US-Canada Supply Chain Issues: The Balance Between Critical Minerals and Green Transition

US-Canada Supply Chain Issues: The Balance Between Critical Minerals and Green Transition

Bilateral Trade and Legislative Opportunities

In the face of criticism from the European Union and Canadian entities, the Inflation Reduction Act (IRA) and the Defense Production Act (DPA) still carve out opportunities for Canadian businesses, considering them “domestic” sources for critical mineral procurement. This comes as the United States aims to diversify away from China-dominated supply chains in the production of electric vehicle (EV) batteries and semiconductors.

The Role of Critical Minerals in US-Canada Relations

The US’s drive for a green transition puts a spotlight on critical minerals, with Canada’s rich resources playing a pivotal role. The US looks to its northern neighbor for cobalt, graphite, lithium, and nickel, vital for EV batteries, while offering capital to enhance Canadian mining and processing capacities. Recent bilateral talks and a White House report outline goals to bolster North American supply chains, signaling a solidified trade partnership.

Funding and Tax Credits Fueling Growth

US and Canadian companies are receiving support through DPA funding, which includes a significant allocation for critical mineral initiatives. Graphite One in Alaska, a Canadian venture, secured a substantial grant for graphite supply, marking a trend towards more such investments.

In addition to funding, the IRA’s “Section 30D New Clean Vehicle Credit” extends tax credits to EVs with Canadian-assembled components, fostering cross-border trade and industry growth.

Advancing Canadian Mineral Processing and Recycling

The Copper Cliff Complex’s expansion in Ontario underscores the strategic development of Canada’s critical mineral sector, feeding directly into the North American EV supply chain. Further strengthening this sector are moves by companies like Umicore and Li-Cycle, with investments in material production and recycling facilities, echoing Canada’s active role in the emerging EV battery industry.

Semiconductor Investments and the CHIPS and Science Act

The CHIPS and Science Act, though primarily aimed at reinforcing American semiconductor prowess, remains open to foreign companies, including those in Canada, for funding opportunities. These investments, while restricted to US-based projects, highlight the interwoven nature of US-Canadian industrial collaborations.

In conclusion, the interplay between the IRA, DPA, and the CHIPS Act illustrates the intricate tapestry of the US-Canada supply chain, underpinning a strategic partnership critical for both countries’ economic and technological ambitions.

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