China is winning the war for the future.

The perennial key geopolitical and geoeconomics issues of the conflict among nation-states over the allocation of scarce critical natural resources have, in the last 25 years, been dramatically affected by the current wave of the globalization of the ownership and of the productive output of natural resources, primarily in Africa and South America. Contemporary globalization has worked very much in the favor of the Peoples’ Republic of China (PRC). China’s goal of self-sufficiency in all natural resources, technologies, and industrial manufacturing for the stated purpose of achieving total independence from the rest of the world is well on its way to success. 

China has combined a coherent industrial policy, based on the above stated goal, and has given that policy a driver with what it calls “capitalism with Chinese characteristics,” which turns out to be not profit-centered but national goal-centered capitalism. 

One result of Chinese goal-centered capitalism has been the decline of North America’s and Western Europe’s dominance as the industrial manufacturing and technological innovation centers of the world. The very same Chinese consumer market for manufactured goods that caused a boom for Western OEMs has been redirected to favor Chinese domestic OEMs to move China into its new era of the policy of dual circulation, the gradual substitution of domestic consumption for export markets. 

Western politicians are frantic to keep their consumer products’ boom going, so they are paying lip service to the notion of a consumer oriented free-market economy based on profit while more and more (disastrously) trying to manipulate that same consumer market demand without any real understanding of supply economics. 

The best example of the failure of the Western approach is the looming and unnecessary energy poverty creating a political theme of an amorphous danger (aka as “boogeyman”) called climate change, a “crisis” being used to attempt to manipulate consumer demand through concepts called “clean energy” and the “Green Economy.” 

Nowhere is there a better example of this than the current political mania for the electrification of transportation power trains. Self-described “experts” and “analysts” confidently predict the market penetration of so-called EVs, electric vehicles, over the next decade and well beyond. But these predictions fail miserably when analyzed through the prism of what is known about the existence, accessibility, volumes, and economics of deposits of the critical technology metals that would need to be present for such predictions to be viable. Further analysis of the current production, distribution and use of electricity is necessary. 

Ninety nine percent of the world’s transportation runs on oil based fuels, the distribution of which is in effect universal. The same cannot be said for electricity. 

The recent breathless coverage of weather “extreme” events, drought in California, hurricane in Louisiana, and flooding in New York and New Jersy have two things in common; one is that they are blamed on “climate change”; and a second thing, that no one in journalism seems to have noticed, that all of, and each of, these events have dramatically reduced or eliminated the flow of electricity to consumers in the affected regions, not just by generation reduction but primarily by disrupting the distribution of reliable electricity. 

Imagine, for a moment, that you are a perceptive observer of the U.S. electrical energy production industry and of its distribution industry. (Note, you therefore couldn’t and wouldn’t be a mainstream media journalist). How would “greened” emergency services, for example, be able to fulfill their charge (excuse the pun) without reliable continuous electric energy production? The answer is that they will rely and always must rely on fossil fueled vehicles and localized electric generators. 

Now further imagine that such fuels and vehicles have been made extraordinarily expensive due to the increased costs (due to supply reduction following forced demand reduction) of fossil fuels, storage batteries, and the need for reliable backup power generation.  

The legacy power distribution systems of America and Europe cannot even today cope with extreme weather events and government paid emergency services can only function with off-the-grid power sources. China has a lesser problem, because its electric power generation and distribution are being built on a national scale with exactly the problem, the interruption of power distribution, I am describing being considered and taken into account by China’s industrial policy execution bureaucracy. 

How would (will) a California city, such as Los Angeles, function in a heat wave/drought when the choice is between air conditioning or charging your electric car? The famous “Valley” society of the Los Angeles complex grew originally after World War II with “all electric homes.” 

How will steel, aluminum, and copper be mined, refined, and fabricated without baseload, continuous and reliable, electric power to sustain the enormous continuous drains of power that batteries cannot sustain? Such flows cannot be created or sustained by solar panels and wind turbines.  

And note that without a steady increase in the production of copper, which is refined ELECTROchemically and melted in electric furnaces, there can be no clean or green energy transformation. And that there can be no production of the companion metals upon which our electronics depend without massive production of the base, structural metals, within which they occur in tiny quantities. So, paradoxically and ironically, mining will have to increase manyfold and baseload fossil and nuclear electric generation would have to be increased dramatically to sustain the flow of scarce technology metals for the “greening” of society.   

There is, of course, an alternative. Electricity for air conditioning, lighting, and transportation can be allocated by privilege, I.e., economic class. The wealthy and their servants will have all that they need and the rest will simply exist in a dry, hot world of water and food rationing. Politicians by the way will rate as “servants” of the wealthy. That must be what the Western politicians think, because that is the world they are creating. 

The real question is: Will the climate change “crisis” collapse the fragile democracies of the West before anyone comes to their senses outside of China. Note that China already has secured sufficient supplies of all the metals it needs to avoid the supply crisis now barreling down on the West.

Can Environmentalists Handle the Truth about Mining?

The recovery of the amount of non-fuel natural resources necessary for the world, or even just the USA, or the EU, or China, to go “green” would simultaneously entail the construction of a massively enlarged minerals processing industry the likes of which the world has not seen since the creation and growth of the steel industry, which is and will remain the structural backbone of our civilization. Much of the sourcing and processing infrastructure that is needed for its own domestic consumption of natural resources has already been accomplished by China. But for the rest of the world, such resource recovery and processing onto useful forms at that “greening” scale would require the diversion of a significant percentage of national GDPs for decades. Such an allocation of capital would mean a realignment of class structures notably the obscene enrichment of an elite industrial ownership class in the USA and the EU, and a lower standard of living for most of their populations as energy in vast amounts would have to be more and more devoted to mining, refining, and manufacturing, and the costs involved when passed down to consumers would be all-consuming.

The resources necessary for greening the world are simply not available.

The “experts” mistake the notion of “earth abundance” for economically accessible. It is a fact that, for example, neodymium is more common in the earth’s crust than lead. This fact is often cited by proponents of rare earth permanent magnet manufacture as the reason not to worry about running out of the neodymium necessary to make all of the rare earth permanent magnets necessary for the “greening” of the world. But this is nonsense. The accessible deposits of rare earths, globally, allow the new production today annually of about 30,000 tonnes of neodymium while the annual new production of lead is 12,000,000 tons, approximately 400 times the rate of production as neodymium. The key to natural resource recovery is the accessibility, physically, chemically, and economically, with current technology, of deposits able to be developed into producing mines.

The key to processing the mineral ore concentrates from the mine is the availability of technology chains that provide the separation (from the other elements in the ore), the purification, and the transformation into user forms of the metals in question economically.

The mining and concentrating of most of the ores of the metals have the same processing technology and even remarkably similar extractions from the ore concentrate of solutions of the chemical salts of most metals. But the technology chains for the separation of, the purification of, and the metal and alloy making of, and the fabrication of useful metallic forms of the metals vary dramatically, In fact, the economics of any mine depends on the costs of the technology chain downstream of the extraction from the ore of the desired (and measured as, but not yet in that form) metal values.

In the case of the rare earths, any profits derived from mining them are entirely dependent upon the existence and efficiency of the downstream technology stream from the mine. What I will call the 2011 fantasy was the belief as stated almost universally by the junior miners of the time that they would sell a “mixed con(centrate)” of rare earths and make a profit. The universal myth of the time was that Chinese rare earth processors would pay 65% of the basket price of the contained rare earth values. Then as now, that was a myth. At the time the Chinese were offering to pay at most 45% and then only counted the valuable rare earths such as neodymium, praseodymium, terbium, and dysprosium. The prices of rare earths used then, as now, in preliminary economic assessments (PEA), by junior miners were taken from the posted selling prices of rare earth finished chemical and metallurgical products in China. This was at best ridiculous and at worst disingenuous. I lean towards the latter explanation.

But the biggest problem with Chinese “lowball” pricing, which pundits saw as predatory was the fact that such prices did not include costs of health, safety, or environmental management. This did not and does not yet seem to matter to the “greens,” who acknowledge the existence of Chinese mining practices not to disparage their predatory pricing but to discourage American rare earth mining as “dirty and polluting” as is its Chinese counterpart. The so-called “greens” here display their complete ignorance of American mining practices, which are probably the most regulated in the world with regard to health, safety, environmental management, and the remediation of land after the mine has become non-economical.

There seems to be a complete lack of understanding of where resources come from and how they are found, recovered, and processed into useful forms. Even more telling is the lack of understanding that to “green” our society we must dig into the black earth, mechanically and chemically concentrate the minerals we find, chemically separate them, chemically and pyrometallurgically process them into useful raw material starting forms, and then mechanically fabricate them into end-user (consumer) forms. The production of useful, necessary, and critical forms of metals and materials is energy intensive! Solar panels and wind turbines cannot even begin to supply the concentrated power needed for smelters, steel furnaces, copper refining, aluminum production, and myriads of other energy intensive necessary processes.

Ramping up all of the necessary processes to provide the raw materials and finished goods for a “green” world would impoverish the world through the necessary diversion of energy required and the ultimate exhaustion of available recoverable resources.

The end of cheap energy and the ultimate rationing of metals and materials that would result from a “greening” of the world is the real existential crisis.

Jack Lifton on the Real X-Factor in the Critical Materials Supply Chain

America’s permanent civil servants, otherwise known as the employees of Federal agencies and the staffers of the elected officials of both local and national governments, are required to believe in the efficient market hypothesis as promulgated by the credentialed clerisy, in this case the Chicago (Milton Friedman and his disciples) School of Economics. This school holds that it is a law of nature that the demand for and the supply of any commodity will always trend towards an equilibrium in which the one equals the other, so that, for example, if the demand for copper wire exceeds the supply then capital will pour into the copper production industry until the supply equals the demand, or prices for copper will increase so as to deflate the demand increase, or some combination of both will occur.

Since there is no infinite reservoir of copper just waiting to be mined, refined, and fabricated by the driver of increased prices, the efficient market hypothesis fails to be reliable when the real world is involved.

This would, of course, be common sense if not only the correct (Ivy League) education, but also first-hand knowledge, experience, and skill in the particular subject matter were valued in Washington, DC. They are not.

What the Chinese refer to and define as “New Energy” is the production of electricity by means other than using fossil fuels for heating water to a boil and using the steam to spin turbines. This definition includes solar, wind, fuel-cell, nuclear, and recently commercialized chemically based rechargeable storage devices and systems such as batteries. Thus, all, or in-part (hybrids) battery powered, fuel cell powered, and even hydrogen powered (internal combustion engine) motor vehicles in China are called “new energy vehicles” (NEVs) and I am going to adopt that terminology here.

The contemporary market for NEVs globally is primarily driven by politicians, not consumers. In authoritarian industrial economies such as China, consumers can be forced to demand NEVs by laws and ultimately by the mandated production of only NEVs. This is known as industrial policy planning. In the free-market economies, politicians attempt to do the same thing by artificial price manipulation, aka subsidies in the form of tax incentives or outright grants to make prices appear lower than they actually would be if only efficient market dynamics were involved. These payouts sourced from taxation are known as “free money” in the capitalist economies. This free money is of course a transfer of wealth from the general population to the wealthiest by the pretense that it is for the common good.

Legislators (a.k.a., politicians) attempting to drive, not just influence, the consumer market for energy use, do not understand thermodynamics as applied to the production and use of energy by man-made devices. The relatively inexpensive electrical energy derived by burning fossil fuels cannot economically or efficiently be substituted by more expensive methods of transforming sunlight and wind through the use of the scarce resources of the electronic and magnetic properties of metals that are scarce mainly because of the energy needed to collect, separate, purify, and concentrate them. That energy can never be recovered by using them to transform light energy or the kinetic energy of wind into useful forms of electricity. Alternate energy construction economics fails with wind and solar.

It is argued that, even so, such relatively inefficient methods of energy production are a common good, even a necessity, since their purpose is to preserve an environment that is best for human beings. This is a moral judgment not a scientific one, in any sense. In an open system, it is not possible to balance or preserve or recycle energy efficiently. The world is an open system and pretending it is a closed one is a thought experiment and is not realistic.

Natural resources available to us are limited by the amount of energy we are able to deploy economically to extract, refine, and fabricate them into forms useful not to the inanimate world but to our species for its comfort, health, safety, or survival. Extracting particular resources means reversing the natural forces that created and mixed them together in the first place, and this always needs an excess of energy input over what is recoverable from the use of the resource.

Natural resources are not organic. They do not reproduce themselves. Human beings use and must continue to use the energy of fossil fuels to produce the structural metals necessary to recover relatively tiny amounts of technology enabling metals for energy transformation and then pretend that the relatively small and expensive amounts of useful energy obtained by the use of the electronic or magnetic properties of the technology enabling metals are saving the world, but the net irreversible flow of energy used to obtain these metals overwhelms the useful production of electricity obtained and due to the fact that the new energy generators wear out (I.e. return to their natural oxidized and useless state relatively rapidly) can never be recovered. In fact, additional energy must be applied to recycle them to the metastable state in which they are useful. Peter is being used to rob Paul.

A good example is the production of lithium for lithium-ion batteries. The best deposits of lithium currently used to produce it are the South American brines in which the lithium content is 2000 parts per million or 1/5 of 1 percent.

In order to produce 2000 tons of lithium, it is necessary to process 1,000,000 tons of water! It will be argued that most of the energy necessary for this is from natural solar evaporation, so that no fossil fuels need to be burned to create it. However, it must be noted that half of the world’s lithium is still derived from hard rock deposits of the mineral spodumene. The average run of mine grade of spodumene is 1% Li, measured as metal, so that 2020’s 50,000 tons of Li from spodumene required the moving, crushing, and processing of 5,000,000 tons of rocks.

The 140,000 tons of cobalt, measured as metal, produced in 2020 required the mining of 30,000,000 tons of copper and 2,500,000 tons of nickel in both of which the run of mine content of Co was less than 0.5%. The rock moved to produce this amount of copper, nickel, and cobalt was 3,000,000,000 tonnes.

The energy necessary to mine, crush, roast, smelt, extract, separate, purify, and fabricate these metals into useful forms is staggering, and it is all produced by burning fossil fuels!

Just as the Chinese were allowed to set costs of producing rare earths without considering environmental degradation, health, and safety so western politicians do not consider the energy costs or source development necessary to produce New Energy.

The Chinese minimize their need for the most energy intensive part of resource production, mining, by buying and importing ore concentrates whenever and from wherever possible. Lately, this has included even the rare earths. America and Europe have fallen far behind China in globally sourcing mined materials.

The amount of energy just consumed in mining, but not refining critical materials outside of China is staggering. There is no way this can be economical or efficient. This need for energy will inhibit the development of countries such as the DRC in Africa, slow the development of Chile, Argentina, and Bolivia and raise the cost of living in Australia.

The prices for the critical metals for new energy production will continue to rise but if present trends continue their supply will only be what is leftover from Chinese domestic needs and from those sources outside of China not controlled by China, because it doesn’t need them. China is the single largest producer of electricity of any nation; it has already allocated the necessary power for its new energy construction as well as obtained the necessary flow of raw materials without impeding its consumer’s needs for their standard of living.

No one but the Chinese has looked at the life-of-mines of critical natural resources. This is the key to a new energy future.

The laws of nature supersede those of economics.