Energy and metals meet national security interests

US administration wants to expand domestic production of critical metals

This week have written about the importance of commodities for the world and investment portfolios in the years ahead, and how the war in Ukraine will turbocharge a reconfiguration of global supply chains with Vietnam as one of the big winners. Along those two vectors, the Biden administration is rumoured to invoke the Defense Production Act, which goes back to the Korean War, to mobilize domestic production of key materials for batteries/energy stocks, magnets and electric vehicles. These metals include lithium, nickel, cobalt, graphite, and manganese.

If the Defense Production Act is invoked by the Biden Administration is would mean a big policy shift and the early contours of industrial policies coming back in the developed world after decades of blind trust and hope in globalization without thinking about the fragility it has created. Electrification of heating through air-to-water heat pumps and transportation through electric vehicles are part of the green transformation trend and one of the biggest changes to society since digitalization changed all industries in the span of just two decades. The green transformation combined with urbanization and global supply chains being changed under national security interests will cause structural inflation in the developed world. To understand how fast electrification in transportation is going look at the battery EV delivery figures below and watch the lithium price explosion. Demand is outstripping supply by a large factor.