Rare metals, energy transition and green capitalism

22 May 2023

This article originally appeared in French in the journal Lutte de Classe no. 229 February 2023.

For years, the leaders of the most developed countries have been making proclamations and speeches about the urgency of taking measures to combat global warming, and in particular about the need to implement an energy transition.  They say they want to reduce the share of fossil fuels - coal, oil and gas - in favour of renewable energy sources.

    But these assertions remain hollow.  To quote the title of a report by several hundred experts published in June 2022, “The Energy Transition Is Not Happening”.  Indeed, to this day, 80% of the energy used in the world is still produced from oil, gas and coal.  Worse, since the outbreak of the war in Ukraine, many countries have revived the most polluting energy production: not only coal-fired power plants but also plants using shale gas, which is imported from the United States, because its production is still prohibited in the European Union, due to the harmful consequences on the environment.

   [In Britain the government has given the go-ahead for shale gas exploitation - however it is currently dependent on local consent so it has not been able to proceed. There has also been the approval of new licences for the extraction of oil and gas from fields in the North Sea - due to come on stream before 2027, against the objectives of the government’s own “Net Zero” targets.]

    The leaders of this world have never talked so much about the environment, but in reality not much changes.  In the capitalist system, the masters of the economy are ready to consider only those changes that can become sources of profit.  This is the case when the governments abundantly finance new industrial sectors: that of wind turbines and solar panels for renewable energies.  More recently, it is in the automobile industry where developments are taking shape in the area of electric cars.  Car manufacturers are anticipating the birth of a new market, and Tesla’s success has whetted their appetite.

    It is still difficult to assess the extent of these changes, as the capitalists concerned and the political leaders who are supposed to defend their interests are themselves unable to do so.  To take just one example, at the end of October 2022, the European Union decreed that the sale of new vehicles with internal combustion engines should cease by 2035.  This did not prevent one of its main officials, Thierry Breton, European Commissioner for the Internal Market, from declaring, only one week after this decision, that manufacturers should continue to produce such vehicles!  Capitalists and their representatives, faced with the contradictions of their own economy and the resulting uncertainties, are unable to make sense of it.

    This article focuses on only one of the elements that fuel the capitalists’ uncertainty, but not the least important one: the raw materials that are essential to produce electric vehicles.

Rare Metals: the oil of the 21st Century?

According to a study conducted in 2021 by the International Energy Agency (IEA), a typical electric car requires six times more mineral elements for its construction than a gas-powered vehicle: copper for electrical wiring, cobalt, graphite, lithium, nickel, to name a few.

    The demand for lithium in 2040 could be 50 times higher than today and for cobalt and graphite 30 times higher, if the world rushes to replace gas-powered vehicles with electric ones. In addition to these minerals, there are others, no less essential, which are fuelling the uncertainty of industrialists even more, the so-called rare earth metals: vanadium, germanium, tungsten, antimony, beryllium, etc.  In other words, some 30 metals, a tiny amount of which, once its electrons are agitated (by an energy source, like a lamp), emits a magnetic field that enables energy to be produced without generating a single gram of carbon dioxide.

    Despite what their name might suggest, these metals are not so rare: they exist everywhere on the planet, associated with the other most abundant metals, such as iron, copper, zinc or lead, but often in minute proportions.  The existence of these minerals has been known to mineralogists since the 18th century, but most of them did not seem to have industrial applications.  For a long time, they were little exploited, in small quantities only, because their production was expensive. With the development of modern electronics and cell phones, which use nearly 20% of the global production of rare metals, their exploitation has become much more profitable.

    However, the extraction of these rare metals is extremely polluting.  Refining them is even more polluting because, after crushing the rock, numerous chemical reagents, such as sulphuric and nitric acids, must be used in the process.  Dozens of operations are required to obtain nearly 100% pure rare earths. Hundreds, if not thousands, of gallons of water must also be used, which will be contaminated by these acids.  The discharge of this water is likely to pollute rivers and water tables. Industrialists are reluctant to equip themselves with installations that could avoid this pollution because they are so costly.

    For these reasons, it is very difficult to argue that the electric car would be less environmentally polluting.  The pollution that would no longer be emitted in urban areas thanks to electric cars would be displaced to mining areas.  But this is not what worries the car manufacturers, nor even the IEA experts.

    Nor are they concerned about the social conditions under which these metals are mined.  To take just one example, 80% of the world’s cobalt ore production comes from one country, the Democratic Republic of Congo (DRC).  It is mined primarily in the Katanga province in the south of the country.

    In this region, the mining trusts and the militias that vie for control of the mines have maintained a permanent state of war for decades.  While most cobalt is produced in giant industrial mines, nearly 20% of Congolese cobalt is extracted by individual miners, including tens of thousands of children.  The term “blood minerals” could be applied to all these minerals, which feed the world market and the profits of industrialists in the major Western countries.

The struggle of capitalists and their states for raw materials

The only thing that worries the IEA experts, who act as spokespersons for the industry, is the fact that the sources of these minerals are concentrated in just a few countries.  The example of cobalt has already been cited.  Nearly 80% of the world’s Lithium is produced in two countries, Argentina and Chile, for example.  For copper, it is four countries - Argentina, Chile, the Congo and Peru - which provide most of the world’s production.

    The IEA therefore predicts even greater tensions than those that have occurred over control of hydrocarbon (oil and gas) deposits.  And the report concludes, “These fast-growing markets for key minerals could be subject to price volatility, geopolitical influence and even supply disruptions”.

    For these reasons, manufacturers are seeking to secure their own mineral supplies by concluding exclusive agreements around the world.  One example is Tesla, which, after Ford and Hyundai, is preparing to invest in Indonesia, a country with the world’s largest nickel reserves.  Tesla signed supply contracts in August 2022 with two smelters based in the industrial park where the country’s largest integrated nickel production site is located.

    Governments are implementing a veritable “diplomacy” of metals, in service of their industrialists.  Pressure from Washington has enabled a group of American companies to take a leading role in the Kachi project, which plans to set up large lithium production units in Argentina, in association with Ford.  In this way Ford seeks to guarantee its future production.

    Numerous bilateral agreements have been signed between governments to ensure the supply of these crucial metals.  Japan has such agreements with Australia, Kazakhstan, India and Vietnam. The EU has signed an agreement with Canada to facilitate investment by European companies in the mining sector and is currently negotiating rare earth import contracts with Chile, Mexico and New Zealand.  European Commission President Ursula von der Leyen announced the creation of strategic reserves for lithium and rare earth metals in September 2022. But within Europe, each governmentis defending the interests of its own national industries.  Former German Chancellor Angela Merkel visited Mongolia several times to sign mining partnerships.  Competition to secure supplies of raw materials is increasingly fuelling rivalry between countries.

China, top producer of rare metals ... for the profit of western capitalists

The capitalists of the imperialist powers are faced with a problem, because China now supplies 70% of the various rare metals. And it is more difficult to put pressure on the Chinese rulers than on those of Indonesia or Argentina.

    China has significant deposits, but the importance it has acquired is not only due to the wealth of its subsoil.  Until the 1990s, the American group Molycorp operated the Mountain Pass mine in California, which was then the largest rare earth production mine in the world.  The entire processing cycle was dominated by the General Motors subsidiary Magnequench in Indiana.  In the 1980s, the French group Rhône-Poulenc was one of the world’s two rare earth chemical companies. Its plant in La Rochelle purified 50% of world production.  To reduce production costs considerably, Western companies turned to China in the early 1990s.

    Given the opportunities that were opening up, the Chinese State began to pursue a proactive policy to develop the exploitation of its rare earth deposits.  In the spring of 1992, then leader, Deng Xiaoping, said, “The Middle East has oil, China has rare earths”.  With the cost of producing rare earth metals in China half what it was in the United States, the Mountain Pass mine closed in 2002.

    Already a workshop of the world, China has become the main producer of minerals essential to Western economies.  The ten thousand or so mines scattered across Chinese territory have largely contributed to ruining the country’s environment. In addition to chemical pollution, the exploitation of these ores generates radioactivity.  The ores themselves are not radioactive, but the thorium and uranium with which they are often mixed are.  The radioactivity around the reservoir of Baotou, the capital of Inner Mongolia, a city of three million inhabitants, where 75% of the world’s rare earths are produced, is twice as high, according to some experts, as that recorded in Chernobyl today.  As for the waste, it would need to be isolated for several hundred years.  But, in order to obtain the lowest production costs, nothing has been planned in any way to limit such pollution.

The Chinese state facing imperialism

The Chinese State has also developed refining activities, which are themselves polluting and costly.  China may not produce large quantities of cobalt and nickel, but it accounts for about 65% of the world’s processed cobalt and 35% of the world’s processed nickel.  While China produces 11% of the world’s lithium, it supplies nearly 60% of the processed lithium.

    Pursuing this policy, the Chinese State has sought to attract foreign companies to acquire their technological know-how.  This has taken direct forms: in 1995, a Chinese group bought the American company Magnequench, and five years later the Indiana factory was relocated to the city of Tianjin, south east of Beijing.  This proactive policy enabled the Chinese State to acquire the capacity to produce high-tech components.  Whereas at the end of the 1990s Japan, the United States and Europe accounted for 90% of the production of magnets most commonly used in cell phones and electric motors, China now controls three quarters of global production.  The city of Baotou has become the “Silicon Valley” of rare earths, where a third of the world’s production of magnets incorporating rare earth metals - used for electric car motors and smartphones - is produced.

    In 2018, China became an importer of raw or minimally processed rare earths.  They come from Australia, Malaysia, Burma, Vietnam or Africa. Like the other major powers, the Chinese State is also engaged in this “metal diplomacy” aimed at securing its supplies.  In the Congo, for example, most of the large cobalt mines have been bought up by Chinese financial groups.  In 2016, the Chinese group Schengen became the largest shareholder in the Australian company Greenland Minerals Ltd, with which it concluded an agreement reserving to itself the entire production of rare earths from the Kvanefjeld mine in Greenland, once production is launched.

    By pursuing this policy, the Chinese State is obviously defending its own interests and those of a privileged minority of its associates.  For example, the founder and head of CATL, the world’s largest producer of lithium-ion batteries - the most widely used batteries, nearly 80% of which are produced in China - is said to have become the fourth richest person in China and is listed among the 30 richest people in the world.  But this also benefits capitalist groups that have outsourced their production to companies in China.  This is the case for Apple, for example, which continues to produce iPhones in the factories of the Taiwanese group Foxconn.  This is also the case for all Western car manufacturers, who continue to source their electric batteries there.

    But it can also end up being a problem for capitalists to depend on a State that has the capacity to resist imperialist pressure.  This became clear when, in September 2010, Beijing caused a panic in world markets by abruptly stopping its exports of rare earths to Japan. The Chinese leadership used this pressure tactic in the dispute over the Senkaku Islands in the China Sea, over which it has claimed control since the end of World War II.

    Following the embargo, the US administration sought to reduce dependence on China. As a result, it supported the reopening of the Mountain Pass site in California, which has been back in operation since early 2018.  The Pentagon intends to finance the construction of refining units on American soil.  Much military equipment, including F16 aircraft, cannot function without these rare metals.

    These minerals have thus been added to the growing number of factors fuelling tension between the United States and China, which if the crisis worsens, could lead to military confrontation in the future...  This is nothing new, and it is even this type of crisis that has led in the past to the outbreak of two world wars.  Already in 1916, Lenin described this phenomenon in Imperialism, the Highest Stage of Capitalism: “The more developed capitalism becomes, the more acute the shortage of raw materials, the more fierce the competition and the search for sources of raw materials throughout the world, and the more brutal the struggle for the possession of colonies”.  The sources of these raw materials are no longer in colonies, but the struggles for control of areas of influenceare no less strong.

The politics of big finance: satisfying shareholders rather than digging mines

The dominant position acquired by China may end up posing problems for capitalists in the future.  But the most likely obstacle to the development of new industries at present is the policy of the mining trusts themselves.  Unwilling to take risks, the big companies in this sector have adopted a Malthusian policy of limiting their investments in order to secure their profits first and foremost.  All capitalists, whatever their sector of activity, have adopted the same attitude, so lacking is their confidence in their own economy.

    In the mining sector, this uncertainty is reinforced by the weight of speculation, which causes metal prices to fluctuate wildly.  For example, cobalt prices had reached $24,000 per ton on January 1, 2016; by 2018, speculation multiplied the price by four, to $95,000 per ton. As speculators sold the cobalt, the price declined to $30,000 per ton by April 2019.  The prices of other metals have seen similar developments.  More recently, all peaked after the invasion of Ukraine in February 2022, followed again by a decline in the following months.

    This high volatility makes forecasts very uncertain.  But it does not prevent the giants of the mining sector from posting historic profits, as they have been able to take advantage of periods of rising prices.  For example, the three main groups in the sector, Rio Tinto, BHP, and Glencore, gained nearly $140 billion in profits in 2021, three times more than in 2015.  But their policy has been to pass this on to shareholders, by increasing dividend payments or buying back their own shares to boost the price.

    On the other hand, they limit investments, which are much lower than ten years ago. Yet the importance of these companies is considerable.  The Swiss group Glencore alone, which is both a producer and a trader, controls about 6% of the world’s copper production, 20% of its cobalt, 4% of its nickel, and also has a significant coal production.  When these trusts decide to limit their production, this has a decisive influence on the evolution of the entire sector, and ultimately on that of the entire economy.

There is no green capitalism!

Will there be enough metals to enable the development of electric cars?  These are questions that concern the industrialists in this sector, and no one is able to give an answer today.  What we can say with certainty, however, is that none of this has much to do with environmental concerns.  In capitalism, these concerns have no place.  For those who own capital, the only concern is to calculate their profitability and make sure that it is as high as possible.

    There is no more green capitalism than there is capitalism with a human face.  The long-term management of the planet’s resources, the consequences of their exploitation on the environment, all this does not count. As for the working and living conditions of the millions of proletarians who extract the minerals, transform them, and transport them to the factories where the cars are assembled, all this only appears in the accounting of the capitalists under the heading of production costs, which must be as low as possible.

    In all fields of operation, capitalism is unable to overcome its contradictions.  On the contrary, society is threatened with the worst catastrophes, with the aggravation of economic, political and climatic crises.  No new technology, whatever it may be, will be able to change capitalism and its functioning, nor to put an end to the domination of the law of profit over the whole economy.  The solution is not technical, but political.  The future depends on the ability of the working class to put an end to the power of the capitalist class and to take over the direction of society.  Only then will it be possible to reorganise the economy according to the needs of the greatest number of people and to offer humanity the kind of future which scientific progress promises.

January 10, 2023