GRACELIN BASKARAN: Green elements turn mining into a sexy sector

Mining as a sector has never been “sexier” than it is these days. The volume of international commodity trade deals in the past six months is remarkable — if you were in the sector before this skyrocketing interest, it feels a bit like you bought Tesla stock for $15 a share in 2019. 

The wave of interest by governments in both green commodities and building secure supply chains is unprecedented. Historically there have been points in time where there have been moves to strengthen domestic production. But this parallel push by all big economies at once is indicative of a turning point in human history. We need to green our economies in a way that’s immune to geopolitical disruption.

We can thank Russia for the acceleration of efforts towards both goals. These efforts have fostered collaboration between developing and developed countries on every continent. This week the US and Japan signed a free-trade agreement for minerals needed to manufacture electric vehicle (EV) batteries. As part of the agreement they will not impose export duties on graphite, nickel, manganese, cobalt or lithium. The partners will also identify opportunities to build their respective capacities.  

In March the UK and Canada signed an important agreement to collaborate on critical minerals, including lithium and cobalt, that are a cornerstone for both economies as they are used in nearly all green technologies, including EVs and solar panels. The agreement will help makers of these technologies become more resilient to global shocks, while also encouraging collaborative research & development between Canadian and British businesses to spur innovation, reduce costs and facilitate growth. 

At the end of 2022 the Australia-India Economic Co-operation & Trade Agreement was signed. This eliminated import tariffs for commodities such as manganese, copper and nickel, and critical minerals including titanium, lithium, cobalt, tungsten and zirconium. Natural-gas tariffs were also scrapped, and rightfully so — gas is an important source of transition energy while the world scrambles towards renewables.  

Australia holds large reserves of critical minerals India needs. The trade deal will also ensure Australian service providers along the supply chain — including engineering, construction and higher education — will have an enabling environment in India. The agreement is expected to spur employment-generating economic activity in both countries.  

In December the US signed a memorandum of understanding with the Democratic Republic of the Congo (DRC) and Zambia to strengthen the EV battery value chain. The DRC produces more than 70% of the world’s cobalt, while Zambia is one of the world’s biggest copper producers (with plans to nearly quadruple production over the next decade).  

The memorandum of understanding encourages American businesses to bring in technical expertise and financing for the commercialisation of every component of the value chain, while the regional development of the value chain will steer the DRC and Zambia away from exporting raw resources. It will also support businesses and generate employment in these countries, while increasing foreign exchange earnings and fiscal revenue. 

There are many trade agreements being worked out behind closed doors. Earlier in 2023 German Chancellor Olaf Scholz advocated for a strengthening of economic ties between Germany and South America in the minerals and metals sector as Berlin scrambles to increase its supply of critical minerals needed for EV manufacturing.

South America is a top producer of most commodities. Chile is the largest copper producer, followed by Peru. Chile is also the second-largest lithium producer. As such, it’s likely we’ll see an increase in trade activity between South America and the rest of the world in coming years. 

The EU and US have also launched discussions on trade in critical minerals. US officials want to strengthen competitive access to raw materials that have been extracted or processed by EU companies, while EU officials want to enable their firms to tap into the US’s green subsidies, which came as part of US President Joe Biden’s flagship climate legislation.  

Many of the trade deals concerning hard commodities come with standards built into them. The agreement signed this past week between the US and Japan includes a section that requires the countries to share information on the critical minerals supply chain. Likewise, the US-EU deal that is under discussion comes with high environmental and labour standards. 

It’s an unprecedented time in history. The production ramp-up and trade deals are a harbinger of what’s to come. That $15 a share Tesla stock you bought in 2019? I’d hold on to it. The economic boom is just beginning. 

• Dr Baskaran (@gracebaskaran), a development economist, is a bye-fellow in economics at the University of Cambridge.