View from North America: Partners or Friends?

Dear Members

Good Morning!

Once again, a Sunday morning here in Cleveland Heights, Ohio. The weather’s actually quite decent at the moment: a bit of a change. Although we still have some snow on the ground. Luckily, I was able to avoid much of it, finding myself, as I did, in both Austria and Germany a lot of last month.

I thought I would get this letter to you before I start travelling for most of April, including coming to the MMTA conference in North Carolina.

Since I last wrote, in Europe the Critical Raw Materials Act is now starting its lawmaking journey. On 16 March, the European Commission proposed “ … a comprehensive set of actions to ensure the EU’s access to a secure, diversified, affordable and sustainable supply of critical raw materials.” ¹

In light of my interest in friend-shoring, what caught my eye in particular in the announcement was the following: “The Regulation and Communication on critical raw materials adopted today leverage the strengths and opportunities of the Single Market and the EU’s external partnerships [italics mine] to diversify and enhance the resilience of EU critical raw material supply chains.”²

I think the word “partnerships” here is telling. As a recent piece in the Financial Times pointed out, for such sourcing to be successful, partnerships are going to be all important, with Brussels being seen as “ … a development partner rather than a neocolonial extractor.”³ And whilst partners may not necessarily be friends, there has to be something in it for both parties.

So, if push comes to shove and it’s the EU versus the US seeking to secure a supply chain, I wonder who is going to win: partners or friends with money. When it comes to these last, in relation to semiconductors anyway, the US has already started setting the stage to be such a friend. (I may, of course, have missed many more announcements in this vein, but this particular announcement from the US Department of State caught my eye.) In its press release dated 14 March entitled Department of State Allocating $100 Million in FY 2023 for CHIPS Act Projects, the department announced that, apropos securing critical material inputs: “Semiconductor fabricators require access to critical minerals such as aluminum, arsenic, cobalt, copper, and rare earth elements.  Several nations around the world have relevant mineral resources, and the Department will lead an effort to bring new, more diverse and resilient mining, refining/processing, and recycling capacity online to support global chip production, including in the United States.”⁴

And that’s just when it comes to semiconductors. My surmise is that, in time, there will be plenty more money where that came from and that, going forward, without the ability either of the US or (as the Financial Times notes) China, Europe will not be able “ … to throw subsidy cash around — certainly not at an EU-wide level.”⁵

As the urgency to secure sources of supply becomes ever more urgent, both in terms of quantity and breadth, I believe that trade deals and partnerships are likely to lose out to hard cash. Competing with the likes of the Inflation Reduction Act alone will take some doing.

With that, I should like to bid you farewell from Cleveland Heights for another month. Or maybe less if any of you are going to be in Charlotte at the end of next month.

And I remain, as always

Yours

Tom Butcher

26 March, 2023    
©2023 Tom Butcher 

¹European Commission: Critical Raw Materials: ensuring secure and sustainable supply chains for EU’s green and digital future, 16 March, 2023 

²Ibid.

³Financial Times: EU seeks to tone down the imperial style in search for critical minerals, 23 March, 2023, 

⁴US Department of State: Department of State Allocating $100 Million in FY 2023 for CHIPS Act Projects, March 2023, 

⁵Financial Times: EU seeks to tone down the imperial style in search for critical minerals, 23 March, 2023, 

Tom Butcher is Director of ESG at Van Eck Associates Corporation (“VanEck”). The views and opinions expressed herein are the personal views of Tom Butcher are not presented by or associated with VanEck or its affiliated entities. Please note that VanEck may offer investments products that invest in the asset class(es) or securities mentioned herein.
This is not an offer to buy or sell, or a recommendation to buy or sell any of the securities/financial instruments mentioned herein.

Image: Bachkova, Shuttlestock