A $12bn minerals stockpiling initiative unveiled by the US has prompted questions from analysts and traders over potential market disruption and competition with allied nations also seeking to reduce dependence on China, the Financial Times reported this week.
“At the end of the day, the rest of the world will be in competition with the Americans now,” said Jan Giese, a metals trader at Frankfurt-based Tradium. “You have a player in the market now with almost endlessly deep pockets.”
Project Vault, unveiled last week, will see the US Export-Import Bank provide $10bn in loans for three trading companies – Mercuria, Hartree Partners and Traxys – to purchase emergency supplies of critical minerals including rare earth elements and gallium.
The initiative forms part of broader efforts to break dependence on China, which controls over half the global refined supply of more than 20 metals. Beijing restricted access to several minerals during last year’s trade war with Washington.
However, details remain limited on volumes, specific metals and timelines, whilst storage costs remain unresolved, said the Financial Times.
“The market is waiting for answers on volumes, metals and timelines before it can price anything in,” said Chris Welch of Argus Media.
Patrick Schröder of Chatham House warned stockpiling represents “an emergency solution but not a long-term strategy to create a functioning international framework for critical minerals”.
The European Commission should develop similar plans, said Albéric Mongrenier of the European Initiative for Energy Security, noting “Europe is increasingly running behind the US”.
Whilst the programme could support newer non-Chinese producers, analysts cautioned against relying on government purchasing. David Merriman of Project Blue told the Financial Times that stockpiles “aren’t a long term, sustainable market for producers”.
