OECD Examines Import Dependencies, Export Restrictions on Critical Minerals
About 10% of critical raw materials, as measured by value, faced export restrictions in the last decade, according to a new report from the Organization for Economic Co-operation and Development -- and the use of restrictions grew five-fold in the 2017-2019 period, compared with the two-year period 10 years earlier. Export taxes are the most frequent restriction, the authors said, adding: "This may be related to the fact that, under WTO rules, quantitative restrictions on exports are generally prohibited while export taxes are not."
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An agreement to avoid export restrictions is central to the new U.S.-Japan critical minerals agreement, which will allow minerals processed or mined in Japan to qualify toward content thresholds in the Inflation Reduction Act electric vehicle subsidy regime.
The countries outside the OECD organization that OECD countries are most dependent on for these goods -- China, Argentina, Russia, Vietnam, India and Kazakhstan -- also are those issuing the most new export restrictions. "The OECD finds that the trend toward increasing export restrictions may be playing a role in key international markets, with potentially sizable effects on both availability and prices of these materials," the OECD said in a press release.
In its report, the organization wrote that those restrictions "create incentives for other producing countries to introduce similar restrictions, putting yet more upward pressure on international prices and ultimately creating more incentives to restrict exports. Such spiralling increases in commodity prices have indeed sometimes been both a reflection of, and a factor behind, escalating export restrictions on raw materials in countries seeking to develop domestic processing industries."
While the sourcing of critical minerals is fairly concentrated from certain countries -- such as the Democratic Republic of Congo, Australia, China, etc. -- the report said that trade "remains relatively well diversified. This suggests that the possibility of significant disruption to the global green transition by disturbances to import or export flows of critical raw materials is limited. However, concentrations of exports and imports are significant in some specific cases, notably in upstream segments of supply chains for some critical raw materials, including lithium, borates, cobalt, colloidal precious metals, manganese and magnesium."
Moreover, the authors note, dependencies look different when you consider ownership of the mining and processing firms, since Chinese firms control a significant minority of both cobalt mining in the Congo and lithium mining in Australia.