Western nations are joining forces to break China’s grip on essential minerals

Western nations are directing their development finance and export credit agencies to work with private industry to support critical mineral projects in a bid to break China’s grip on a sector that is key to high-tech industries.

The Minerals Security Partnership, a coalition of 14 nations and the European Commission, will unveil a new funding network at an event in New York on Monday as it seeks to step up international collaboration and provide financial support for a giant nickel project in Tanzania, supported. by the mining company BHP.

A joint statement to be released on the sidelines of the UN general assembly says the network will “strengthen cooperation and promote information sharing and co-financing”. It lists 10 critical minerals projects that have already attracted support from MSP partner governments.

Representatives from BlackRock, Goldman Sachs, Citigroup, Rio Tinto and Anglo American are scheduled to attend the meeting, amid an effort to attract private investors and miners to further invest in the sector.

Jose Fernandez, the US undersecretary of state for economic growth, said another 30 critical mineral projects are being evaluated by MSP as Western governments race to secure the raw materials needed to make everything from vehicles electrical to advanced weapons.

“What China is doing is following the monopolist’s playbook to eliminate competition,” said Fernandez, who accused Beijing of engaging in “overproduction and predatory pricing” to retain control of the global supply of essential minerals.

“We realize that we cannot solve this problem with any one country, we are stronger together,” he said in an interview.

The US and China have been embroiled in a trade war in which Washington has imposed export and other restrictions on semiconductors and other advanced technologies.

China retaliated by restricting exports of some minerals, including antimony, an obscure metal used in armor-piercing ammunition and night vision goggles.

Chinese companies control 90% of the world’s processing capacity for rare earths and more than half of the processing capacity for cobalt, nickel and lithium minerals that are used to make batteries for electric vehicles.

“They were the only game in town — we’re changing that,” said Abigail Hunter, executive director at the SAFE Center for Critical Minerals Strategy, an NGO that has partnered with the US State Department to promote investment in the critical minerals supply chain .

Hunter said the aim is to give “lower-income countries, in particular, an alternative to China when it comes to financing”.

The US International Development Finance Corporation will publish a letter of intent to provide debt financing for a mining project in Tanzania that would loosen China and Indonesia’s control over supplies of nickel, a key battery ingredient.

The Kabanga nickel project is being developed by Lifezone Metals, an Isle of Man-based company that is 17% owned by BHP.

The project is a challenge to Chinese-backed investment in Indonesia, which has reshaped the nickel market, turning the Southeast Asian nation into an effective monopoly with 55 percent of global output, up from 16 percent in 2017.

DFC declined to say what size loan it would provide to the project.

“What we’re really focused on is making sure the private sector gets a fair shake and has the tools to provide the funding and investment to drive the growth of this industry,” said Scott Nathan, chief executive of the DFC.

China has moved ahead of the West in critical mineral projects, benefiting from subsidies, easier access to finance, superior processing technology, lower costs and tolerance for looser environmental standards.

Private investors believe that increased demand for the raw materials needed to drive the energy transition will create a profitable and more stable market. But they say additional support and public-private cooperation is needed to attract larger amounts of capital.

“Investors wouldn’t look at these things if there weren’t potential returns, but it’s difficult. And the question is whether we can thread the needle,” said Dominic Raab, former UK deputy prime minister and head of global affairs at Appian Capital Advisory, a major critical minerals investor.

“I think we’ve started to put together the bones of a plan. But we don’t have the scale yet. And we have to show resilience.”

The US, Australia, Canada, Estonia, Finland, France, Germany, India, Italy, Japan, the Republic of Korea, Norway, Sweden, the United Kingdom and the EU are members of the MSP.