In December 2023, the US House Select Committee on the Chinese Communist Party called for creating a Resilient Resource Reserve, which would “insulate American producers from price volatility and [China’s] weaponization of its dominance in critical mineral supply chains.” The committee recommended targeting minerals “with high volatility, low US domestic production volume, and [Chinese] import dependence,” such as cobalt, graphite, and rare earth elements, but it did not specify what the reserve mechanism would be—a physical stockpile, a financial reserve, or something else.
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If Congress proceeds—as it should—with creating a Resilient Resource Reserve, it should establish a physical stockpile that can meet the critical mineral demands of the US military in a major conflict, as well as influence domestic mineral prices to incentivize expanded US mineral production. This critical minerals reserve would differ from the Strategic Petroleum Reserve as it would directly use stockpile purchases to incentivize domestic production, and it would differ from the National Defense Stockpile as it would explicitly use stockpile purchases to influence domestic mineral prices.
Specifically, supplying the military means stockpiling the strategic minerals necessary to wage a large-scale and high-intensity conventional conflict with China for five years. For incentivizing mineral production, the US government should buy domestically produced minerals to establish price floors that would keep existing US mineral producers operational and incentivize investment in additional US mineral projects. By the same token, it could also sell minerals amid high prices to ensure supply access and create price ceilings that keep manufacturers in defense and other important sectors operational.
Historic precedent, contemporary shortcomings
Washington used to maintain robust mineral stockpiles. During the first decade of the Cold War, the US government stockpiled enough minerals to cover a five-year conflict with the Soviet Union. By 1962 this meant a reserve worth over $77 billion adjusted for current prices. This stockpile was housed at over two hundred locations, ranging from military depots to commercial warehouses, and it contained large-volume minerals like aluminum, copper, lead, and acid-grade fluorspar—some of the most commonly used minerals by the Department of Defense.
Today, the existing National Defense Stockpile is insufficient for supporting the US military in a major conflict. The stockpile targets enough inventories for just a one-year conflict with China, followed by a three-year recovery. Even so, the present reserve—which is worth only $912.3 million and stored at just six locations—meets less than half of the military’s estimated demand in this scenario. It also lacks any inventories of critical aluminum, copper, lead, and acid-grade fluorspar. Furthermore, the stockpile is meant only to be used during a national emergency, and it is not leveraged to incentivize domestic mineral production.
The China model
By contrast, China’s stockpile provides minerals to key sectors during national emergencies and influences mineral prices to support domestic producers and consumers. Illustrating its price influence, in 2016, China purchased copper at depressed prices from domestic smelters to keep them operational. Conversely, to address strategic supply concerns during the COVID-19 pandemic, China stockpiled copper at elevated prices. Again displaying its price influence, in 2021, China released copper from the stockpile to shield manufacturers in key sectors like the power grid from high prices—a far lower threshold than a national emergency.
The proposed Resilient Resource Reserve should operate similarly to China’s mineral stockpile. The first priority should be to stockpile sufficient reserves to fulfill military demand in a major five-year war with China. This includes, first and foremost, minerals needed to manufacture platforms and munitions that would be critical to winning a US-China conflict, including excess volumes for those minerals not mined in the United States or sourced from vulnerable East Asian countries like Japan and South Korea.
Building a stockpile to meet the challenge
In coordination with partners and allies, the US government should acquire these military-related minerals with urgency, given the serious consequences of shortages should a conflict arise before stockpile targets are met. That means purchasing domestic minerals if they exist in the necessary form, but also sourcing minerals quickly from overseas, including from China and Chinese companies abroad. This would not be unusual—during the Cold War, the US government purchased minerals for its stockpile from the Soviet Union. Similarly, China currently stockpiles much of its copper through imports due to its limited domestic production.
After securing a baseline level of strategic inventories, the US government’s second priority should be to purchase and sell additional minerals to favorably influence mineral prices for domestic industries. When prices are low and risk curtailing domestic mineral production, the government should purchase minerals for the Resilient Resource Reserve to boost demand. When prices are high and risk disrupting downstream manufacturing, the government should sell stockpiled minerals to the defense industrial base and other critical sectors.
Pulling the levers of the market
Both the purchase floor and sell ceiling should be above current prices to protect existing mines and incentivize further mine development. In 1957, the US government stockpiled chromium ore at $100 per ton when global prices hovered around $50 per ton. US mineral projects generally have higher capital and operating expenses than those in other countries and thus require higher prices to remain operational.
When prices are low, the US government should purchase minerals from domestic producers at fixed prices to set price floors. In one cautionary example, the final construction of the only US primary cobalt mine in Idaho was halted when oversupply caused by Chinese companies depressed prices and rendered the operation unprofitable. However, if the US government were to purchase high-purity cobalt from domestic producers at $25 per pound, this price floor could support existing projects and incentivize new mines and refineries.
Conversely, when prices are high, the US government could sell minerals at lower fixed prices to key sectors, setting price ceilings. For instance, Russia’s invasion of Ukraine caused cobalt prices to exceed $40 per pound by April 2022. The US government could protect against future volatility by selling stockpiled cobalt to the defense industrial base at $40 per pound. When releasing from the stockpile, the US government should prioritize selling minerals to manufacturers of platforms and munitions important in a US-China conflict.
A reserve made in America
Because one of the core aims of the Resilient Resource Reserve is to expand US mineral production, Washington should procure domestic minerals for its non-military mineral inventories. This approach has precedent. Early in the Cold War, the United States sought to protect and expand domestic mineral production through stockpiling. Under Title III of the Defense Production Act, the US government guaranteed that it would buy certain minerals from domestic producers at fixed prices—for example, it promised to buy domestic copper mines’ expanded production at $0.245 per pound. It took similar action with aluminum, causing US production to double from about 720,000 tons in 1950 to nearly 1.6 million tons in 1955.
Likewise, the US government in 1951 guaranteed that it would purchase all domestically produced tungsten at $3.9375 per pound for five years or until 24,000 tons were stockpiled. Consequently, tungsten mine production increased from 2,000 tons in 1950 to almost 8,000 tons in 1955, which was then the highest level in US history—and virtually all of it was destined for the national stockpile.
While the United States lacks extraction and refining for many minerals, the US government should still only purchase domestic minerals for its non-military inventories so that government demand drives new mineral projects. For instance, in the 1950s, the US government guaranteed that it would pay premium prices for cobalt from the St. Louis Smelting & Refining Division of National Lead Co., incentivizing the firm to build a new cobalt refinery in the United States.
Stockpiling for wartime and peacetime
By building a sizable physical stockpile, a Resilient Resource Reserve could help mitigate supply disruptions to the US military in a major conflict while also incentivizing US mineral production. Both the US government’s mineral stockpiling in the early Cold War and China’s mineral stockpiling today demonstrate the effectiveness of such a stockpile. All that remains is for Congress to act.
Gregory Wischer is a nonresident fellow at the Payne Institute for Public Policy at the Colorado School of Mines.
Morgan Bazilian is the director of the Payne Institute for Public Policy and a professor of public policy at the Colorado School of Mines.
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Image: The Chino open-pit copper mine located just out of Silver City, New Mexico. https://commons.wikimedia.org/wiki/File:Chino_copper_mine.jpg