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The North American mining sector will have to grow to fuel the green transition

February 22, 2023

By:

Peyton Baird

As trade between the East and West breaks down, the North American mining sector will have to grow to meet the rising demand of minerals necessary for the production of 'green transition' products.

A couple of months before the midterm elections of 2022, President Biden signed the Inflation Reduction Act (IRA). As its name makes clear, it was designed to lower inflation caused by massive government spending during Covid19 by, amongst other things, investing in domestic energy production and promoting clean energy. In the US, immediate reactions to this bill were mostly positive as it benefits American companies through subsidies and the promotion of American goods such as electric vehicles and other clean technology products. Outside of the US, the reaction was not quite so positive. Europe rightfully said that the IRA would encourage European companies to move production from Europe to the US, disincentivize foreign companies from setting up production centers in Europe, and would lower foreign investment. These worries were correct, the US made itself an attractive region for the production and development and sale of ‘clean’ technologies. With the bolstering of this industry in the US comes an increase in demand for the raw materials that feed it. The ‘green transition’ requires astounding amounts of raw materials, specifically those that are mined, such as copper, nickel, cobalt, manganese, rare-earths, and platinum group elements.


China is the largest exporter of minerals. In 2021, they were responsible for 51% of all mineral exports. Japan comes in second with only 6.7%. These minerals are necessary for the mass production of clean technologies that the IRA is inspiring. However, China will not be able to guarantee maintenance of this level of export. Over the next ten years, China’s population will be mostly retired with a much smaller workforce moving in to replace the retirees. As a result, their domestic output will be drastically reduced. The Russian Federation is the world's second-largest producer of platinum and cobalt, the third-largest producer of gold and nickel, and the ninth-largest producer of copper. As a result of their invasion of Ukraine, western imports of Russian minerals have ceased. If the west wants to hold true to the green revolution and become a world leader in the production of green technologies such as solar panels and electric vehicles, a supply chain capable of these levels of production will have to be created and protected. We are beginning to see this take place within North America, independent of Chinese or Russian production, and European politics.


The three North American countries - Canada, Mexico and the US - are all rich in natural resources and have extremely integrated trading relationships; this integration will increase as wedges begin to emerge between the west and east. In order for this self-sustainable supply chain to develop, the natural resources necessary for the green transition must be produced locally. Luckily for North Americans, Canada, the US and Mexico are all stepping up to the plate. Over the past five years, the US has increased its total mineral production value by ~10% and maintains a healthy demographic that is highly educated. Over the past five years alone Mexico’s total production value has increased by ~35%. Bolstered by a healthy population demographic in which the retiring population will have a replacement population. Canada over the past five years has increased its total mineral production value by ~44%. Canada does not have as healthy a population demographic as Mexico or the US, but its high levels of immigration nearly make up for the shortfall. As can be seen, there is healthy growth within the North American mining sector. Furthermore, the North American countries have a healthy demographic to support that growth along with the production of green technologies that the mined minerals will be used for. As fissures between the West and the East become more substantial, and the breakdown of trade becomes more known, the necessity of this independent supply chain will become more clear.


To end with a clear example of the development of a self-sustained North American supply chain for the green transition, we can look towards Tesla’s recent announcement to open Gigafactory Mexico, in the northern state of Nuevo León near the metropolis of Monterrey. This location is efficiently located on a main trade route between Mexico and the US and borders Texas which is home to Gigafactory Texas in Austin. Gigafactory Mexico will be able to draw upon the large labor force of Mexico which has experience in both automobile and airplane manufacturing and will be integrated into the Mexican raw material logistical system. This is a substantial ‘win’ for Mexico, and denotes a clear shift in the global system, with the western country of Mexico being favored for additional production than the European or Asian continents. In addition to Tesla, Ford also manufactures its electric SUV in the country, and General Motors announced plans to build a plant for electric cars last year.

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