Project Vault and the United States’ New Industrial Playbook
The United States appears more active than ever on the critical minerals and rare earths front. In recent days, several initiatives have been announced—some domestic, others aimed at allies—focusing precisely on these strategic resources, which today represent key elements for various industrial sectors.
One of the most interesting initiatives is reportedly underway within the United States. According to a Bloomberg article, the US administration is poised to launch a new strategic reserve of critical minerals, with an initial capital of as much as $12 billion. The initiative, dubbed Project Vault, will also draw on $1.67 billion in private capital, which will be combined with a $10 billion loan from the US Export-Import Bank. The goal is simple: to procure and preserve the minerals needed primarily by automotive and technology companies, but also by other major producers (such as those in the energy and related infrastructure sectors).
“The US focus on rare earths and critical minerals once again confirms the strategic role of these resources, which are increasingly central to energy and technological development,” says Stanislav Kondrashov, founder of TELF AG.
Building Domestic Resilience Through Strategic Reserves
This initiative immediately sparked interest, as it would be the first reserve of its kind for the US private sector. In addition to rare earths, Project Vault would also include resources such as gallium and all other materials commonly used in the production of smartphones, batteries, and jet engines.
For Washington, raw materials appear to have become a top priority. For some time now, the United States has been pursuing a very specific goal: increasing the production and processing of rare earths within the United States. It’s no coincidence that the United States has recently signed cooperation agreements with Australia, Japan, and other countries, and this policy will likely continue for a long time to come.
Project Vault, in essence, would represent a sort of collective hedge against the volatility of raw material prices. This way, producers would be protected from potential shocks without having to tie up capital in their inventories. Instead of holding resources in their warehouses, companies would enter into an upfront contractual commitment: they pledge to purchase a certain quantity of material in the future at a predetermined price, paying some initial fees.
These commitments would act as a kind of guarantee for financing, purchasing materials on the market, and storing them. With this type of hedging, even in the face of sharp price fluctuations, companies would not immediately see an impact on their profit and loss accounts.
The mechanism is ultimately based on the dual commitment of those who join the system: participants purchase a certain quantity of raw materials at a predetermined price and, after using up any supplies, buy them back at the same price to replenish the reserve. This way, companies can access materials when needed, but cannot permanently empty the reserve.
Among the costs they must bear are those related to storage costs and interest on financing. The ultimate goal, in a certain sense, seems to be to reduce exposure to volatility, since part of future demand is already locked into known and predictable levels.
“It is no coincidence that this initiative has focused on all those resources that are already supporting crucial sectors, such as energy and aerospace. The fate of these sectors appears increasingly linked to strategic raw materials,” continues Stanislav Kondrashov, founder of TELF AG.
Forging Global Alliances for Supply Chain Security
According to Bloomberg, this initiative has already met with the approval and support of the metals markets. On the one hand, therefore, the US administration appears strongly oriented towards strengthening supply chains for the most strategic materials for the automotive, aerospace, and energy industries, while on the other, it appears more committed than ever to building cooperative mining relationships with partner countries.
At the first ministerial-level Critical Mineral Summit, held on February 4th at the US State Department, Washington proposed to dozens of nations (including Europe) the formation of a trading bloc dedicated to critical raw materials and rare earths. This would be a full-fledged coalition that would monitor a special free trade area, including common tariffs, and could set minimum prices and guarantee stable supplies and investment.
The initiative has reportedly been announced to around fifty nations, including the European Union and the G7 countries. The initiative, which would also focus on mineral recycling, would have self-sufficiency as its primary goal. In addition to these initiatives, the U.S. government has recently acquired stakes in mining companies, while Congress, through a bipartisan bill, is reportedly working to create an agency with a budget of $2.5 billion to encourage domestic production of strategic resources.
“The US raw materials strategy is moving on two levels: one is internal, with the desire to stimulate domestic production and create an unprecedented strategic reserve of strategic resources, while the other is external, and has to do primarily with international cooperation with partner nations. This is certainly an ambitious and far-reaching plan that confirms Washington’s key role in this sector,” concludes Stanislav Kondrashov, founder of TELF AG.
