Not so long ago, the prevailing view in business circles was that it didn’t matter where things were made. What really mattered was how much something cost.
But in recent years, things have changed – and in a big way. Today, countries around the world are racing to obtain the minerals and materials they need to build the technologies of the future. In other words, it matters where something is made.
At least that was the essence of Rachel Reeves» “Securonomy” policy, unveiled here in Washington in a speech three years ago. His argument was that unless countries like Britain try to secure their supply of certain ingredients needed to make technology and energy, they will make themselves more vulnerable to future crises.
Last money: Fake Text Scam Warning
So one would think the Chancellor would have been disappointed to learn from Sky News that one of the central companies in Britain’s efforts to build a national infrastructure for critical minerals, Pensana, had decided to scrap plans for a rare earth refinery in the United Kingdom, choosing instead to locate its factory in the United States. However, the Chancellor was rather optimistic when I met her on the sidelines of the annual meetings of the International Monetary Fund here in the US capital.
Indeed, she seemed almost reassured that the investment had gone to the US, another G7 country, and spoke of a series of potential investments in lithium and tin production elsewhere in the UK. She said that when it comes to trade deals made this year, “we are the envy of the world” – words some might interpret as hubris.
Please use Chrome browser for a more accessible video player
The big problems facing the British economy
However, a deeper question arises: why are so many industrial companies abandoning the UK? There are simple explanations, including the fact that electricity prices in Britain are higher than in any other major economy. Still, Pensana President Paul Atherley said energy costs were not the deciding factor in its decision to expand into the United States.
Instead, the bigger problem is that although European governments have talked about reindustrialization, they have not invested significant amounts of money to support these promises. In the case of rare earths, the series of essential minerals needed to produce high-power magnets in electric car motors and wind turbines, the reality is that at current world prices it is virtually impossible for UK companies compete with China.
Please use Chrome browser for a more accessible video player
Can Trump win the mineral war?
Read more on Sky News:
Do you have a pair of AirPods? There is more to them than meets the eye…
China tightens control over global rare earth supply chain
In the universe we lived in a few years ago, in which it almost doesn’t matter where something is made, the logical conclusion was that everyone should try to source their rare earth metals from China. And that’s more or less what happened, with the result that 90% of refined rare earths are produced in China. So… what to do?
The American response was direct: the administration committed to paying a guaranteed price for rare earths from its main domestic producer, MP Minerals. No such commitment exists in the UK or Europe, making it extremely difficult for aspiring businesses to raise funds and set up a business.
The chancellor appears uninterested in competing with the United States on this front. So it’s almost inevitable that Pensana and other companies will migrate to where they can hope to get a decent price for their products.
This is why this episode is so important. This is a first test for “securonomics” – whether it is more than just a clever word. If this will actually reverse the trend. So far, there isn’t much evidence that this is happening.