Finding Rare Earths in Japanese Mud

A close up photo of colbat rocks

Japan has identified a large rare earth deposit of its own, but it’s not going to change global supply dynamics. Here’s the situation.

Rare earths are typically a byproduct, so the bottleneck isn’t ore access; it’s processing capacity. And China has a monopoly on the processing. Japan may have found a massive deposit, but that’s just step one. The deposit is located near Minamitorishima Island, under 8km of water, and extraction just isn’t economically viable as of now.

This is just another example of Japan having to get creative with the hand it’s been dealt.

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Transcript

Hey all, Peter Zeihan here. Coming to you from Colorado, several people have written on the Patreon page asking about the new Rare Earth project that the Japanese are poking into offshore. It’s called the Minamitorishima, I think way too many syllables. Anyway, the idea is that it has significantly higher concentrations of rare earths and some of the production sites around the world today. 

And is this something that is going to change the math of rare earth production? Probably not. Let’s start with how we do it now. Rare earths are not something we use in large volumes. Like, your car probably has less than a 10th of a gram of the stuff in it. But that doesn’t mean it’s not critical. 

It changes the electrical properties of a lot of things. And so we’ve got, I think, 13 different rare earths that we use in different concentrations, in different things, just in microscopic amounts, typically. Well, what that means is there really, until recently, hasn’t been anything called a rare earth mine. What you do is you produce something else. Iron ore, copper, silver, for example. 

And then you take the tailings and you process the tailings that might have a higher concentration of, these things, which sends it through several hundred vats of acid over several months and from somewhere from a half a tonne to several tons. After that amount of time and that amount of acid, you get one ounce of the stuff. So it’s really available in very small volumes. Now, the, the mud that they have dredged up from meto Minamoto or Ashima, has a reasonably high concentration somewhere in the range of 6 to 8000 parts per million, which, compared to a lot of the mines out there, is pretty low. But if you compare it to the handful of mines that have popped up in recent years as part of this kind of geopolitical scramble, for the stuff, some in China, mountain passes the United States, for example. 

It doesn’t compare all that great, the richest rare earth mine, if you want to use that term, is in South Africa, and it’s about ten times the concentration of what the Japanese are dredging off the seafloor. Mountain pass is probably about 4 or 5 times the concentration. It is richer than some of the clays that the Chinese are mining. 

But you got to remember when you’re talking about South Africa, a mountain pass or, China, you can basically drive a truck to it and put a shovel on the ground and start doing it. The mean a meter or Cima deposit, while huge, absolutely huge, is at the bottom of the seafloor on the abyssal plain under eight kilometers of water. 

So you have to bring it up and then dry it and then start the processing. So you’re already talking about costs that are on average, in order of magnitude higher than anything, anywhere else. About the only thing about meter millimeter or Cima, that is really interesting is the concentration variation. There’s two different kind of buckets for rare earths, lights versus heavy. 

And most of the deposits in the world are for the light ones, and the heavy ones are the really rare ones. Whereas the Japanese on this abyssal plain have found one where it’s about a 5050 split. But in order for it to be economically viable, you’d have to see the price of these things not go up by a factor of 2 or 3 or 5 or 10, but probably 50 or 100, in order to justify economically the infrastructure. 

And at the moment, there’s no sign that that’s going to happen, because, again, rare earths are a byproduct of other mining. And the limiting factor is not not, not not the actual access to the or the limiting factor is the processing capacity, which the Chinese basically have a lock on at the moment. 

We are seeing that change in pollutants, places like Mountain Pass are building it out, and there are a number of countries out there, Australia, Malaysia come to mind, that have some of these facilities dormant. 

But for them to be economically viable, the price of the stuff has to go up. So the Chinese will continue to have the leverage until such time as countries decide to kind of marry national security to their economic decision making on these things. And if that happens, this will all kind of work itself out in a year or two. 

And even in that scenario, I really don’t see the Japanese stuff coming to the forefront. Just keep in mind that the Japanese, among the major powers are the least resource rich country in the world. And so they will be always trying out new technologies and new places to see what they can make work. And most of them will never pan out. 

But, they have to try. And every once in a while generates, big advances and things like efficiency, which is one of the reasons why Japan is the most energy efficient of the major countries in the world, because it’s been forced to by its geography, kind of think of what’s going on with railroads in that category.

Trump Announces $12B Rare Earth Stockpile

Photo of rare earth minerals: praseodymium, cerium, lanthanum, neodymium, samarium, and gadolinium. Photo by Wikimedia: https://en.wikipedia.org/wiki/Rare-earth_element#/media/File:Rareearthoxides.jpg

The Trump administration has announced a plan to create a $12 billion stockpile of rare earths. The goal is to create a buffer against any supply disruptions, but this is just a band-aid.

Depending on the metal and use case, this stockpile might give the US a five-month supply. But the core problem still exists: the US doesn’t have any domestic refining or processing. It’s not all that hard or expensive to extract and process this stuff; the US just hasn’t invested in the infrastructure to do so.

If the goal was to establish real supply security, this stockpile isn’t the way to go about it. But hey, at least we’ve got an extra five months.

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Transcript

Hey all, Peter Zeihan here, coming to you from Colorado. And today we’re looking at a new initiative from the Trump administration to solve the critical materials issues. Short version. The United States doesn’t refine most of its materials these days. It relies on countries that have much lower pollution concerns, like, say, China or India, to do the processing. And then we buy the process material and do whatever with us. 

What that means is, well, while you save a lot of money and you certainly clean up your own local environment, you subcontract all of this out to countries that, in the case of China, might not be the most friendly and then might cut off supplies at a later time, as the Chinese have done to a number of countries from time to time, including the United States. 

Anyway, the idea is you establish a $12 billion stockpile. The U.S. government is going to be tapping the import export bank. And so the idea of using one government agency to finance the development of another, I personally find that delicious, but bygones. And the idea is you buy these processed metals, primarily rare earth metals, and then they are in the United States. 

So you have a buffer. I don’t want overstate this. It’s a good step. It’s in the right direction, but it’s going to get crazy. $12 billion of critical materials for a country that is a $25 trillion economy is not going to last a long time, probably somewhere between 1 and 5 months, based on the specific material, because there are over 30 different materials that they’re talking about here. 

It’s a step in the right direction. But if your goal is to really achieve a national security issue and economic self-sufficiency, you need to make these things yourself. Right now they’d just be buying them from China on the open market a little bit more than what we need, and put them into basically a safe. What you need to do is build up the processing. 

The problem here is that there is no such thing on the planet as a rare Earth element mine or rare Earth element production line. Rare earth metals exist as small, small impurities in other mineral extraction, primarily things like silver, but also copper and zinc and a lot of other things, uranium, for example. And so what happens is you have your mine that produces X mineral. 

You process that to get X refined mineral and then the waste material you then go through a separate set of steps that involves several hundred vats of acid. Basically with every step you concentrate the mineral that you’re after, whatever it happens to be. And after six months to a year of such processing through acid, you eventually get some refined metal rare earth metal that you can use, but it takes several tons of raw material to generate one ounce of the finished metal over months of steps, and hundreds of vats us and until the United States builds that infrastructure, which isn’t technically difficult. It’s chemically very tricky. Until you do that, you are never going to have independence from international suppliers. Now, there’s nothing about this technology that is new. It was developed back in the 19 tens and 1920s. The U.S. obviously can do it. It’s not even particularly expensive even if it is environmentally dirty. 

But it does require space, and it does require capital and does require planning. It does require infrastructure. And at the moment, the Trump administration has not put a dime into that effort. If and when that changes, I will be there with bells on to sing and dance. That is not what is happening today. Today we are building the equivalent of a piggy bank that we still have to fill up.

North Carolina’s Silicon Mines: Leverage for the US?

Mining operations with trucks

With how important semiconductors are for the future, can the US use the high-purity silicon quartz mine in North Carolina as leverage for negotiations?

While the quartz from this mine can be used to make semiconductor-grade silicon and the ultra-pure crucibles needed to grow silicon crystals, this isn’t the kind of leverage that’s going to have everyone else bending the knee. The US is already a leader in this space, but given the complexity of semiconductor supply chains, no single country controls a majority.

The US and allies dominate the high-end stuff, but none of this works without all 30,000 inputs and 100,000 steps. So, does it give the US some leverage? Sure. But that doesn’t change the fact that we still depend on a fragile, global supply chain for semiconductors. We’d need about $20 trillion and 40 years if we wanted to do it on our own…

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Transcript

Well, it’s definitely officially winter here in Colorado. Peter Zeihan here. Today we’re taking a question from the Patreon page, specifically about semiconductors. This person says that he recently learned about a mine in North Carolina that produces high end silicon quartz. 

And it’s essential in semiconductor fabrication. So could the US use this in trade negotiations in order to cut a deal with countries around the world? Certainly. Quartz is used for two things. Number one, it is the source of the silicon dioxide that eventually goes into the crystals that are grown in a vats to the size of cars, to be sliced into the wafers that are the core of every semiconductor. 

And so product from this mine can be used for that. But what this mine is really good for is the ultra, ultra, ultra pure silicon dioxide, which you use not for the semiconductors themselves, but you use to make crucibles that are used to melt and purify other silicon dioxide. So you need really pure stuff in order to make the crystals, and you need super duper pure stuff in order to make the crucibles and the US is a world provider of both. 

So yes, U.S could absolutely use this as leverage. But that implies that the United States is looking for leverage, that we need leverage that we don’t have leverage. And that’s just not true. You see, one of the things that people forget is that there are so many pieces of the semiconductor supply chain, 30,000 independent inputs, 100,000 supply chain steps, and no country controls a majority of any of them. 

The United States does things that no one else can do. And when it comes to the material side of the equation, we have a lot more going on than one silicon dioxide mine. You see, what happens is you need things like indium and gallium and copper and arsenic and bismuth and all these other things. And yes, the Chinese dominate the processing. 

All of those materials, but only up to the point because the Chinese tech base is, well, it’s still a developing country by most measures. And so they can’t get to the purity that’s required to make mid-grade semiconductors much less high end. So what happens typically is, say, copper. The raw copper ore comes from Chile. It’s partially processed in something called red copper. 

Where all but 2% of the sulfur has been cooked off. Then it gets sent to China, where they cook off the rest and purified as much as they can. And that’s good enough for, say, you know, the wires in most electronics, but it’s not good enough. So for semiconductors. So the copper then comes to another country, typically the United States or Germany, Japan and Korea, where it’s turned into something called eight and copper or nine and ten and 11 and, and that’s the number of nines of purity. 

So an eight and copper is 99.999999% pure. 11 would be three more nines. Parts per billion in terms of contaminants can sometimes be too much. And the Chinese can’t do any of that. So yes, they dominate the low end processing. They do the grunt, they do the dirty work, but they can’t do the high end. So all of these materials round trip multiple times from the country where the ore comes to China to do the primary processing somewhere else to the finish processing, and then the Chinese re-import the ultra purified components that are the basis of their semiconductor industry. 

So yes, silicon dioxide out of North Carolina is a major geopolitical pressure point. It is something that gives a lot of leverage, but it implies it’s the only thing. And there are dozens of points on just the material side of the equation, where the United States or its allies have a de facto monopoly and the Chinese have nothing. 

That’s before you consider the real high end work that deals with design, or the mid work that deals with packaging. 

The Chinese are doing their best to catch up, but they literally have to catch up in over 2000 subfields and they’re not closed in very many of, them at all. The most advanced one, of course, are the etching machines themselves, the extreme ultraviolet machines that come out of the Dutch from ASML. 

But ASML itself has over several thousand suppliers around the world, the single largest component of which are in the United States. So anyone who tells you that the Chinese can overtake us in this industry is ridiculous. But also anyone who tells you that we could do it ourselves is ridiculous. This is the most sophisticated supply chain system that humanity has ever created, and if we decided we want to do every part of it in the United States, that is easily a $20 trillion project that will take 40 years to complete. 

Don’t let anyone tell you otherwise. 

The Future of Bolivian Lithium

photo of lithium

Bolivia is in the midst of a political reshuffling that could alter its minerals future.

For decades, Bolivia’s socialist government has kept the country poor and starved of foreign investment. On top of that, the complex internal political situation between the indigenous population (who live in the regions containing these vast lithium reserves) and the rest of the country, makes accessing these minerals complicated.

A more market-friendly government may embrace foreign investment, but that could upset local communities. Even if they can figure that out, the Bolivians couldn’t have chosen a more challenging time; global demand is entering a lull driven by unsteady US industrial policy and Chinese demand for raw minerals is fading.

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Transcript

Hey, Peter Zeihan here. Coming to you from lake, Monona terrace here in Madison, Wisconsin. The land of cheese curds. There is the Capitol back there. Today we’re talking about a country that does not come up often, and that is Bolivia. They recently had a pretty significant shift in their electoral system, it’s resulted in a significant shift in political alignments. So back going into the early 2000, Guy by the name of Evo Morales came in who was a poor coca farmer, became president. Started Bolivia on a path towards what they call socialism. It’s really, low grade populism. 

And I don’t want to say he drove the economy into the ground, because that would imply that most of Bolivia was doing well before. But he certainly didn’t leave the place better than he found it. We’ve had 20 years of governments that were of Evo Morales or people like him. And the country, was already functionally the poorest of the major states in Latin America. And it’s still in that position. Bolivia is split into two chunks. And that’s part of the problem. 

You’ve got the lowlands in the east that are basically an extension of the agricultural zones of Brazil. About one third of the population lives there, mostly European descent. It’s mostly an agro industrial economy, not the most productive on the planet, but still you know, it’s a hungry world. So you produce agricultural exports and it does. Okay. The upper two thirds are indigenous. 

And the reason the indigenous live in the upper two thirds is they were killed everywhere else. The Native American experience in South America is not significantly better than the one in the United States. In most places, Bolivia is only a partial exception, because when you move upland, what we discovered, what humans discovered throughout the 1415, 1617 and 1800s is that the locals were able to reproduce and women were able to give birth at 12,000ft, whereas the Europeans cannot. 

And that singular biological difference. The people who had adapted to that before the Columbian Times, were basically able to populate this zone. Bolivia had a number of very, very, very, very, very, very stupid governments in the 1617 hundreds, in the 1800s. And they generated one of the original rules of Latin America is that no matter how many wars you lose, you can still beat Bolivia. 

And you can also count on them to pick the fight. So Bolivia lost a lot of territory, was basically reduced to what it is today. And most of the land is of limited use. That doesn’t mean that in the modern times it’s of no use. 

In some ways, what’s going on? Bolivia is a little similar to what we have in the United States. In the United States, we’ve been mining the country since formation, since a little bit before formation. And so most of the really good metal deposits have been mined out. And as we enter a world where we know, we know we need different sorts of materials, most notably things like rare earths or lithium. 

We’re going into places that we really haven’t mined before, and there are very, very few of those. And most of what they are are on or near Native American lands, which in the United States, for the most part, are reservations. Now, the native population in the United States is only about 1% of the total, and all of their lands are directly controlled by Congress and the Bureau of Indian Affairs. 

So if the federal government decides to force the issue, it can’t. That’s not how it works in Bolivia and Bolivia. Those zones are where two thirds of the population live, two thirds of the population is native. And you can’t just wave an administrative wand and make it happen. So it requires a lot more negotiation, and the local communities have a lot more say in how it goes down. 

As a result, under the governments of Evo Morales and his successors, we basically had the federal government in Bolivia say that any sort of extraction had to involve the federal government as well as local groups, and that created such onerous terms. Really, no one played the Russians and the Chinese, you know, toyed with the idea, but really we’ve had no meaningful production. 

And Bolivia is part of the lithium triangle that connects Bolivia, Argentina and Chile. So there is no doubt that the minerals are there. Just the legal structure to get them out has not existed. 

Give you an idea of just how far behind how backwards Bolivia is in this regard. Argentina, where foreign investors are actively penalized. And it’s discussed publicly, has significantly more foreign investment in their space and development of the lithium fields than Bolivia does. 

Basically, less than 1% of the world’s lithium comes out of Bolivia, despite them having arguably the best deposits on the planet. So with this new government, will this change what might have having a federal government that is more pro-market is probably going to take us into a different direction, but it’s not going to obviate the fact that two thirds of the population still lives in the zone that controls the political decisions that are required, so we’re more likely to get a lot of civil unrest if we move in the direction of greater mineral extraction. 

There’s one other thing to keep in mind. One of the reasons why Bolivia did okay during the last 20 years is commodity prices have been pretty high because the Chinese basically hoovered up everything, and that allowed a little bit more production to come out of Bolivia than normally would have. We’re now kind of in this moment where we’re hanging. 

The Chinese are still churning along, building stuff, but the demographic situation is atrocious, and they’re not going to be with us a lot longer. At the same time, we’ve got the United States where there seems to finally be this economic and political understanding that we need to do a massive re industrialization program. But we have a government that is actually penalizing people who do things in that direction with state ownership or with tariff policy. 

So we’re kind of hanging right now. The trends up Demand of the past are fading very fast, and the trends of Demand of the future haven’t really taken hold with policies that are going to really encourage them. And that means we’re at this soft point for commodities where the Bolivians are trying to make decisions. So they’re making the decisions about the right things at the right time, but they don’t yet have the economic impulse that would make it really, really stick. So tough times for the Bolivians. Let’s see what happens on the other side of this flip.

Rebuilding the American Industrial Base, Rare Earths Edition

Photo of rare earth minerals: praseodymium, cerium, lanthanum, neodymium, samarium, and gadolinium. Photo by Wikimedia: https://en.wikipedia.org/wiki/Rare-earth_element#/media/File:Rareearthoxides.jpg

American reindustrialization was always going to be painful process, but there were several ways to soften that blow; the biggest of which was our trade relationship with China. At least, it was.

The tariff situation that began in April soured our relationship with the Chinese. Since then, they’ve halted exports of rare earth magnets, a crucial component in…well, basically everything important. A quick disclaimer/history lesson: rare earths aren’t all that rare, they’re just difficult and time-consuming to extract. The Chinese subsidized the sector beginning back in the 80s and made it illogical for anyone else to try and compete. Hence China’s dominance in this field.

Now, the Chinese are dangling that rare earth carrot in front of Trump. Unfortunately, the American industrial base must be rebuilt for a whole lot more than just rare earths. Something that a little strategic foresight would have helped with.

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Transcript

Peter Zeihan here, coming to you from Colorado. Today we’re going to talk about the status of the US-China trade talks and where the United States is with its re industrialization. And the short version is things going really badly. If you remember back to the first week of April, the Trump administration put a 55% tariff on everything coming from China. 

And then we got into a shouting match with the Chinese, and that number went up and up and up and up until I think we had 185%. And then a couple of months later, we had a bit of a truce and the numbers went back down to 55%. What’s the best way to go through this? So the issue at the moment, right now is that China is refusing to export rare earth products, most notably magnets, to the United States. 

And these magnets are used in any number of electronics, aerospace, and especially automotive parts. Rare earths are a group of materials that are relatively difficult to source not because they’re rare, but because they’re not present and particularly high concentrations. So if anyone says that there’s a rare earth mine coming online, that’s a good indication that you should just completely ignore that person because there is no such thing rare earths are produced as a byproduct of other metals purification and refining. 

So you have a silver mine, you extract the silver, you then use the tailings and go through and extract the rare earths. And the same thing for copper and gold and bauxite and all kinds of other things. There’s like a dozen rare earths anyway, extracting them and purifying them is not particularly difficult. It’s just that the concentrations are low. 

So it requires several steps, several hundred steps. And the rare earth materials themselves share a lot of chemical properties. So you have to basically separate them from one another as well, which is where most of the time takes. So you take these tailings, you grind them down, you add some chemicals to dissolve everything, and then you basically boil the whole thing in acid. 

And that separates a little bit out. And then you take that and you put it into the next batch of acid, and you do it again, and then up and again and again. And you do that a few hundred times. And at the end of the day, after usually 6 to 8 months of separation and acid treatments and starting with several tons of material, you get a couple of ounces of rare earth metals and a little goes a long way, for most uses, these things are really just doped rather than the core production level. 

So, you know, all the rare earths that are used by the entire world could probably sit in a garage, every year. Anyway. It’s expensive, from a minerals processing point of view. And it’s dirty because of all the material that is used because of all the acid and because the radioactivity that naturally comes from a lot of mining activity. 

So what happened was back in the 1980s, most of this stuff was done in the United States or in Europe. But the Chinese, who were early in their economic development, had decided that anything that you could throw cash at and anything where they could ignore environmental regulations, they would have an advantage in. So they threw a lot of money at this industry in order to dominate production. 

And in doing so, because of the subsidies, they ended up producing the rare earths for significantly lower price point than anyone else could. And because of that, we were able to use rare earths and things like rare earth magnets in order to make what we call computers today, specifically solid state drives. For those of you who are older and you remember the old spinning hard drives. 

Yeah, they didn’t use many rare earths, but the solid state drives did so the whole point was, now that we have this available, we’re going to move to a type of technology that uses much less electricity generated by far less heat, and sets the stage for the processing and computing revolution that we’ve known throughout the 90s and the 2000. 

For example, smartphones wouldn’t have happened without this. So the Chinese have honestly done this a solid. However, over the 2000s and especially into the 20 tens, the Chinese got into rare earth material manufacturing, which is a significantly more sophisticated step, and simply purifying the rare earths. And that’s where the magnet stuff comes into play. And over the last 15 years, they’ve basically dominated that space and they’re refusing to export the metals to everybody else so that they can do the manufacturing. 

And now they’ve dominated the manufacturing and they’re refusing to export the manufactured product. So this is a very real crimp, in the trading system and a very real point of leverage for the Chinese. Now, nothing that I have just told you is a mystery in the sector, whether that is computing or automotive or mining or metals purification. 

But it is all news to the Trump administration. Remember that normally when a president comes in, he brings somewhere between 1300 and 3000 people in with him to stock the senior government. Trump’s brought no one. He just fired all the people who were there before, because he really doesn’t like anyone to remind him, even indirectly, that he might not be the smartest person in the room on every single topic. 

So if anything that I just told you was news, that’s because you’re not an expert in metals refining a computer manufacturer. Neither am I, but I talk to a lot of people I know what I don’t know, and I seek out that information. And Trump is not a person like that. So what happened with the trade talks is Trump on April 2nd made these big announcements with those big game show boards and then just assumed that everything would magically happen the way he had dictated, regardless of what the situation on the ground was or the interests of other parties. 

It was very Obama asked. Honestly, the two of them are very similar from their management style. Anyway. What this means is that even though the United States holds probably 90% of the cards in any meaningful trade talk, the Trump team is so small and is so siloed in what they do now. And then, of course, is hobbled by their boss that they can’t develop the staff. 

It’s necessary to keep them informed on things like this. And so the Chinese system, even though they hold very few cards, they know where those cards are and they’ve played them very effectively against the Trump administration and basically brought American auto manufacturers to the brink of collapse by metering out this one little product, which is a point of leverage that they have. 

The smart play is if you’re going to pick a trade fight, the first thing you do is start building up the alternative infrastructure that you need. When stuff on the other side goes away. And so in this case, luckily some of that work has already been done. So about 15 years ago now, the Chinese tried a similar trick with restricting rare earth exports to Japan when they were having a spat over something, and the Japanese figured out over the course of the next nine months how to use three quarters fewer rare earths. 

Because, you know, for the last 20 years, the Chinese have been dumping it on the market below cost. So everyone just kind of gorged on it and no one really worried about using less. While the Chinese figured out ways to use less, they did the same thing with the Russians when it came to Palladium anyway. 

Well, the Japanese were doing that. Everyone else realized that there could be a supply shock here. And so they built out a lot of the physical infrastructure that was necessary to process rare earths. We did it here in the United States. The Australians did it, the Malaysians did it, the French did it. And what’s happening now is some of that infrastructure is spinning back up because this is now an issue of the day. 

Again, we didn’t operate it until now, because the Chinese were subsidizing it. So there was no point now that it’s a national security issue, that the math has changed and people are turning all that old infrastructure on. But the next step is going to take a little bit more work. Turning the finished material into manufactured intermediate products like the magnets. 

That will probably be a little bit more involved than simply turning on some metals refining. I can’t give you a timeframe for how long that will take, because this is not something that has been done in the United States in a while. And unlike the, metals refining, where it’s an issue of no more than a year, we don’t know what the time horizon will be for bringing it on online, but this is one of probably 3 or 4 dozen things where the Chinese have done some version of this that needs to be rectified. 

If the United States is going to prepare for whatever is next. If you’re one of those people who would like to think that the trade situation is going to revert to how we were 15 years ago, I mean, I think you’re wrong, but we would need this in order to prevent any sort of regression or long term fights with any partner, most notably China. 

And if you’re like me, you’re pretty sure that the globalized system is never coming back. Then we need to do this regardless if we’re going to have stuff like, I don’t know, cars or we need to invent technology to get along without the rare earths one of the two. Anyway, this is all stuff that should have been done before we picked a trade fight and before the Trump administration demonstrated that they really don’t have a good grip on the core issues that are necessary to invent the next world, whatever that happens to look like.

Will Trump Pump the Brakes on Greentech?

Both in the US and globally, the green energy transition has been all the rage for the past few years. With President Trump’s second term kicking off, how will it impact the green transition domestically and beyond?

For the green folks outside of the US, the impact should be minimal. Since the US doesn’t manufacture most Greentech components or provide much financial support, Trump’s influence is (mostly) contained to the US. But the story isn’t so pretty for those in the US.

The main challenges for the green transition in the US are transmission infrastructure and financing. Federal support is crucial for developing the infrastructure to get the energy from where it is generated to where it will be used. Trump could make this development and coordination process much harder. Wind and solar projects require more robust financing than a traditional fossil fuel plant, so cuts to federal incentives or subsidies could make these projects unviable.

Without federal backing, many of these green projects would stall. Private investors might try to step in, but they can’t match federal funding levels. Trump has the ability to significantly slow down the green transition, but at least that doesn’t extend beyond the US.

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Here at Zeihan on Geopolitics, our chosen charity partner is MedShare. They provide emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it, so we can be sure that every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence.

For those who would like to donate directly to MedShare or to learn more about their efforts, you can click this link.

Learn about medshare here

Transcript

Hey, all Peter Zeihan here coming to you from Colorado today. We’re taking a question from the Patreon page. And that’s specifically what sort of impact can Donald Trump have on the green transition, both in the United States and wider abroad? Abroad, very, very little. The solar panels aren’t made here. The wind turbines are not made here. And U.S. financial support for anyone else’s transition is well below $1 billion a year. 

So, you know, you know, whatever. It’s all about what would happen here and here. The the federal government has a lot of, means for changing the way the green transition works. A couple things to keep in mind. Number one, green technologies, as a rule, require a great deal more transmission infrastructure because where most people live is where it rains. 

And so you can grow your own food. We don’t have a lot of desert cities. So in most cases we generate power with coal, nuclear, and natural gas relatively close to where we live. And so transmission for most power plants is well under 50 miles. But most of the places that are very sunny or very windy are not within 50 miles of where we live. 

It’s in the Great Plains, it’s in the desert southwest. And so you have to build these pieces of infrastructure to generate power well away from where people are. And then you have to wire that power to somewhere else. And that often means crossing jurisdictions. And if you cross a economic or political jurisdiction, the regulatory burden becomes more robust. 

And it’s up to the federal government to try to smooth that out. So if all Donald Trump does is not smooth things out, becomes a little bit more onerous to build green tech anywhere because you can’t hook it up to a source of demand, then that’s problem one. Problem two is much bigger. You see, if you’re doing a conventional, facility, whether it’s coal, natural gas or a nuke, only about one quarter of the cost of the facility is in the upfront construction. 

And then linking that up to the grid, most of the rest is fuel, especially for coal and natural gas. So as a rule, it varies based on where you are and how close you are to the fuel source. As a rule, about 80% of the cost of the lifetime cost of a coal or natural gas facility is the fuel. You basically buy it and burn it as you go. And so with that sort of model, you only have to finance the initial 20% that it’s required for the construction of the facility and looking it up to the grid and everything else. 

You have an income stream to defray and ultimately overpower the cost of the fuel moving forward. It’s not how green tech works. The whole point of solar and wind is that you don’t have fuel. The fuel is free. Well, that means that most of the costs, almost all the costs are upfront. Over two thirds go to the construction and linking it up to the grid. 

So the degree of financing you need megawatt for megawatt is more than triple what you need for a more conventional fuel system. Now, one of the things to keep in mind in the United States is that capital costs have roughly increased by a factor of four since 2019, as the baby boomers have retired, and the money that they used to have in stocks and bonds, that fueled the sort of capital environment that we had ten years ago just no longer exists. 

They’ve all been liquidated and they’ve gone into T-bills in cash, which is driven up the cost of financing for almost everything, including power plant expansion. Well, if you’ve seen the cost of capital increase by a factor of 4 or 5, and you have to finance three times as much for wind and solar as you do for core natural gas, you can see where the problem is. 

This is normally where the government would step in with concessionary deals on whether it’s on taxes or directly on financing in order to help bridge that gap. And so all Donald Trump has to do is say, I’m not going to finance this stuff anymore, and a lot of it is going to go away, even if, as isn’t the case in the desert southwest or in the Great Plains, solar or wind are already cheaper on an all in cost basis over the entire life of the project. 

But that’s not the number that matters. Part of the problem that I’ve always had with the green communities, they keep using this thing called levelized cost of power, which shows how over the life of a project, the cost of solar and wind has gone down and gone down and gone down. And it has. But they assume that there’s no problem with intermittency. 

So like when the sun sets, solar doesn’t work anymore. If you pair a more realistic cost structure because you know you want electricity after the sun goes down. Hello. With financing the issue, then the federal presence in the financing world really is critical. And even in projects that make a huge amount of sense, not just environmentally but economically. 

If you can’t get that financing right, you can’t have the project. Private industry can step in, but it’s going to be a hard sell to do financing for something on concessionary terms, for something that it’s going to take longer to pay out as compared to a colder natural gas plant. And you might get local and state governments kicking in some for political and environmental reasons. 

But there’s no way that they can compete with the sheer volume that the federal government can come up with. So we should expect a lot of these projects to slow down quite a bit. Even if Donald Trump doesn’t call them out by name is something that he doesn’t like. You interrupt the financing and you simply don’t get much new construction.

Are Rare Earths Really That Rare?

A close up photo of colbat rocks

Rare earths are back in the headlines, but is all the hype worth it? Let’s breakdown what these are and how “rare” they actually are.

Rare earths are byproducts of mining for other metals like nickel, copper, and uranium. While not rare on Earth, they are rarely found in sufficient abundance in a single location for their mining to be economically viable. The only real challenging aspect lies in the refining process, which is just dirty, time-consuming, and expensive…but not all that difficult to do.

China dominates rare earths because they have subsidized production (artificially lowering the price) and they’ve been doing it for decades. So, other countries haven’t had any incentive to turn on their refining capacity, yet. Once the Chinese overplay their hand or the system crumbles, other nations will just ramp up production.

This isn’t really something to fear, other than a few months of issues. However, the US should be more concerned with other critical supply chains like aluminum, steel, and lithium, where the US has yet to build out sufficient infrastructure.

Prefer to read the transcript? Click here

Here at Zeihan on Geopolitics, our chosen charity partner is MedShare. They provide emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it, so we can be sure that every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence.

For those who would like to donate directly to MedShare or to learn more about their efforts, you can click this link.

Learn about medshare here

Transcript

Hey, all, Peter Zeihan, coming to you from a very, very chilly Colorado. Today we’re taking a question from the Patreon page that’s been popping up a lot in the news about rare earths. There’s a lot of angles to this, but basically, it seems that the Trump administration is really interested in getting some production of the stuff. And the question is, how does it work? 

What do we need? Where do we go? You may recall recently Trump, falling to Russian propaganda again said that, Ukraine owes the United States $500 billion and it should pay for it with rare earths and not get a security guarantee in exchange. By the way, total USA to Ukraine at this point, according to US government sources, is less than $100 billion, of which two thirds is weapons that were just sitting in warehouses that we were going to blow off anyway. 

Anyway, rare earths, unlike the name rare earths are not rare. They are produced as a byproduct of mining. When you’re doing nickel or copper or platinum? Uranium? Palladium. That’s a platinum group. Coal ash, phosphates, sometimes lead. 

I said iron ore already. Aluminum. Bauxite. Anyway, there’s like 20 different, macro metals that you mined for, plus coal ash, that produce Rees as a small soda product. 

And so what usually happens is you produce the primary thing that you’re after. And then with the waste from your refining process, you maybe do another run of that in order to concentrate the earths a little bit more. But then that next stage of taking that kind of slag that’s been partially refined and turn it into useful rare earth metals, is very dirty. 

It’s very polluted, and it takes a lot of time. So usually what happens is you take that slag and you to ship it off to China. Because back in the 1980s and 90s, the Chinese were looking for industries that they could corner and their technology was not very good. And they settled on rare earths because it was expensive and it was dirty. 

But they have a very capital flush system where they basically print currency and confiscate everybody’s bank deposits to pay for whatever development plan they want. So what they do is they you build a couple hundred vats of acid and you dissolve everything in the first bout, and then you get the remnants. You put that in a second batch, and then the remnants from that third, that remnants of the fourth that intruded. 

And over the course of months, starting with tons of slag material, you might end up with an ounce of a rare earth metal. Anyway, the Chinese cornered this market because it was something that no one else was like, oh, I want to do that. And so they ended up super saturating the market because Chinese economics are about throughput rather than efficiency. 

And they continue to subsidize the industry today, which is why, based on the Earth, somewhere between 50% and 95% of it comes out of China, the refined metal. And then, of course, in the last 10 or 15 years, they tried to go, downstream, into processing and building product out of those things. Be even less successful in that. 

Anyway, this technology is based on the 1920s. So there’s nothing that’s difficult about this, and it doesn’t really take a lot of time to set up. It’s just that once you actually start putting your slag into the acid, it’s going to be months before you get any material. So the problem is not rare earths per se. The problem isn’t even production. 

Rare earths are a byproduct of any number of industrial, mining and purification processes. The problem is building out that processing capacity. Now, how long does that take? I would argue that in Australia, Malaysia, France and the United States, most of that work has already been done. But nobody wants to turn it on because you’ve got several months where you’re not getting any product. 

And the Chinese continue to super saturate the market and provide the world with below cost rare earths. So at some point, a switch is going to be flipped, and everyone’s mind when they realize either that the Chinese are overplaying their hand with their control of the processing capacity or trying to just brakes. And everyone realizes that if they still want the stuff, they’re going to have to make it themselves. 

Once that happens, all of this spare refining capacity around the world will spring up. And the problem we solved in six months to a year. Until then, we are in the unfortunate position that the US government seems to be beholden to Chinese and Russian propaganda on the rareness of rare earths, and that, unfortunately, is shaping policy in a number of places. 

It’s like if you want to be paranoid about things that the Chinese dominate. This isn’t where you go. You should be concerned of other types of processing, such as turning bauxite into aluminum, turning iron ore into steel, turning lithium concentrate into lithium metal because those are places we’re setting up the, replacement infrastructure. The United hasn’t really started at scale yet. 

And if the Chinese break before that’s done, we will then have to build out that infrastructure in an environment when we can’t get the intermediate product. And that will generate the mother of all inflation pulses. So, you know, one miracle at a time, I’d argue that this specific problem, rare earths, is not all that much of a problem. 

There’s plenty of streams coming from plenty of places. We just have to turn on a few things to solve it.

Counting (Lithium) Chickens Before They Hatch

Photo showing trucks at a lithium mine

Some new advancements in AI and geology have revealed a massive lithium deposit in Arkansas’s Smackover Formation (great name by the way). While this is good news, we still have a lot of work to do before this lithium sees the light of day.

Traditional methods of lithium extraction aren’t going to work in Arkansas, so Exxon is pioneering a chemical extraction process, which is showing promise. Again, we’re early stages in what this will look like, but it has solid potential.

This deposit might not solve the demand EV’s are bringing about, but there is huge potential to improve grid storage. This would allow excess renewable energy to be stored, addressing rising energy demands in the US. Again, this is still early on, but energy storage could be transformed by 2030.

Prefer to read the transcript? Click here

Here at Zeihan on Geopolitics, our chosen charity partner is MedShare. They provide emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it, so we can be sure that every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence.

For those who would like to donate directly to MedShare or to learn more about their efforts, you can click this link.

Learn about medshare here

Transcript

Hey everybody. Peter Zeihan here, coming to you from Portsmouth, New Hampshire, which is not only disturbingly pleasant—I mean, it’s kind of surreal—but there are more good food options within a two-block radius than in the entire Denver metro, which kind of pisses me off anywho. I’m here near Market Square, and today we’re going to talk about the new…

Well, it’s not all that new, but the popularization of the lithium deposit that was found in Arkansas. Now, like I said, it’s not new. This is called the Smackover formation, which is a great name. I want to buy a drink for whoever named it. Anyway, it’s been producing bromide for the better part of a century, so the geology is reasonably well known.

What has happened is one of the breakthroughs with AI is being able to look at the geology from new angles, and correlate it with updates in understanding for mining and geology that have come in the decades since. And they think that there’s more than enough lithium there to supply global supplies for like a factor of nine or something. Ridiculous.

Now, I don’t want to overstate this, because just because the lithium is there doesn’t mean it can be harvested. For example, 90% of the oil in the world that we are aware of will never be able to produce. It’s too deep, it’s too technically challenging, the bits are too small—whatever it happens to be. But in the case of the Smackover, in specifically the Arkansas part of it, there’s already production in this zone, and it has been for decades.

Just not for lithium. Quick review of lithium production. There are two types: you’ve got rock formations and rock mining, which is what dominates in Australia. It’s a little bit more expensive than the other method, because you actually have to pull the ore out of the ground and grind it up and process it to extract the lithium from everything else.

But it is a relatively quick way of doing it, even if it is involved. It’s rock mining, so, you know, you’re going to have all the tailings, you’re going to have all the processing issues, and all the at-long costs. It’s energy-intensive—all that good stuff. Second, you have brine mining, which is what they have in Chile.

There, there’s a subsurface water source that is rich in dissolved lithium. You pull the liquid out, you pour it into an evaporation pond, and over the next 18 months, you, you know, basically wait for it to concentrate. So it’s cheaper than rock mining in Australia, but there’s a really long lag time, and you need a specific sort of surface.

Up on top, in order to do the extraction.

So the Atacama Desert in Chile is one of the driest parts of the world, and the mines are about 7,500 ft. So you have a lot of sun, you’ve got a desert, you’ve got low vapor pressure, and it still takes 18 months to concentrate the brine down to something that can actually use. In the case of all, in case of Arkansas, it is a brine formation.

The Smackover. But you’re talking about a state where the highest point in the entire state is like 2,500 ft, and where the mines would be, they’re significantly lower. And you don’t have the large, flat, dry areas. Arkansas is pretty humid, so doing traditional evaporation is just completely a no-go. And if that was the only technology in play, this wouldn’t work at all.

But it’s not the only technology in play. There is a relatively new method for lithium extraction from brine, which is basically a direct extraction that uses chemical catalysts and similar things to extract the lithium from the water. Now, the concentration in Arkansas is about 300 mg/L versus 400 mg/L in Chile.

So the Arkansas deposit isn’t as good in terms of quality as a Chilean one, but there’s a lot of infrastructure in place already, and Exxon is the primary company that is involved. And, you know, Exxon doesn’t pull things out of the ground unless it thinks it can make money. And so it has pioneered this direct extraction technology in a number of test wells already on site in Arkansas.

So the only thing that has really changed is that we’ve had this new AI model saying that there’s a lot, a lot, a lot, lot more than we originally thought. And in the next three years, Exxon expects to have first commercial volumes. Now, they’re not telling us what “commercial volumes” are, so we’re going to have to wait and see.

But, one of the things that has been a limiting factor on a lot of the green transition is batteries, and I have not made any secret of my general opposition to lithium use in transport, because it’s a horrible battery chemistry. It charges too slowly. It discharges too slowly. It heats up and swells. It’s just a bad idea to put on something that moves.

But if you were to make a lot of small- to medium-sized batteries, put them in series, and just put them in a building where the heat and the swelling could be maintained or even harvested, you could use it for grid storage very, very, very easily. So this isn’t going to revolutionize the world of EVs, but it might, if it works, revolutionize the world of electricity.

One of the problems we’re going to have in the United States over the next ten years is as the Chinese system vanishes from the world, we’re going to have to expand our industrial plant. That means we need at least 50% more electricity generation than we currently have. And until and unless we can build the infrastructure to link the entire country together so that anyone can generate power anywhere and send it anywhere else—which is a tall order.

The easier patch is to put a lot of batteries in a lot of places, so that during periods of high supply and low demand—for example, solar shining during the day—you capture the extra and then use it at night. Everyone’s asleep at night. You burn your natural gas at night, when normally you would cycle. Now you just pour that energy into a power, into a battery pack, and then you use it during the day.

You know, you could use this in any possible grid if we can produce enough lithium at a low enough cost. And I have to say, between the engineering, the technology, and the geology, this does look promising. Just keep in mind: first commercial production, 2027, which means first large-scale batteries, 2030. This isn’t going to solve everything overnight, but it’s a very promising step in the right direction.

US Discovers Huge Lithium Deposit: What It Means…

Well, it sounds like the US finally decided to join in on the fun and make a lithium discovery of their own. This deposit is – supposedly – the largest ever, and it is located in the McDermitt Caldera near the Oregon-Nevada border.

I want to make clear that these are only estimates, so don’t pop the bubbly quite yet. On top of that, permitting and infrastructure buildout will take years to complete. Even when all that is done, lithium’s battery chemistry remains sub-optimal and has several limitations.

Despite these challenges, the McDermitt Caldera lithium deposit has the potential to shake up the industry. The US needs to balance this discovery with investments in researching better battery chemistry alternatives.

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First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

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Transcript

Hey everybody. Peter Zeihan here coming to you from Colorado. A lot of you have written in asking me what I think about this new supposedly lithium deposit that has been found near the Oregon Nevada border. That’s in a place called the Mcdermitt Caldera, which, if you’re familiar with plate tectonics, is where the Yellowstone supervolcano used to be. Basically, the Yellowstone supervolcano is a hotspot, and this is where it was ages ago.

Anyway, volcanoes bring stuff up from the mantle and even the core, and they tend to be a little interesting from human point of view. And so the minerals in the caldera are undoubtedly interesting and supposedly they found a whole lot of lithium. But if the estimates prove true, it will be the world’s single largest deposit, bigger than what is in Chile or Bolivia or Argentina or Australia for that matter.

So, you know, potentially groundbreaking. And I think this is great, obviously, but for things to keep in mind, number one perspective, estimated potential real exploration has not yet been done. And until it does, you know, don’t count those chickens. Number two, let’s assume that it’s as good as we think it is. Well, you still have to build the mine.

And from the day that all the permits are approved to the day that you get first large scale production, it’s still going to be in excess of four years out in the permitting process. You’re going to add another 2 to 3. And a lot of this is on Native American land. So there’s a whole nother level of politics and negotiation that goes into it.

So I would be surprised, even in the best case scenario, if we saw a meaningful output out of this thing in less than eight years, ten is probably more likely. So the chicken counting is going to have to wait third. Let’s say we manage to get all this out of the ground and it looks really promising. Well, then you have lithium or it still needs to be processed into some sort of intermediate form, like concentrate.

And only then can it be refined into metal, and only then can it be turned into things like batteries. So there’s an entire manufacturing supply chain that has to be built up. Now the United States is starting on this. We’re working with the Australians on some of this, but this is again something that takes a minimum of 2 to 4 years to get going at scale.

I would argue that we should work on the processing regardless that way, even if this new source of or doesn’t work out, we can still tap water from places like Chile or Argentina and have more and more of the supply chain within the Western Hemisphere. Okay. What else? Oh, yeah. One more thing. Lithium sucks. I mean, we use it as our dominant battery chemistry because we don’t have anything better, but it’s not particularly energy dense.

It can only work for so many recharge cycles, and it tends to swell and heat up when you use it. So it can start fires, which is one of the many, many, many, many, many reasons why on flights they tell you that if you have a lithium battery, don’t put it in your checked bag because no one’s down there to check on it.

You have to carry it with you. Hopefully over the next decade we will figure out a and easier battery chemistry, maybe even one that’s a little bit more, I don’t know, environmentally friendly because the mining and refining that’s necessary to do lithium at scale is pretty messy. We need several hundred billion dollars into new materials science research for GreenTech and in none of the subfields is it more important than figuring out something that works for batteries better than lithium?

But until that happens, lithium is the best that we have. So this Mcdermitt Caldera, the Thacker Pass mine area, looks promising.

Processing: The Greatest Threat to US Economic Security

As we continue down the path of deglobalization, the US has checked most of the boxes needed to thrive in a disconnected world. Between shifting supply chains and moving manufacturing closer to home, there is still one box that the US hasn’t checked off – processing.

That unchecked processing box just so happens to be the most significant threat to economic security for the US. The US needs to flesh out its processing capabilities in three major areas of concern: industrial materials, agriculture, and oil.

The US must develop processing capabilities and partnerships for materials like lithium, copper and iron ore to support the industrial buildout. To improve food security and avoid famines down the road, finding ways to add value and expand food production close to home will be essential. The US is already a significant oil refiner and exporter, but there is a mismatch in the type of crude produced domestically and what US refineries can process; to reduce import dependency, the US will need to retool its refineries to process domestic crude.

Overcoming these processing challenges will prove crucial for the future of the US and its continued economic security. Regardless of political, ideological, or environmental stance, developing these processing capabilities will allow the US to prop up various industries and avoid catastrophe down the road.

Prefer to read the transcript? Click here

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:

First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

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Transcript

Hey everyone. Peter Zeihan here coming to you from the road in Colorado. Yesterday I gave you a quick talk about what I saw as the greatest national security threat to the United States for the next foreseeable future. I’d like to do the same thing now for economic security and in a word, processing. Before I explain what I mean by that, let’s go back a little bit.

The whole idea of globalization is that any product can go anywhere, take advantage of whoever can produce that product, the lowest cost and the highest quality, or at least that’s the theory in practice. As soon as countries realize they can reach into any economic space. They take steps to benefit themselves. Maybe they put in trade restrictions or in the case of processing, maybe they subsidize.

So different countries around the world are throwing a lot of money at making sure that certain industries are headquartered, or at least heavily emphasized in their own places. So Taiwan, Korea, Japan, they do this heavily with semiconductors to the tune of hundreds of billions of dollars of subsidies. The Russians use a lot of the d’etre is from the Soviet system, which used to supply a an empire which now only supplies them.

And, you know, they’re pretty economically backward. So they use all the extra stuff to produce things for export or in the case of the Chinese, in order to ensure mass development and mass employment. They throw basically bottomless supplies of capital at industries, really anything that they think that technologically they can handle. They want to be able to produce and if they can, cornered the market.

What this means is that other countries, United States, are reliant on countries that have put their thumb on the scales in order to participate by anything else. And now the globalization is breaking down. The United States is facing a double threat. Number one, a lot of manufacturing that used to be done here or could be done here or, you know, from an economic efficiency point of view should be done here, is done other places.

And so a lot of that has to be reshore at or near shore to French. Second, none of this works unless you have the processing. If you have iron ore, but you don’t have the processing to turn it into steel, you can’t do construction. If you have silicon, you don’t have the ability to process it in the silicon dioxide.

You can’t play in the semiconductor space and on and on and on. So things kind of fall to three general categories. The first are industrial materials like lithium and copper and iron ore and the rest. The United States in most of these is a bit player in the production and nearly a non-player in the processing. And since the United States is now attempting a mass industrial buildout, it needs to get good at that again.

It needs to make partnerships with the countries that have the raw materials. Australia is at the top of that list. Brazil’s probably close second. And then it needs to work with those countries either to do the processing in them or at home. Now, one of the things that I do like about the Biden administration’s economic policies and there aren’t a lot, is that the Inflation Reduction Act prioritizes this and says that in order to qualify for certain subsidies for things like EVs, the materials that go into them must be processed within a NAFTA country or an ally that is identified by negotiations such as Australia.

So we are moving in the right direction there, but we need to think of a much broader net. So for example, aluminum not only to the Russians and the Chinese dominate about three quarters of aluminum production in the world. Aluminum as a byproduct, generates a lot of trace materials like, say, gallium, which are really useful for solar panels.

Same thing with silver. Silver processing or copper processing generate a lot of the stuff that you need for rare earth metals. All of this stuff needs to be recaptured in some way. Otherwise, the industrial rail building that the United States is attempting really isn’t going to go anywhere. Because if you don’t have the materials to do it in the first place, it’s going to be kind of a pointless endeavor simply to build up what you would need to make them every single day.

That’s number one. Number two is food. The United States is the world’s largest food exporter and is the number one exporter of any number of materials and food products. But we don’t do a lot of the value add as part of those exports. This is missing a lot of really low hanging fruit. And if you look at the world writ large, the same thing that applies to globalization and processing applies to agriculture.

Lots of countries for food security issues, national security issues, protection issues whose have made it very difficult for the United States to export, say, soybean meal. But they still allow the import of soy by expanding the footprint in American agro industry so that we do more of the processing here. Not only do we get a higher value added product, but as global fertilizer markets around the world get problematic, a lot of major food producers are simply going to vanish because most food production outside of certain areas that have been producing it for centuries can only do so with massive applications of fertilizer.

Again, in China is the case in point. The EU’s about five times as much nitrogen fertilizer as the global average. So not only with the United States earn a little bit more money and have more food security. If we did this, we’d also be able to step in and help other places that are suffering from famine more quickly because we’d actually have semi-finished or even finished food products rather than just the raw material.

And then the third one is one that the Biden administration is not going to like to hear about, and that is oil. Oil by itself is useless. It has to be refined into diesel and gasoline and naphtha and the rest. And the United States is the world’s largest oil refiner and the world’s largest exporter of refined product. However, there’s this huge mismatch within the American energy sector.

Back in the seventies, in the eighties, when we were all running out of oil, American refiners became convinced with good reason, that the future of global crudes were very heavy, very sour, very polluted crude streams. And so what they did was they refined the entire American refining complex to run on the crappiest crude you can imagine, stuff that’s just goo or even solid at room temperature.

But then we had the shale revolution. And the shale revolution is different in that the crude that is produced from it is super light and super sweet. So right now, American refiners prefer to import the heavy crap stuff from the white world, leaving the light sweet stuff. We produce ourself available for export. So the smart play here would be to retool or even better expand the American refining complex in order to process not just the crappy stuff in the world, but also the stuff that we produce ourselves.

So we are less dependent upon the inflows and outflows of exports and imports in order to keep our refining complex alive and keep fuel the tanks. And for those of you who are super ultra mega greens, who are convinced that the internal combustion engine is not the way of the future, that’s fine. Consider that the most aggressive, realistic plan.

And it’s not very realistic for getting the EVs on the road and and stopping the production of internal combustion engine vehicles is now before 2040, which means as late as 2050, the majority of the vehicles that are still on the road are still going to be internal combustion. So even in the most aggressive plan, we are still going to need tens of millions of barrels of gasoline and diesel and the rest for decades to come.

If we’re going to avoid an energy shock where the whole system just cuts down. All right. That everything. Yeah, I think that’s everything. So processing it. Lots of processing. Oh, yeah. And even if you don’t buy into the green transition or even climate change, we still need to do this because without the Chinese and the Germans and everyone else in global manufacturing, North America has to at least double the size of its entire industrial plant.

That’s a lot of steel, a lot of aluminum, a lot of copper and all the rest. So really, it doesn’t matter what your ideology is. We don’t have enough of the intermediate stage of process stuff that we need to even attempt to do everything else. So let’s focus on that first and then.