned the lesson and now it is taking control. So interesting historically doesn’t matter anymore. Now, I push back hard against that. I’m very curious about the ways in which you would respond to that. But my first thought here is that, one, again, none of us are kind of downplaying the extent of China’s actual leverage in terms of we’ve seen no gallium, tungsten, etc., yttrium shipped to Japan since the effect of embargo, right?
And that’s control. At the same time, we’ve seen, already this year, several massive smuggling cases, including some that implicate local authorities, including a Chinese optics firm, which has a lot already getting massive domestic penalties. I think it was the Shanghai Customs Anti-Smuggling Bureau had caught them mislabeling things. And the reason that’s called out is because they need an example to make because they know this is happening much more broadly, and don’t have full control.
And so one stuff is still happening that Beijing is still reacting to. But I think, more broadly, it’s interesting to know what was different between the rare earths industry of 10 years ago and the rare earths industry of today that enabled Beijing to increase its effective leverage over that industry? And I’d say at this point, yeah, Beijing has a pretty good, I mean, good as a relative term, but pretty effective ability to cut off certain exports, but they have invested so heavily.
And so, as we look to new targets and new risk vectors and other controls, I think when we’re looking at fractured extraction, a lot of what we’re looking at is in fractured governance and in general of these production chains is what is necessary for not complete, but much stronger control, what undermines control. And then you can really, this isn’t exactly a simple formula or something, but it helps to think through for any potential new risk factors, does China have what it needs? Does Beijing have what it would need to implement controls to what extent?
And if you don’t have a sense of what it requires, you’re not going to be able to model that at all. I don’t know if you have any thoughts on that part.
Jess: Yeah. I mean, on the note of undermining control, I have some ongoing research very much in process on the China Myanmar border and just thinking about the high levels of heavy rare earths coming in from Myanmar to China. And a lot of what we’re seeing there is that much of the supply chain is depending on actors’ relationships that really extend so far beyond central control, which is maybe not surprising in many ways.
But heavy rare earths, many are mined in Kachin State, where Chinese firms and cross-border brokers, transporters, local authorities are all helping organize this movement, including ethnic armed organizations. So you have the Kachin Independence Organization taking control of key mine sites in 2024. It suspended mining operations.
It renegotiated arrangements with Chinese investors. And since then, it’s introduced more centralized licensing, taxation, transport controls. So we’re seeing not only how political authority on the Myanmar side can disrupt supply, but also how customs processes and middlemen and all of these actors that are really hard to get your finger on and talk to and understand, they’re shaping the movement of these resources across the border too.
Andrew: Totally. That’s fascinating. And I mean, it strikes me that, this is an obvious observation, but I still think it’s worth pointing out, when there’s big money to be made, as there are in critical minerals and rare earths, people will find a way, right? And so even when Trump was first putting on the tariffs, the Liberation Day tariffs, I remember listening to a podcast and someone saying, “Yeah, people are just going to smuggle stuff across the border to Canada or from Canada,” right? Across some of the Great Lakes or whatever.
And I was like, “Yeah, of course, they are. People are incentivized to do this.” So, I don’t know if you have any wider thoughts on how some of the things you talked about interact with some of the more illicit activity like smuggling or even just kind of lobbying various governments, whether that be in China or outside China, to change policy. How does all that fit into it in terms of kind of weakening China’s leverage, broadly speaking?
Jess: I am a China nerd. I’m also a China in Southeast Asia nerd. So I’ve been focused on Laos for a very long time and a bit more on Myanmar recently. And seeing how the demand for heavy rare earths has increased. You hear the Myanmar story a lot more, but I’ve also been kind of slowly tracking that in Laos and how mining regulations have been shifting to allow for more exploration, or there are mines that are already kind of starting up very quietly that maybe don’t have the legal approval yet. So, I’m seeing kind of smaller scale operations.
It reminds me of really similar cases in the early 2000s of Chinese agricultural businesses coming into Southeast Asia and kind of setting up shop and dealing with like a steep learning curve in a new regulatory environment. So, I feel like we’re seeing that with some of the rare earth rush here too.
Andrew: Yeah, that makes sense. I mean, commerce finds a way and policymakers always somehow feel surprised that people will break the rules in order to make some money. Switching gears just slightly, but staying on the fractured governance topic, how does what you’ve learned, both of you, about kind of China’s governance of these industries impact how you think about U.S. efforts to reshore or fringe shore some of the production of these minerals. Is there any lessons there, you think?
Jess: Yeah, absolutely. And I’m curious what Coey thinks about this one, too, because we’ve talked about it a little bit. But I guess looking across China’s rare earth experience, one lesson is that building domestic capacity is one challenge, and it’s a massive challenge. But then coordinating across an entire supply chain and making it resilient or trying to nudge it towards social, environmental acceptability or commercial viability, it’s a whole other suite of problems.
So Western governments can subsidize mines or processing facilities, but that doesn’t automatically create a supply chain that works at scale or can withstand political or commercial pressures. I think, even a really highly centralized government like China’s, The sector took ages to develop, and we’re still seeing all of these instances of illegal mining, uneven enforcement, environmental issues. So, it’s not that they have an industry that works. And I think those are problems we’re going to have to keep dealing with.
And the U.S. regulatory environment is particularly challenging. We see Beijing repeatedly trying to consolidate the industry and bring production under tighter control. I guess I’ve been doing a bit more work here in Utah and the western U.S., and I see a related set of challenges. There’s a real interest in building these domestic processing facilities here in the West rather than relying on overseas facilities.
But I think we’re going to talk about this more later. The difference between setting up a mine or setting up a mine to processing to manufacturing is a real challenge that I’m noticing. And we’re seeing kind of roadblocks to setting up processing facilities here already. So, I guess in the U.S., as in China, challenges are whether everything from governments to firms to researchers, investors, local communities, can they actually coordinate or agree on a shared project, even though we know their interests are going to change over time?
Yeah, I also am concerned about companies, maybe they’re willing to invest in a commodity when prices are high, but they pull back when that falls. Maybe policymakers are willing to prioritize national security in the moment, but perhaps that shifts down the road or local communities are concerned about employment versus environment. So, you have all of these puzzle pieces that when I’m looking at material facilities on the ground, it just replicates a lot of the issues that we’ve seen in China.
Andrew: Yeah, all great points. Cory, I know you’ve got thoughts. Why don’t you give us your thoughts? And then I’d love to kind of talk about this processing issue. So maybe you can kind of introduce that as our next topic.
Cory: Absolutely. So I’ll try to segue that. No, absolutely, and I think Jess is exactly right. A lot of the things that we see Chinese policymakers doing are to address challenges that we’re now starting to face without a toolkit. And so, I’ll add just a couple of things, I think she said it very well already, but I’ll just add a couple of thoughts.
One, I think increasingly, as I talk to entities that are dealing and setting up new projects in Southeast Asia, often trying to figure out whether to court or shun Chinese investment and partnership, that’s always a big question. Do you go with the entity who you’re kind of afraid of, but is really good at it and will give you a lot of money or the entity who says it’ll give you a lot of money doesn’t really know what they’re doing, and with the US, which has other issues?
So, it’s definitely challenges. But as I engage with some of those folks, they will frequently say that one of the most powerful facets of the Chinese mineral economy, if you will, obviously it’s a diverse economy, there’s a lot of different stuff with different minerals, but in general, one of China’s greatest strengths, comparative advantages, is just the integration across industry chains. And so, if you want to make nickel in Indonesia, well, you have a thousand Chinese buyers. And all the people buying that nickel and going to HPAL or whatever, or the ore to HPAL or whatever to get your high value, high purity products, well, then there’s another entity that they can guarantee get offtake. And that person with offtake is guaranteed offtake for them as well.
So we have this whole chain of guaranteed buying, basically. And the thing is that’s not guaranteed because a government has told them to. Yeah, there are subsidies for sure. There’s supports for supply side. And China’s got a lot of supply side supports, don’t get me wrong. But the ecosystem now is that if you bring online some capacity, there’s probably an industry in China that wants to buy whatever you’re making.
For batteries is the prototypical case. But now we’re facing the U.S., is like, yeah, we’d like to have someone make gallium. Great. Get gallium by product recovery. Who’s going to buy it? Someone who makes gallium nitride. Well, who’s going to make gallium nitride if the only buyers are Chinese and they have their own? Where’s the rest of the connection there? And so that’s what I mean by integration. I’m not talking about vertical integration within one company.
That’s a thing, right? But I’m talking about just the chains. And alongside that, I’d argue that this isn’t a thoroughly vetted thesis or anything. I’m not going to defend the dissertation on this tomorrow. But a thought, at least, is that I see a lot of China’s efforts to overcome some of the fragmentation with, or some of the fracturing, with consolidation of industry, right? You do see that a lot. And so, for example, there are a bunch of different rare earth miners. Now there’s only a few because Beijing has forcibly consolidated a bunch of them, right?
And I think the kind of banal, obvious analysis is that there are fewer entities to control. This notion of there’s a central government who can just press the button and control these entities, and the fewer the better it’s easier. That’s a superficial analysis, frankly. It’s not wrong, but it’s just very shallow, I think more interesting is what they’ve done is shaped entities whose incentives already align with the rest of the incentives. So, if you have a company that is only making something because of a subsidy, that company stops doing what you want the moment the subsidy ends.
That’s not what Chinese industry is. Chinese industry is highly subsidized But also, you even see when you see VAT rebates falling, you see subsidy supports falling, you see R&D supports falling, and they keep doing what they’re doing because at this point, they’re incentivized to do it. So, I think what Beijing has been doing, where Beijing is successful in industrial policy, I would argue, it’s less about direct control necessarily of particular actions, and much more about selecting and reshaping entities so that what those entities want is what Beijing wants.
And that’s where I see the greatest successes. Where that isn’t happening, Chinese industrial policy is failing. And I don’t want us to take the wrong essence from that on our side as well. So, push back on that as well, obviously.
Andrew: Now, I want to throw back to Jess. Do you have thoughts? I have two quick…
Jess: No, that was just great. I totally agree.
Andrew: Cool. Yeah. I also agree. I have two quick thoughts. One is Jess operates in the world of academia where she has to thoroughly provide evidence for all of her assertions. We, in the consulting business, can shoot from the hip a little bit or so. I just pointed that out, which I like. That gives us a little bit more flexibility.
Jess: It’s a privilege.
Andrew: But this is becoming a theme actually that one of the strengths of Chinese industrial policy is demand management providing guaranteed offtake of whatever it is whether that be a new innovation or even a technology that’s actually not quite up to the frontier standard that the Chinese state will still buy or these minerals going into different things. I don’t hear that as enough of a discussion in D.C. It seems like a real weakness in U.S. industrial policy, partly because that’s not in our governing DNA to govern our economy like that.
But if we’re really going to do industrial policy, we need to get better at it or at least wrap our minds around it. At least that’s kind of my thinking. Related to that, I think, is this idea of it’s not just pulling the stuff out of the ground. It’s this idea you have to process it, right? And then when you process it, who’s going to buy the processed material? And then what does that go into? But I want to bring it back just to another great paper that you wrote around what you call midstream geopolitics, the processing stage of the supply chain.
So, maybe you can introduce us to that concept and just talk about how all this relates, the processing piece, why that’s so important, I guess.
Jess: Yeah, thanks for this question. I’m really excited about processing these days. This is a paper that I wrote, again, with Raphael Deberdt and Philippe Le Billon at the University of British Columbia. And we worked on, well, when we started to work on this, we felt there was so much focus on mining, while at the same time, some of the most consequential industrial and geopolitical dynamics were happening further along the supply chain and kind of that refining processing space.
So, for us, midstream geopolitics is about how control over those processing capabilities create certain points of power, leverage, dependency. Having minerals in the ground is, of course, one thing, but transforming them into materials that industry can actually use requires things like specialized facilities, technical expertise, intellectual property, really long-term investment. Right? It’s not just that upfront investment. So processing isn’t just a technical step in the supply chain. It really can be a strategic choke point. If you think about this, you know, think about rare earths, since we’ve been talking about them a lot, the U.S. has the Mountain Pass mine in California, and historically its ore concentrate was sent to China for processing, like much of the rare earth material around the world.
So, even with domestic extraction, even if it was low, it was being sent elsewhere to be processed. And I think what we’re trying to do in this paper is show how the midstream connects not only to mining, but also to the upstream. So, countries with mineral deposits take, Indonesia with nickel or the DRC with cobalt, they can use things like export restrictions or domestic processing requirements to attract investment, but they may still, as Cory mentioned, depend on things like Chinese capital technology expertise to build that capacity.
Meanwhile, you get processors, you know, dependent on mines and manufacturers, dependent on processors for usable inputs. So, we were trying to trace all these relationships between the midstream and downstream and midstream and upstream. And we ended up in the paper identifying nine different relationships that I’ll talk about a little bit later or kind of mechanisms that explain how the mid is connected to the down and upstream. So, I think we’ve talked a lot about how mining and the midstream kind of interact. And something we’ve tried to cover in this paper is also the downstream.
So, how processing can constrain downstream manufacturers through things like trade restrictions or tech dependencies, as we’ve talked about. But also then how manufacturers and governments can influence processing through investment, de-risking, purchasing contracts. So, when we’re looking at these relationships, what we’re trying to flag in this paper is that they’re multidirectional. It’s not one influencing the other, but that it goes both ways.
I guess to your question on how this relates to great power competition, we see the U.S. and Europe trying to build alternative processing capacity through subsidies, investments, friendshoring, while China’s advantage reflects decades of investment or economies of scale. And all of this makes it difficult for new facilities to compete, especially when prices are low. So, in the paper, we use cobalt as a case study to go through these nine mechanisms.
One thing, for example, we mentioned is on the U.S.-Idaho cobalt belt and how it illustrates how efforts to develop domestic production have been undermined by market conditions that make it really difficult for companies to sustain operations there.
Andrew: Yeah, I think, and Cory, maybe you have thoughts here as well, one thing I never really hear all that much about in this discussion in the U.S. in terms of building out our own rare earths and critical mineral supply chains, people talk about offtake agreements and price floors, but they actually don’t talk much about what you’ve mentioned twice, just sort of the price environment in which you’re investing, right?
So you’re going to invest capital to extract or process a certain mineral with some kind of assumptions around what the price will be and what the profit will thereby be, and also kind of what you would require for a subsidy for the government if the price isn’t high. But these prices are going to move, right? So I don’t know if either of you has further thoughts on that. But you’re trying to build an alternative supply chain in a global environment. And I think actually maybe not to preempt you, Cory, but I mean, one thing that China can do is really push the price up or push the price down by adjusting its supplies and kind of potentially impact Western efforts to build alternative supply chains through sort of market mechanisms.
Cory: Yeah, just I’ll add one piece. I don’t have a grand theory of this yet. Certainly not one I could defend in a dissertation at a Jess’s level, but…
Andrew: We’re consultants, remember. Go for it.
Cory: The bar is low. No, I’m just kidding. No, one thing we do see already is that Beijing itself is very concerned about this exact issue. And I’ll just give one tangible example, the lithium price cycle. Effectively, so on two fronts, there have been a lot of mining investments by Chinese companies that then get completely canceled. And we’re talking about appreciable percentages of theoretical global capacity appearing overnight and disappearing overnight as a company says, actually, the price environment isn’t right.
And this quite clearly perturbs Beijing, which is thinking about this from a kind of a national energy and resource security perspective. Like they’re very dependent, for example, on imports of lithium from, I mean, certainly Australia, Chile, also Zimbabwe, elsewhere, and they process it all, most of it, but they’re looking at domestic to balance the geopolitics of the midstream, as to Jess’s point. And so, it’s great for Beijing when a company is like, “Okay, we’ll invest in more lithium extraction assets, more lithium processing,” whatever it is, and especially the mining in the case of lithium.
And then a company says, “You know what? The price environment is shifting away from what our assumptions were. This is no longer tenable, end of project.” Back to earlier point, that decision is fully commercial and will actually happen in many cases, including with CATL mines. [Jiangxi 0:43:34] is a particular mine. If anyone is getting PTSD from hearing that word, right? That term, you have to be really niched too, but I’m sure there’s a few listeners out there. Beijing is quiet, but probably livid about this fact that these long-term strategic investments are being driven ultimately by a price cycle.
That’s not great. So that’s another example of where there are gaps between commercial interest and beyond that. Beijing’s broad response to that has been to try to avoid spooking the market with heavy-handed interventions so far. Who knows how long that’ll go? The other thing it’s done is to focus on futures markets and other financial mechanisms for hedging mechanisms that might help companies deal with uncertainty a bit better, right? But generally speaking, Beijing has not solved that problem.
And I think we have only just begun to think about that problem. So for what that’s worth, I don’t have an answer for it. But yeah, Jess, give us an industrial policy that works, Jess. Over to you.
Jess: Yeah, two seconds. Hold on. No, I don’t have that answer for you. I’m sorry.
Andrew: Do you have any further thoughts on the pricing issue, Jess? You mentioned it a couple of times. I don’t know how you think about that.
Jess: Yeah. I mean, the way I’ve thought about it, and this kind of relates back to your point about something we’re not seeing in U.S. industrial policy, kind of the demand and offtake agreements and all of that. I think we see investment in the U.S. at that very kind of front-end stage, and then it kind of drops off. I mean, if we know that prices are going to be volatile the way they are, and you have this very globalized market, I think the U.S. would have to, in some way, start to invest across time and not just right at the beginning or set up something to support companies if this is what the government would like them to do. But I’m not a consultant. So, this is where both of you, I would follow your lead.
Andrew: Well, I think this issue of where the vulnerabilities lie leads me to another question, which I think Cory has highlighted in some of our work for clients on where China’s choke points are and are not. And also in your midstream paper, you look at, of course, China being a dominant processor, but also an importer of a lot of raw materials, which creates a vulnerability, right? China, if it’s importing a bunch, it’s much more of the raw material. It’s harder for it to potentially use its leverage to control the processed export, because it then creates a vulnerability for itself if its imports are somehow cut off.
So, can you just Talk to us about what you’ve found on the import vulnerability piece and how that may or may not affect Beijing’s ability to use its leverage.
Jess: Yeah, absolutely. And I think this will be really high-level and we can direct people towards the paper. But I think this is a really important part of the story. China’s position is often discussed as though it has all the leverage and very little vulnerability. And of course, well, China dominates processing in minerals like rare earth, graphite, etc., positions in other minerals are just more or dominance in other minerals is more partial, like cobalt, copper, lithium, nickel. So, despite this enormous processing capacity, China’s really dependent on these materials.
In another paper that we worked on called Minerals at the Margins, we put together a chart of mineral advantages between China and OECD countries based on reserves, production, and processing, just to try to think through where some of those vulnerabilities and points of leverage are. Something else I’ll say about processing is China’s also expanded its control beyond the materials to the technologies. And I think that’s a really important part of the story because, on one hand, they’re importing and will have to maintain a certain level of imports to keep processing them.
But there’s also this recognition that restrictions are being extended to processing capacity. So, I think it was announcement number 62, maybe correct me, Cory, extended export controls to technologies involved in mining, smelting, separation, recycling. So, I think that is part of this story that we need to pay attention to in terms of vulnerability. It makes processing technology itself a strategic resource and can make it a lot harder for other countries to diversify.
So, you asked, does this affect how Beijing uses its leverage. And I think both are really important parts of the story as to how that happens. Although we shouldn’t assume that interdependence will necessarily prevent China from using expert controls aggressively, those controls can still disrupt downstream industries and also damage commercial relationships, encourage other countries to diversify, even, I think, undermine the wider production networks that China depends on.
So I guess to kind of try to summarize a lot of different thoughts there, I don’t think we can gloss over the fact that China has significant leverage in certain minerals and all of these other import dependencies, processing dependencies, but its position is powerful precisely because it’s so deeply embedded in global networks that allow the import, the shared technology, again, a system resulting from decades of globalization.
And of course, that also can create restraints. So, I think to understand how Beijing is using its leverage, we need to look at both sides of that relationship. And I think the midstream geopolitics offers a bit of a framework to do that. And we should talk about the nine mechanisms at some point, too.
Andrew: Yeah, I definitely just want to touch on the nine mechanisms. I want to give Cory a chance. He said he had a foot stomp on one of the points you made. So, Cory, what do you want to add there?
Cory: Yeah, 10%, Jess. And the way we’ve been kind of breaking it down, just as a basic framework, is that China has a lot of vulnerabilities and a lot of strengths. And it’s trying to wield the strengths to shore up its vulnerabilities, right? And so, for example, tech controls, not good for China’s growth. So, what do they do? Export controls. Well, export controls where they have strengths. But you also see, to your point about controlling like the equipment and everything, restrictions on the export of rare earth processing and the processing of technology and equipment came years.
The first ones came years before any of the U.S. trade issues that we’re talking about now. Why? Because that was an industrial advantage that they want to maintain. And there’s a whole separate logic of industrial policy that in a non-retaliatory context still says protect leading edge advantages. Now, they did not, for example, before the U.S.-China trade eruption, basically, before that, they did not hold hostage exports of raw materials.
That’s a new piece. But I think the first thing is that there are a lot of reasons for controls. In this case, China has expanded the use of those controls for retaliatory purposes, and especially the use of dual use. But now, one of the questions that comes to the rest of the world is, let’s say you diversify and have new rare earth processing technologies outside of China, it’s also in their interests, not for retaliatory purposes or geopolitical purposes, but just to protect their leading edge advantage to make sure no one else has that.
Very simple test of this case — Is Lynas just selling its technology to every other company in the world that wants to make rare earths? Obviously not. It’s Lynas’ selling point, right? And it’s not because Lynas a hostile actor at all, right? And I’m not trying to pick on them. It’s because that’s their advantage. And so, it’s scaled that up to a national, and you still have a similar logic. So, it just kind of further complicates things. But on the flip side, I think we also see, for example, you’re talking about where China’s vulnerabilities are.
What we’re talking about is China’s resource vulnerabilities. You’ve done a ton of great work on that. And the beryllium stuff you worked on, that was really interesting. I’d overlooked previously. But also economic vulnerability. Like, China cannot afford for its biggest export growth markets to fall off. And so, as much as we’ve seen, for example, the threat of cathode materials and other battery related materials before Busan that was threatened, I do not expect that we’d see Beijing materially curb battery exports to the world because what would their industry do?
That’s one of the most important, like that’s an economic security issue if their exports fall off. And so just kind of adding that to the mix of being holistic about our own strengths and vulnerabilities, but also China’s.
Andrew: Yeah, good points. Good points. Jess, I’d love for you to walk us through the, is it the nine mechanisms?
Jess: Mechanisms, dynamics. I forget the word we use in the paper. And I don’t need to walk you through every single one, but I do think it just helps me kind of center what we’re talking about with these midstream geopolitics. We use, again, cobalt as an example, and we walk through all of them. So, the dynamics are things like decoupling and de-risking, as we’ve talked about, export controls, friendshoring, market power, which would include pricing and price dynamics, on-shoring, reshoring, forms of resource nationalism, techno-nationalism, and stockpiling.
So, we use cobalt as a way to kind of walk through all of those and look at dependencies or strengths between the downstream and midstream, and then midstream and upstream. So, the DRC, as I’m sure a lot of your listeners know, accounts for about 76% of global cobalt supply. That was in 2024, while around 96% of Congolese cobalt production is sent to China for processing. So, you have this situation where neither side’s position makes sense without the other at this point, and it creates opportunities for leverage and dependency.
So, in the paper, we walk through these nine dynamics. So, if you took resource nationalism, for example, the DRC can use export policies to encourage domestic processing and capture more value. If we think about this in Indonesia, they’ve done something similar with nickel. But building processing capacity requires capital technology expertise, which is often coming from Chinese firms. So, you have this kind of two-way relationship. So, countries are gaining some bargaining power without necessarily gaining full control over their supply chains.
If you look at that in terms of market power, we could go back to the Idaho example I mentioned. China has invested in processing over decades, creating this huge economy of scale. But we look at Idaho, the copper belt in the U.S., where companies are trying to develop domestic production and facing low and volatile prices. You know, again, one of the mining operations was suspended after just five months after opening in 2022. So, a country doesn’t have to impose an export ban to exercise power. You get these market conditions and pricing that we were all just talking about.
And so, we go through this in the paper, thinking about techno-nationalism, stockpiling, de-risking, etc. And these nine dynamics aren’t completely separate tools. They often overlap with each other. Governments combine them in different ways. But through them, we’re trying to show how leverage comes from the ability to shape other actors’ options. So, I’d emphasize that leverage via midstream geopolitics runs, again, in these multiple directions. And processing isn’t simply a bottleneck. I think that’s often how it’s framed in a lot of policy conversations.
It’s not this choke point bottleneck that you either control or don’t control, but we really see it as a site of ongoing negotiation across these interconnected supply chain segments. And they’re constantly changing. Again, thinking about strategic dynamics or pricing dynamics and more.
Andrew: Totally. Well, and to your point about them constantly changing, I think, by definition, using an export control is not a one-time thing. Maybe that’s the wrong way to say it. By definition, using your leverage begins the process of eroding your leverage. Maybe that’s the way to say it, right? Because you incentivize whoever you’re selling to, to find a new supplier if you become an unreliable supplier. So, I think very clearly, if you’re going to use leverage, you’re using it in a dynamic situation, almost by definition. Cory, I don’t know if you have thoughts on that or the sort of wider kind of framework that Jess put through.
Cory: Yeah, I mean, this is the nature of using your leverage is incentivize everyone to try to get around it. There’s no secret to that. But it does tie back to this conversation we’ve had off and on for a couple of years now, which is, has China overplayed its hand? By deploying leverage, you’ve incentivized everyone. And again, I think both sides have overplayed their hands in many cases, in many specific instances. But in general, this isn’t one of them, to my mind.
I think the overplaying of a hand, for example, is not when someone tries to get around leverage that you’ve deployed. That’s just expected. And I don’t think Beijing was at all… I think they knew very well what they’re getting into with this, frankly. I think overplaying is things like unexpectedly high impacts on the EU that then you have to slowly walk back so you can try to engage with the EU on trade negotiations.
And that kind of collateral damage that some of the Chinese export controls had that disrupted other strategic interests, that’s overplaying your hand. I would entertain that argument that it’s overplayed its hand in those ways, sort of disrupted other interests. But yeah, no, I think that whole discourse has been overplayed a little bit.
Andrew: Thanks, Cory. Yeah, I tend to agree with how you’ve framed that up. I think the other question we need to be asking ourselves, in D.C., everyone’s very focused on kind of the problems as they exist today. Another way to say that is the problems that have built up over the past decade. China, for its part, I think is much more focused on what are the future choke points? You talked just about how China and the U.S. and Europe and others are thinking about how they can build up new points of leverage.
And this relates to another paper you wrote, which I think you already mentioned, the one entitled Minerals at the Margins, looking at critical minerals that sit outside of the current geopolitical spotlight, but could become strategically important as technology and demand shift. So, maybe you can talk to us a little bit about what drew you to that idea and what your sort of definition of a mineral at the margin is.
Jess: Yeah, definitely. I think to be completely blunt, what drew us to this idea was frustration with how narrowly the geopolitics of critical minerals is discussed, right? You just kind of hear the same things over and over. And so much of the conversation, rightfully so, is focused on a handful of minerals, rare earth, lithium, cobalt, graphite, and they’re very important, and also on how Western countries can catch up to China.
So it’s kind of the repeat conversation and they’re important concerns, but they also mean that we’re often reacting to existing dependencies rather than anticipating where things might emerge or, as you mentioned, kind of future technologies or new points of leverage. So, we use the term minerals at the margins to describe minerals that are recognized on lists as critical, but they’re outside this geopolitical spotlight, even though they could become strategically important as technology and demand evolves.
So, they occupy, I think, a kind of double margin. They’re peripheral to current policy debates, and their future material importance is potentially underappreciated. So some examples we write about are hafnium and zirconium, which are important for nuclear technologies and advanced manufacturing, as well as boron and beryllium, which have applications in defense and other advanced technologies. So, something that we found interesting is that I mentioned earlier, OECD countries already have significant advantages in the production or processing of many of these minerals.
So, while conversations are tending to focus on where China dominates, there are these existing strengths elsewhere that receive much less attention. So, our main point in the paper is that we shouldn’t stop worrying about lithium or cobalt, or that these less prominent minerals will necessarily become the next choke points. We’re not in the business of predicting the future. That’s also something you’re better at. But what we’re really trying to get across is that this idea of criticality isn’t fixed.
It changes with technological innovation, material substitution, shifting demand. And a mineral that seems relatively peripheral today could become essential to a future technology or something that dominates today maybe, you know, we’re not using in the future in the same way. So, I think this is really important for how we’re thinking about industrial strategy, rather than simply trying to replicate China’s capabilities and sectors or catch up to China. Countries could also invest in minerals and supply chains where they already have strengths or try to invest in science to navigate where those future strengths will lie. Yeah, I’ll leave it there.
Andrew: Yeah, that’s another great point. Cory, I don’t know if you have thoughts. I mean, I’ve heard you echo some of these before, which is, China’s perspective seems to be, “If the West and the US in particular wants to build a redundant supply chain and spend billions of dollars, tens of billions, hundreds of billions, that’s totally fine with us. You’re just recreating something that we’re already doing. No problem. Go waste your resources and have yourself distracted from trying to contain China.” But it’s also a great point on Jess, not only about there are minerals in the future that may become more critical, but also some of the things that we’re worried about being controlled today, we could potentially design out of products as a solution as well.
Cory: Yeah. I mean, a lot of companies are figuring that out right now, as well as national labs and other actors across the world as well, both government and private sector — Where can you obviate the problem? Where can you insure against the problem? Where can you just handle the problem head on? And those are different solution sets. And I think to state the obvious for the corporate side is you have limited capital, you have limited attention and expertise, and a huge amount of uncertainty.
If any of these things were more certain, if I knew I could spend 10 million on working out a new material that doesn’t require certain input, and that would be security. You just do it. You just pay the price. The thing is you have no idea if that R&D effort would work at all. Is it going to take a year? Is it going to take 15 years? And so I don’t want to overstate the uncertainty in some cases. In some cases, it’s more clear, and we have seen progress.
But in the sticky cases where you haven’t already seen solutions, it’s probably because there’s too much uncertainty, we don’t even know how to allocate the resources. And so, there’s a lot of speculative investment that is not speculative in a way that and diminishing or criticizing, it’s necessarily, you have to speculate on some of these. You have to take bets and risks. And governments and corporations are able to take very different risks and not always in the way that the other one would like.
Andrew: Yeah, I mean, that’s the nature of business, right? Is taking risks and then figuring out where the government should play a role in that, I think is the public policy issue around that. Cory, you did want to bring back up the issue, I think this is actually a good point, as we look at this transition in the West, the issue that Jess has highlighted of a just transition. What do we mean by that? What are the elements we need to be thinking about beyond just the supply-demand dynamics, the choke points, things like that? So, did you have a question you wanted to raise with Jess to kick that discussion off?
Cory: Yeah, no, I would love to get Jess’s thoughts because I think with a lot of policy conversations I have at least, the notion of just transition, it’s very easy to kind of set aside as, oh, it’s this nice to have thing. It’s for the climate folks or it’s for the kind of environmental justice folks, etc. And that’s nice, but we have problems we need to solve yesterday. So, we’re going to solve them through any means necessary. And I’m not trying to dismiss or think too little of some of these conversations, but I do find it’s very easy, in many policy conversations I hear that are focused on security, to set aside a lot of the real just transition principles.
Personally, I think that’s a mistake. I think that a lot of the elements of a just transition are the same things you need for an effective and durable solution to these problems. And so, Jess knows the space so much better than I do. And so what I’m hoping to ask Jess is just to talk a little bit about what do you mean by a just transition, and where does it play a role in not just building a new processing facility, but making something that’s durable, reliable? How does engagement with communities and then things like that that are central types of just transition, how does that impact the viability of a new ecosystem as we’re trying to rebuild?
And I say this also personally, just for what it’s worth, I also think we have a moral imperative. If you’ve got to build something, build it right. But even just on the practical elements, what does this look like? And I would love to hear from your research what you found.
Jess: Yeah, thanks so much. I really care about this question, and agree that setting aside the principles is a definite mistake. There is a moral imperative. I think, let me just start with the idea of a just transition. I think this, in some ways, I understand why it feels played out in certain sectors or for certain audiences. A lot of this is not about transition, what we’re seeing, and there’s some great papers that critique transition as it actually being about addition. So, we’re not at all transitioning energy resources, right? We’re just adding new resources.
And maybe some are low carbon, maybe some aren’t. There’s a lot of great literature in kind of the green extractivism space that also critiques this. So, something that I’ve been kind of thinking about and writing on is not just transition, but something we’re calling just shoring, because why not continue to create a bunch of new terms? So, just shoring, we have a short commentary out in Nature Energy, and then a longer paper that I hope will be out soon. But it’s really asking how critical minerals can be produced in a more socially, environmentally acceptable way.
And we’re reacting to a lot of the shoring strategies. So, friendshoring, onshoring, reshoring, and saying, “Okay, this is all happening. It’s not just for climate, right? It’s not just a transition.” It’s also about, as I mentioned earlier, defense, digital technologies. So how can we insert justice into these reshoring, friendshoring processes in ways that kind of build on a just transition, but also recognize that there were shortcomings to that framework? So, I mean, the practical questions are always the hardest because this is why policy is difficult, right? To come up with the thing that is good for everyone, where it works for business, it works for communities.
But something or a few things we’re writing about in this paper are rethinking demand. So, sort of what you were talking about with the minerals at the margins paper. So, what are we actually producing these minerals for? What are the governance structures around them? Where’s investing on lands that are, for example, indigenous, agrarian, where about 70% of the new investments are for critical minerals projects in the U.S.?
So, just-shoring is not something where we’re saying we need to refuse all mining, but we’re really trying to think about it from exploration phases to closure and develop a framework for how we can bolster critical minerals development in the U.S. or in ways that feel secure that still respond to a lot of the climate imperatives.
Andrew: Yeah, this is, I’m sure for a lot of our listeners, an area where they’re less familiar. Our audience is quite hardcore policy focused. Are you hearing any of this in the conversation around policy as people are talking? How do we build out a critical minerals industry in the U.S.?
Jess: You know, a lot of what I end up talking to people about are specific projects. And projects tend to, from at least what I’ve encountered, they tend to arrive in a place and see environmental and social concerns or issues around land access as obstacles instead of something to tend to. So, I haven’t seen it as something that is like an overarching framework that really considers the kind of principles of justice, right?
So, if you’re thinking about a broad justice framework, it’s distributive justice, it’s procedural, It’s restorative. It could even be intergenerational, environmental. It’s not something that I’m hearing a lot, maybe in some kind of safeguard departments of companies. That’s where I would have these conversations the most, but not as a broad framework for developing new projects, which is something I think we all really need to push for if we’re going to do this at home. And again, back to where we started the conversation, we offshored these industries because they were so damaging.
Andrew: Totally. I was thinking the exact same thing. There’s a reason. China didn’t come steal this industry from us. We gladly used to lead the world, as you all have documented, in rare earths processing, and we decided to give it up effectively. And I would just imagine that, you know, it’s a great point that we can have this strategy, we can want to implement XYZ industrial policy, but at the end of the day, these mines are in someone’s backyard. These processing facilities are in someone’s backyard.
And you’ve got to get the local folks on board if we’re not going to go through another round, 10 years from now, of everyone wanting to boot these industries out again. So, it’s really a great point. And I’m hoping that your writing and conversations can kind of instill some of this thinking into the policy process as it evolves.
Jess: Thank you. I will keep trying.
Andrew: Well, listen, Jess, this has been a great conversation, very wide ranging. You’ve been super generous with your time. So, we really appreciate it. Thank you so much for sharing your wisdom and your time with us today.
Jess: Yeah, thanks so much for having me and wanting to talk about all these papers. And I will continue to admire your work and listen to the pod.
Andrew: It’s very kind of you. We’ll have to have you out again after a couple of the papers you mentioned are published so that you can talk about them in even more detail. That’d be great.
Jess: I’d love that. That would be great.
Andrew: Awesome.
Jess: Thanks so much, Andrew and Cory.
Andrew: Well, thank you. Yeah, well, we’ve lost Cory. We thank him as well. He had an appointment to run to, but thanks, Jess. It’s been great. And we appreciate everybody for listening. So, thanks, everybody, for that. And we’ll see you next time. Bye, everybody.
