Department of Energy Technology Metals Subsidy Program Is Short-Sighted

A Department Of Energy Short Sighted Subsidy Program To Benefit Chinese Natural Resource Production Is Approved!

The New York Times reported on March 20, 2009 that

“The Department of Energy has tentatively awarded its first alternative-energy loan guarantee, breaking a four-year logjam in the federal loan program.”

What wasn’t reported was that this was one of the most short sighted, and harmful to the domestic American natural resources industry, decisions in history, and that it makes no sense at all if the purpose of such loans is to reduce greenhouse gas emissions and stimulate the American economy to produce not only jobs but new wealth.

In effect, the DOE is adding value to Chinese production of the base metals, aluminum, zinc, and copper by making the recovery of select technology metals, which can be, if economical, i.e., in demand and/or priced sufficiently high, byproducts of the production of those base metals.

It seems that anyone at the Department of Energy with the skills to look at the long term consequences of decisions and actions involving the demand for technology metals has left the department.

The DOE and its supporters in the Congress are patting themselves on the back for “breaking the logjam” of applications for Federal subsidies for sustainable energy with this “loan” guarantee. These market ignorant, myopic bureaucrats are proud of themselves for deciding, in fact, to mis-use more than 500 million dollars of other peoples', the taxpayers’, money. They are requesting that an application by a thin-film photovoltaic solar cell manufacturer to develop the mass production of a product based on a technology called CIGS be approved forthwith without any independent verification of claims made by the applicant that the critical raw materials are “earth abundant” and available in the marketplace. Applause, please.

But has any one of the DOE bureaucrats or temporary appointees of the current administration noted that CIGS technology is critically dependent on the supply not only of (C) copper, but also of (In) indium, (Ga) gallium, and (Se) selenium? Have any of them noted that the USA is today a net importer of copper, and that the USA is totally dependent on foreign sources for indium and gallium, and that they along with selenium are only produced as byproducts of zinc, aluminum, and copper base metal production. All of them also, the byproduct metals, that is, by the way, are only present in newly mined base metals and are even then only recovered if and when those metals are processed, at added costs, to separate out these byproducts, which are part of a group of the minor metals that I call the technology metals without the products of which no country can maintain itself as a high-tech economy.

The United States Congress funds within the budget of the Department of Commerce, the Bureau of Land Management, BLM, and the BLM funds the United States Geological Survey, USGS. If one goes to the Internet site http://www.usgs.gov one will find the updated “2009” commodity mineral surveys for copper (.pdf), gallium, indium (.pdf), and selenium (.pdf), which I have hot linked here for interested readers. These surveys note the world production of these metals, their sources with regard to the producing nations, the amounts currently used in the USA, and the percentage of those amounts that are imported.

To save you the trouble of looking for the data on import reliance as a percentage of total American domestic demand you may use the following link (.pdf), which will open for you a table produced just a month ago by the National Mining Association, a lobbying group in Washington. You will note that America’s import reliance on gallium is 99% and for indium is 100%; for copper our reliance is only 32%. Selenium is not listed, because its production and use in the USA are not well enough known.

Note that the USGS data indicates that, for gallium, world production in 2008 was estimated at 95 metric tons and US consumption at 48.4 metric tons, more than 50% of the world’s production! For indium the figures are 568 metric tons total production and 160 metric tons U.S. consumption. In other words the USA consumed nearly 1/3 of the world’s new production of indium just last year!

Gallium, indium, and selenium used for new production by the DOE’s loan applicant will need to come from new production of gallium, indium, and selenium, because the existing supplies are not known to be in surplus, and, in any case, are all byproducts, which are only produced, if and only if the base metals in which they are found are produced and processed to recover them.

The use of gallium in existing applications in the USA, as just one example, has, as is obvious from the USGS data, tripled in just the last 4 years. The production of the base metal from which almost all of the gallium is obtained, aluminum, has in the same time period risen, though only by 20%, since 2004, to 40 million metric tons (see USGS data here [.pdf]). Clearly the increase of the recovery of the byproduct gallium has risen far beyond the rate of increased production of aluminum, but we do not know which aluminum smelters are now producing how much gallium, and we do not therefore know if the world recession that has already caused a sharp reduction in the production of aluminum may have caused a disproportionately large decrease in the production of new gallium.

The same arguments may be made for our knowledge of the present and near future production of indium, from zinc, and selenium, from copper.

The demand for the technology metals such as gallium, indium, and selenium has very little in common with the demand for their source base metals, aluminum, zinc, and copper, but the supply of those technology metals is completely dependent on the supply of those base metals. Has the DOE taken this into account?

The production of thin film photovoltaic solar cells using CIGS technology will increase the demand for gallium, indium, and selenium.

Will it be possible to satisfy that demand? Is it possible today to determine if it is possible to satisfy that demand? Is it significant that the largest producer of gallium, indium, and selenium is the People’s Republic of China, PRC? Is it significant that the PRC has been reducing its export allocations and raising its export taxes on these and other technology metals steadily for the last five years? Is it significant that the PRC openly admits that it plans and wants to be the world’s source of high technology finished goods, which will require in the foreseeable future all of its current and projected supply of the technology metals to meet its domestic demand?

The United States has a greater variety of mineral resources than any other nation in the world. Yet because of activist pressure the United States does not produce most of the technology metals, which it could produce in quantities that could make America’s high-tech industry self sufficient and therefore make the US economy secure.

The same activists turn a blind eye to the fact that mining and refining in America is the cleanest and safest in the world, and prefer that we obtain metals such as gallium, indium, and selenium, as much as we still can, from the PRC, which utilizes low paid labor in appalling conditions and produces many times more pollution in their production than we can ever eliminate in their use.

I would ask if the DOE has taken into account any of the above data or analyses in their decision to grant a 500 million dollar loan guarantee to an applicant that cannot prove it can economically utilize the facility it is planning to construct, because it cannot prove that its production capacity will be not be limited by the availability and rate of production of its critical raw materials, which will entirely need to be imported?

Disclosure: none

Comments

[disdaniel:]

Take a CHILL pill Sir!

Mar 24 03:03 PM

[Buffettz:]

I think the imports of these metals will cost the US a lot less than the $475b it spent on imported oil last year. Get some perspective!

Mar 24 03:29 PM

[aquaculture:]

Thanks mr. Lifton for this valuable note.
I had gone through some of the same metrics some time ago in a research and came to the conclusion that CIGS is dead on arrival. This changes the matter a bit, though I still believe all CIGS PV efforts are doomed to fail in the long run.
A hand-holding kind of perk?

Mar 24 05:11 PM

[aquaculture:]

As to the other rare bird in the solar space, given the current situation in copper mining, do you have any ideas on theTellurium supply situation in the U.S? I have the demand side covered.
Any thoughts would be appreciated.

I did an article a while ago on silicon.

seekingalpha.com/artic...

Mar 24 05:37 PM

[carbonates:]

Not to worry, Congress is going to beat DOE to the punch and end all mining on US lands before these technologies even develop:

"H.R. 2262, unveiled Thursday by House Natural Resources Chairman Nick J. Rahall, would greatly expand the power and authority of a law--originally aimed at encouraging U.S. mining on public lands-to ban any mining and exploration on public lands deemed to be environmentally sensitive."

If you think $475B was a lot for imported oil, wait until you see what is coming when we not only don't produce domestic oil, but don't produce any commodities other than agricultural ones!

See: www.mineweb.com/minewe...

Mar 24 05:43 PM

[dag_in_va:]

Tellurium is definitely one of the "technolgy metals" in this category, especially given the expansion plans of CdTe solar cell producer Firstsolar.

Mar 25 09:02 AM

[coreopsis:]

Really a pointless article without any focus. We live in a physical world -- material matters. Materials (ie minerals) have an unequal physical distribution in the mineable earth's crust.

Our long-run future in this country and our planet should not be dictated by a gallium strategy. As said earlier, please CHILL and get on to serious topics.

Unless of course you advocate US military occupation of the entire globe. Now that's definitely worth discussing ;-)

Mar 25 10:27 AM

[pansyed:]

To User 360916.

You need to read the article again and understand what Mr. Lifton is saying.
Think you missed everything or are you just someone who has an opinion where the facts do not matter?

Mar 25 04:10 PM

[Lisa Reisman:]

I agree with the ends but not the means. We're going to post a story on this as well on MetalMiner (agmetalminer.com) but doing a quick search of countries of production for the 3 major metals you discuss, Indium, Gallium and Selenium, I found that China has no more than a 30% market share for Gallium, is a primary producer of Indium (though Japan, Canada and Belgium are also big producers) and Selenium is not even produced by China (it's biggest refiner is Japan). I can give you countless examples of products needed and purchased by US companies whose raw materials must be imported. It's common. I can't argue you on the short-sightedness factor though. I don't have any doubt that many of the elements of the stimulus programs are short-sighted but these three specific metals can be obtained from more than one country of origin...

Mar 25 05:18 PM

[Conan the B...:]

Anyone following Cobalt?

Apr 06 02:24 AM