And the bit I missed; there is already a US stockpile, Ed Conway mentions visiting a huge whare house in his book. It is managed by the Defence Logistic Agency (DLA). Unfortunately, as its funding is authorised directly from Congress, it's purchase contract says - this contract is to purchase xx MTU of X over 30 months, however this contract can be cancelled with 30 days notice. That, and absolutely nothing will gain you access to the British Museum.
It is also constrained by a Congressional Law which says that all purchases must be at the best possible price (sic). So if X is quoted at $xxx CIF China - DLA can't be offering a premium to that even if its purchases must be China-free (which they must for DoD from FY27).
Hence, I think, why a different pool of money has to be dreamed up - also why the US keeps reverting to tariffs - because they can without too much effort.
I think that there is a piece missing from most analysis on floor pricing / stockpile buying / secure supply chains which relates to financing - debt most obviously because risk has a visible price, but equity as well because risk has a return profile.
We are in the process of financing a critical minerals mine in SW UK (you get 3 guesses as there are 3 mines ready to be financed). Pick your government backed financing package (seeking to overcome the competitive/comparative advantage), which with most ECA's takes the form of a partial guarantee to a bank. Alongside the usual causes of failure, offtake pricing, for the reasons you eloquently describe above cannot be adequately risked because PRC pricing is not entirely supply/demand driven. So projects don't get financed, or have to be done so with so much equity as to make them uneconomic.
Keep writing on this; it's considerably better than the comparable article in today's FT and I'm about to send to a number of UK govt Critical Minerals policy advisors - they need to be educated (in things other than PPE).
Thanks I've done several bankruptcies in this space (frankly the only time you get a reasonable entry point given the risks) and either tariffs and a period of much high costs or some offtakes-as-nicorette to wean everyone off China pricing dynamics and dependency are the only options that I can think of.
And the bit I missed; there is already a US stockpile, Ed Conway mentions visiting a huge whare house in his book. It is managed by the Defence Logistic Agency (DLA). Unfortunately, as its funding is authorised directly from Congress, it's purchase contract says - this contract is to purchase xx MTU of X over 30 months, however this contract can be cancelled with 30 days notice. That, and absolutely nothing will gain you access to the British Museum.
It is also constrained by a Congressional Law which says that all purchases must be at the best possible price (sic). So if X is quoted at $xxx CIF China - DLA can't be offering a premium to that even if its purchases must be China-free (which they must for DoD from FY27).
Hence, I think, why a different pool of money has to be dreamed up - also why the US keeps reverting to tariffs - because they can without too much effort.
US stockpiles are small and yes, the rules are finnicky and not an awful lot gets done the way they are currently constituted.
Alex - well written and explained.
I think that there is a piece missing from most analysis on floor pricing / stockpile buying / secure supply chains which relates to financing - debt most obviously because risk has a visible price, but equity as well because risk has a return profile.
We are in the process of financing a critical minerals mine in SW UK (you get 3 guesses as there are 3 mines ready to be financed). Pick your government backed financing package (seeking to overcome the competitive/comparative advantage), which with most ECA's takes the form of a partial guarantee to a bank. Alongside the usual causes of failure, offtake pricing, for the reasons you eloquently describe above cannot be adequately risked because PRC pricing is not entirely supply/demand driven. So projects don't get financed, or have to be done so with so much equity as to make them uneconomic.
Keep writing on this; it's considerably better than the comparable article in today's FT and I'm about to send to a number of UK govt Critical Minerals policy advisors - they need to be educated (in things other than PPE).
Alistair
Thanks I've done several bankruptcies in this space (frankly the only time you get a reasonable entry point given the risks) and either tariffs and a period of much high costs or some offtakes-as-nicorette to wean everyone off China pricing dynamics and dependency are the only options that I can think of.