What You Need To Know
The US Energy Department's Critical Materials Collaborative, established in 2023, aims to decrease dependence on China for vital materials crucial for technology and defense. With many critical materials essential for clean energy, such as cobalt, graphite, rare earth elements, and lithium, China's dominance in their extraction poses national security concerns. The initiative strives to diversify sourcing, explore alternatives, and elongate material lifecycles.
While multiple Energy Department offices are leading this charge, these initiatives complement broader government efforts, including significant investments by the Defense Department through the Defense Production Act Investment (DPAI).
In recent years, DPAI has awarded many hundreds of millions of dollars to strengthen the industrial base, enhance national defense capabilities, and develop domestic rare earth element supply chains.
The Energy Department's collaborative efforts will build on these initiatives to enhance efficiency, reduce costs, and mitigate environmental impacts.
The DoD defines strategic and critical materials as those needed to support a military and essential civilian industry, but that are not available or produced in the U.S. in sufficient quantities to meet our needs. U.S. reliance on foreign sources of chemicals and solid materials increases risk to critical DoD munitions. The concentration in China of global supply chains for strategic and critical materials creates risk of disruption and of politicized trade practices, including the use of forced labor.
Why This Is Important for Retail Investors
Diversification: Investing in companies involved in finding alternative sources for critical materials can provide diversification to a retail investor's portfolio.
National Security Impact: Understanding the efforts to reduce reliance on China for critical materials and secure domestic supply chains can help investors gauge geopolitical risks that may affect their investments.
Industry Growth: Investing in companies contributing to the development of clean energy technologies reliant on critical materials may present growth opportunities in a rapidly expanding sector.
Innovation Potential: Companies involved in the exploration of new sources and recycling methods for critical materials could offer investment opportunities in innovative technologies.
Sustainability Focus: Supporting initiatives that aim to extend the lifetime of materials after extraction and minimize environmental impacts aligns with the growing interest in sustainable investing among retail investors.