Reuters Next: U.S. cobalt miner to Trump: use tariffs as 'scalpel' not 'sledgehammer'

Jervois Global

11/12/2024 18:23

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      Miner says tariffs should be used strategically, not
bluntly
    

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      Cobalt demand rising globally, but market oversupplied
    

        * 
      Jervois favors metals sourcing requirements for
manufacturers
    

        * 
      Cobalt market not seen as 'level playing field'
    

  
    By Ernest Scheyder and Shashwat Awasthi
       NEW YORK, Dec 11 (Reuters) - U.S. President-elect Donald
Trump should deploy tariffs strategically rather than bluntly as
he aims to support American mining companies facing stiff
Chinese competition, a senior executive at cobalt producer
Jervois Global  JRV.AX  said on Wednesday.
    Jervois, like many U.S. producers of cobalt, lithium and
other critical minerals, has struggled in recent years as
Chinese rivals flood global markets with cheap supplies of
metals often produced at standards below what is expected by
many governments and manufacturers.
    For Jervois, that competition led it to close the only U.S.
cobalt mine before it even opened. Cobalt is used to make
electric vehicle batteries, electronics and a range of weapons,
among other goods.
    Trump, who takes office in January, has threatened to impose
wide-ranging tariffs on Canada, Mexico and China, each tied to a
basket of policy proposals with far-reaching aims. Speculation
has swirled in recent weeks that Trump could use tariffs to
bolster American mining.
    "With tariffs, we do have to be careful. What we're looking
for is a more scalpel than sledgehammer approach," Matthew
Lengerich, head of the company's U.S. operations, said in an
interview at the Reuters NEXT conference in New York.
    Lengerich noted that cobalt and other critical minerals are
not typically imported in their raw metal form into the U.S.,
but used overseas to build cell phones and other products that
are then imported. 
    The U.S., for example, already imposes a 25% tariff on
Chinese cobalt that is somewhat ineffectual as few Chinese
miners bring the metal into the country.
    "Demand for cobalt continues to grow and it's actually
growing at an incredible rate," Lengerich said. "But the
market's oversupplied at the moment."
    
    EFFECT OF TAX CREDITS
    Tying the Inflation Reduction Act's EV tax credits to where
critical minerals are procured, though, is the kind of market
prod that should be encouraged by Washington, Lengerich said. 
    "We have actually seen a change in purchasing behaviors and
customers willing to pay up to a 25% premium for the cobalt
sulfate that ultimately ends up in an electric vehicle,"
Lengerich said. 
    "Those are the kinds of policy things that we need to learn
from and say, 'Well, how else could we incentivize manufacturers
to use domestic supply (of metals) in their products.'"
    Trump's transition team is aiming to do away with that EV
tax credit, Reuters reported last month.
    Washington should consider establishing a national program
to stockpile metals when commodity prices are low in order to
financially help U.S. mining companies and to ensure supply for
defense purposes, Lengerich said.
    For Australia-based Jervois, though, its U.S. cobalt mine is
likely to remain mothballed until prices for the metal hit at
least $20 per pound, roughly double current levels, Lengerich
said. That's largely because of the cost to meet high U.S.
safety, labor and environmental standards. 
    "We certainly have to see much higher prices than what we
have today," Lengerich said. "It isn't a level playing field,
and I think that's one of the things that makes it really
challenging."
    The company last year received Pentagon funding to study how
best to develop a U.S. cobalt refinery, something the country
also lacks. 
    Despite Trump's widely-known support for oil and gas
production, Lengerich said he expects the incoming president to
support more domestic mining, largely due to national security
concerns.
    "We'd expect to see continued support for the building of
those supply chains," Lengerich said. "These things don't happen
overnight. They're challenging projects that take time to bring
to fruition."
    
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 (Reporting by Ernest Scheyder, Editing by Nick Zieminski)
 ((ernest.scheyder@thomsonreuters.com; X: @ErnestScheyder;
+1-469-691-7667; Reuters Messaging:
ernest.scheyder.thomsonreuters.com@reuters.net))