The US Department of Defense is set to launch a program aimed at estimating prices and predicting supplies of critical minerals such as nickel and cobalt, as per a report by Reuters.
This initiative, announced on the Pentagon’s website in October, seeks to enhance market transparency but introduces a potential new variable into global metals markets.
Part of Washington’s broader efforts to boost US production of critical minerals used in weapons manufacturing and the energy transition, the program is designed to address the lag in US output compared to market leader China.
The challenge lies in the susceptibility of attempts to build new American mines to commodity price fluctuations, as demonstrated by Jervois Global’s decision to suspend a cobalt project in Idaho due to low market prices.
The program, Open Price Exploration for National Security (OPEN), is spearheaded by the Defense Advanced Research Projects Agency (DARPA) and the US Geological Survey.
It involves the development of an artificial intelligence-backed model to establish a metal’s “structural price” based on production details, labor, supply, and other costs.
While the Pentagon aims to enhance price transparency for government agencies and commercial entities, concerns have been raised about the potential for conflicting price structures.
The traditional approach relies on futures markets and pricing agencies, whereas the Pentagon’s program could create a separate method for determining prices.
DARPA emphasized that OPEN is not intended to set an official US government metals price or replace existing futures markets. Instead, it aims to provide transparency and mitigate perceived risks to national security associated with current market dynamics.
Several companies, including financial information firm S&P Global and defense contractor Lockheed Martin, have submitted bids for the project.
The AI model is expected to be rolled out in three phases over two years to predict supply disruptions caused by unexpected market shocks.
As the Pentagon seeks to revolutionize the construction and dissemination of price, supply, and demand predictions for critical materials, questions linger about how the US government’s involvement in estimating prices and supplies will be received by mining companies, customers, and metals exchanges. The program’s impact on existing market structures, developed over centuries, remains uncertain.
