SAFE’s Minerals Center advises pricing supports do not provide a silver bullet to fundamental market challenges. SAFE advocates for a more comprehensive, coordinated policy approach that enhances overall U.S. competitiveness in the critical minerals sector and careful analysis before pursuing price support mechanisms to address volatility in critical minerals markets to avoid unintended consequences.
Washington, D.C.—Responding to the Department of Energy’s (DOE) request for information (RFI) on Critical Materials Market Dynamics, SAFE outlined challenges to supplying materials for America’s advanced manufacturing renaissance and energy transition. DOE’s RFI was a clear reaction to the current low-price environment, which is forcing some operations to shut down, halting many projects under development, and making it increasingly difficult to finance new mining and processing ventures. SAFE highlighted price volatility as a feature of the market, while underscoring cost-side policy measures to increase competitiveness of U.S. and trading partner projects.
SAFE cautioned against government intervention in mineral prices, arguing that pricing support should only be considered when commodity prices are so fundamentally dissociated from production costs that viability isn’t achievable. The reality is that determining the right prices for commodities is extremely difficult, and the consequences for getting it wrong are costly or further hobble the industry these policies aim to support.
Additionally, while supporting stockpiling materials necessary to maintain critical government operations—like those related to national defense—SAFE expressed skepticism that such a mechanism would be a feasible way to address price volatility overall in energy supply chains given the scale of demand across a broad range of industries.
Capital expenses versus operating expenses
Different critical material supply chains face unique challenges. Market dynamics, including trading models, quantities trade, market liquidity, and volatility levels vary depending on the mineral. Additionally, producers face diverse project-specific factors that impact their capital and operating expenditures, ranging from resource location and grade to infrastructure needs, energy costs, and regulatory requirements. To effectively support critical materials projects, DOE must first determine whether individual projects face challenges on the capital expense or operating expense side.
On the capital expense side of the equation, grants and loans, like the kind provided by the DOE’s Loan Programs Office, and streamlining permitting process to reduce the time and costs associated with new projects can both help.
However, operational expense issues vary significantly across different markets. Some potential solutions include:
- Funding research and development (R&D) of innovative mining technology to improve extraction and processing methods and make domestic industry more competitive.
- Enacting tariffs to help protect a nascent market from distortions caused by other countries subsidizing or dumping critical materials on the global market.
- Create sourcing provisions for tax incentives to spur the development of a market premium for qualifying materials. The 30D tax credit for EV materials provides a framework that should be considered for other critical materials.
SAFE cautioned that tariffs can help level the global playing field, but only if other key stakeholders implement similar policies. SAFE also noted that sourcing requirement should be paired with policies that stimulate demand—like emissions standards that incentivize electric vehicle production.
Closely related to these challenges is the complex qualification process for new producers, which slows down the integration of emerging sources into supply chains. Initiatives like Li-Bridge can explore the potential to streamline these processes for domestic and allied producers of critical materials and their substitutes.
Read more of SAFE’s analysis of what works—and what doesn’t—to support sustainable, transparent supply chains for critical materials.
