The U.S. Needs To Expand Its Cobalt Reserves

The U.S. Needs To Expand Its Cobalt Reserves

Relying on China for this critical mineral threatens American national security.

In March, Jervois Global Limited suspended construction on its Idaho Cobalt Operations mine (ICO), citing high completion costs and prices too low to yield profits. The $150 million project was only weeks away from starting production. At total capacity, it would have supplied over 1,900 metric tons of cobalt annually—enough to meet about ten percent of the United States’ demand. But now, before Jervois can resume operations, it will have to wait for cobalt prices to rebound. Such a pause could last years and put the project at the mercy of a volatile commodity market.

ICO’s shutdown came shortly after the Chinese Communist Party (CCP) indicated that it would tighten its grip over cobalt markets. Decades of state investment and subsidization have made China a dominant supplier of the mineral, which has vital applications in defense technologies, advanced electronics, and the rapidly growing electric batteries sector. The country currently controls 72 percent of global refining capacity, and Chinese firms own a vast majority of the world’s largest cobalt mines. This allows the CCP to strategically flood markets and drive down global prices to strengthen its position relative to competing nations. Jervois’ challenges are thus indicative of a more significant economic and national security problem facing the United States: China using its significant supply influence to undercut and bankrupt attempts to build out secure critical mineral supply chains.

Foreign price manipulations in critical industries are far from a new phenomenon. In 2015, China flooded global rare earths markets, forcing California’s Mountain Pass Mine out of business and hindering America’s defense production capability. The Pentagon responded by putting millions of dollars towards the domestic rare earth mining industry. Similarly, amid concerns that the United States had become over-reliant on Russian nuclear fuel, Congress appropriated funds to establish a National Uranium Reserve in 2020, which has since helped to rebuild domestic mining and enrichment capacity from near zero. In both cases, unacceptable mineral dependence on a foreign entity of concern prompted a swift policy response.

The United States cannot afford to rely on China for cobalt. Its supply chain is more concentrated and vulnerable than any other critical mineral, and China has repeatedly shown a willingness to cut off mineral access from other nations. In 2010, China banned rare earth shipments to Japan over a fishing dispute, resulting in major price shocks. More recently, the CCP responded to new U.S. semiconductor regulations by imposing export restrictions on gallium and germanium—minerals needed for producing solar panels and cell phones.

Similar restrictions on cobalt would have disastrous long-term consequences for U.S. markets. According to a study conducted by the National Mineral Information Center, just a 20 percent reduction of cobalt supply into the U.S. economy would result in up to a two percent reduction in GDP. China is more than capable of exerting this sort of pressure.

To insulate markets from impending disruption, policymakers should take action by building up the nation’s cobalt reserves. As a first step, Congress can invest in replenishing National Defense Stockpile (NDS) stores, which have fallen to historic lows due to repeated multimillion-dollar sell-offs dating back to the 1990s. Strengthening the NDS will address the most immediate risks of the United States’ cobalt import reliance—and crucially, it will allow for the national defense industrial base to remain operational in an extended conflict with China.

Still, an expansion of the NDS would need to rely heavily on foreign sourcing in the near term. Defense Stockpiles are inherently limited in their application, as they can only be used to support military readiness. Securing America’s cobalt supply chain for the broader economy will require new policy mechanisms that support civilian industries and level the playing field for producers at home.

One option is the establishment of a Strategic Cobalt Reserve. Such a reserve would operate similarly to our Uranium and Strategic Petroleum reserve programs, purchasing domestically produced cobalt and storing it for use during national emergencies. If China restricts exports or the market is otherwise distorted, these reserves could be periodically sold to maintain price stability and prevent shortages. A Strategic Cobalt Reserve would also give the federal government broader authority to establish loan programs and multiyear direct purchase agreements for domestic mines and refineries. As vulnerable new projects like ICO ramp up production, such initiatives will provide essential investor confidence, financing options, and price stability to weather foreign manipulations.

Critics of expanded mineral reserves might argue that such programs represent wasteful government spending. They contend that even with robust public support, domestic businesses ultimately can’t succeed in global markets. In the case of cobalt, these notions ignore the state of international strategic competition and a rapidly changing economy. Cobalt demand is facing an unprecedented surge in the coming years due to widespread electrification efforts, with market size expected to double by 2030 and increase more than five-fold by 2050. At this rate, global production capacity will be insufficient to meet consumer needs before the end of the decade, prompting higher prices and new investment. Domestic mines and refineries won’t just become economically viable; they will be indispensable. In the meantime, China will continue to subsidize its own industry, crash prices, and keep our economy reliant on its cobalt for as long as possible. For the sake of preserving our industry and national security, the United States must respond with its own public investments today.

Jacob Greenberg is an energy and natural resources reporter. His work has previously appeared in RealClearEnergy.

Image: Shutterstock.