The last few years may have been a sharp wake-up call to U.S. legislators. Growing protectionist sentiments around the globe and geopolitical concerns like the Russia-Ukraine War have devastated supply chains for key markets.
The Russia-Ukraine war has caused major disruptions in the agricultural and automotive industries. Russia and Ukraine account for a substantial portion of the global fertilizer trade. Russia produces 9% of the world’s nitrogen fertilizer, 10% of phosphate fertilizer and 20% of potash fertilizer. Russia is also a key supplier of metals and minerals needed to produce cars.
Other major producers like China have demonstrated a willingness, and perhaps eagerness, to limit exports when it suits them either politically or economically. China announced in July that it would be extending its export restrictions on phosphate fertilizer through the end of 2022.
The US and European countries are becoming warier of the mineral and material overdependence on rivals like China and Russia. In September, the U.S. Department of Agriculture announced it will invest $500 million to increase domestic fertilizer production to help with supply chain disruptions from Russia. This commitment is double the amount of its previous commitment.
The US also announced that Canadian countries qualify under the 1950 Defense Production Act (DPA). This means that an investment in Canada by the Department of Defense will legally be the same as an investment domestically, opening a lot of doors in Canada.
What Is Driving This Shift And What Does It Mean?
President Joe Biden’s administration has national security concerns over heavily relying on rivals for key minerals and metals. The principal industry Biden is worried about, although there are many impacted by strict Chinese exports, is the automotive industry.
In the coming decades, the electric vehicle (EV) market may be set to explode and currently, the EV battery supply chain is reliant on too many foreign countries presenting a potential national security threat. The US is eager to change this and become a producer or create strategic partnerships with allies for the critical materials needed for a shift to EVs.
Canadian companies qualifying under the DPA will allow the Department of Defense to capitalize on Canada’s fruitful natural resource landscape. Canada has reserves of key resources like cobalt, potash, phosphate, lithium, copper, and more.
Canada has provided the DOD with a list of 70 projects that could warrant U.S. funding under the DPA and the U.S. is ready to invest. The U.S. military has a new pot of money for investing in private companies with new mining projects.
Companies like Arianne Phosphate Inc. DAN DRRSF, a potentially promising phosphate mining company, might be the type of targets the US military is looking at. Arianne Phosphate is among the few in North America that can respond to the growing demand for phosphate.
Because phosphate is an essential component in fertilizers and lithium-iron phosphate batteries for EV cars and energy storage, the company could be of interest for DOD projects. The DPA opens up hundreds of millions of dollars in spending and President Joe Biden’s administration has indicated a high interest in creating a strong domestic EV battery supply chain. Although there are still logistical kinks to work out with the DPA, it seems clear that America will be turning away from rivals and looking to Canada for resource extraction for key industries like EVs.
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