Leveraging the Defense Production Act to Stockpile Minerals

On December 3, 2024, China imposed export bans on antimony, gallium, and germanium—three elements with important defense applications. Antimony is used in over 200 munitions of the Department of Defense, ranging from 5.56 mm ammunition to 155 mm artillery rounds. Gallium is used in cutting-edge radar systems like the Lower Tier Air and Missile Defense System. And germanium is used in infrared lenses for night vision and thermal imaging in naval vessels, combat vehicles, and aircraft. Beyond defense applications, these minerals are also vital for American industry and commercial technology, such as fiber optic cables.

Our defense will suffer if we don’t work around this export ban

Since the U.S. relies heavily on China for these minerals, China’s new export ban could delay the manufacture of defense platforms and munitions, exacerbating already depleted defense stocks and further undermining America’s warfighting capabilities. The United States depends greatly on China for other minerals, too. For example, for minerals in which the U.S. is more than 50% net import reliant, China—the Pentagon’s “pacing challenge”—is the leading import source for 24 minerals. Critically, China could ban exports of these other minerals, such as bismuth (used in defense alloys) and tungsten (needed for armor-piercing munitions).

As a result, the U.S. government must stockpile strategic minerals to ensure a reliable and resilient supply for the defense industrial base.

Yet, the government’s current mineral stockpile—the U.S. National Defense Stockpile—“is not intended to influence prices in the market or insulate private industry from supply shocks.” This stockpile is only supposed to be tapped “in times of national emergency,” namely war. Stockpile acquisitions and releases from the National Defense Stockpile are also subject to bureaucratic approval by the Strategic and Critical Materials Board of Directors. These strictures are not conducive to protecting the defense industrial base in the global mineral market, which faces risks of supply shocks from China.

How to use the Defense Production Act

Notably, however, the Trump Administration could use the Defense Production Act (DPA) to build a separate mineral stockpile that can function outside of national emergencies and war. This stockpile would be capable of not only selling minerals to the defense industrial base amid supply shortages but also acquiring minerals from domestic mineral producers to incentivize domestic production.

Previous presidential administrations have indeed used the DPA to build sizable mineral inventories. In December 1963, for example, the DPA mineral inventory was $1.5 billion (valued at over $10 billion in 2024 dollars). Administrations have then sold portions of these stockpiled minerals to domestic firms to alleviate supply shortages. In the first half of 1965, the U.S. government released over 20,000 tons of copper from the DPA inventory to domestic firms amid tight global supplies. Multiple administrations have, too, sold DPA inventories to support defense manufacturers facing constrained mineral supplies. For instance, the DPA inventory was authorized in 1963 to release 30,000 tons of titanium sponge for a Navy prime contract, given limited commercial supplies.

Encourage domestic mining

Administrations have also used DPA authority to incentivize domestic mineral production. During the Korean War, the U.S. government effectively set a price floor in 1951 for domestic tungsten: it committed to purchase all domestically produced tungsten at $63 per unit for five years or until three million units were stockpiled. U.S. tungsten production then increased from 2,000 tons in 1950 to almost 8,000 tons in 1955, with nearly all of it sent to the national stockpile. The U.S. government applied this same policy with aluminum, and it helped increase U.S. production from about 720,000 tons in 1950 to nearly 1.6 million tons in 1955.

Under the DPA, the incoming Trump Administration has broad unilateral authority to create a new DPA mineral inventory and to acquire and sell those minerals at its discretion. The DPA explicitly includes stockpiling in its “national defense” programs and declares that the U.S. government’s policy must consider stockpiling strategic materials. Under 50 U.S.C. §§4533(a), the president has statutory authority—which has been delegated to agency heads—to purchase or commit to purchasing industrial resources, including materials necessary for the defense industrial base.

Importantly, the National Defense Authorization Act for fiscal year 1993 transferred the DPA inventory to the National Defense Stockpile. However, this transfer only applied to minerals in the inventory as of June 30, 1992, so minerals acquired for a new DPA inventory are not required to be transferred to the National Defense Stockpile.

Where to get the funds

The Trump Administration could use any of the Defense Production Act’s $1 billion in unobligated funds for stockpiling minerals. Depending on the final defense appropriations bill for fiscal year 2025, the incoming administration could tap even more funds, likely an additional $450 million to $900 million.

The Trump Administration can immediately use these funds to purchase or commit to purchasing minerals for the stockpile because current U.S. President Joe Biden has already signed a waiver for DPA purchases concerning critical minerals. This action waives the statutory requirements for a presidential determination, terms of sale, spending limitations, and congressional notifications and authorizations.

This DPA inventory should contain minerals currently used by the defense industrial base, including minerals already in the National Defense Stockpile, as well as those excluded from it, including copper and bismuth. However, the incoming administration should also acquire minerals needed for future Pentagon programs, such as minerals for quantum computing.

When releasing these minerals to domestic firms, the president should sell these minerals to approved domestic manufacturers in critical sectors, prioritizing the defense industrial base. The president could also release these minerals to government consumers, such as Department of Defense labs conducting materials research.

The stockpile could include unconventional forms, easy to use quickly

The minerals stockpiled should also be in a form that can be integrated into defense manufacturing with minimal additional steps. For example, instead of tungsten ore and concentrates—which the National Defense Stockpile currently contains—the DPA inventory should contain tungsten metal powder. Importantly, the inventory should exclude materials in overly specialized forms (e.g., aluminum sheets tapered to a specific degree) that have narrow applications and could become obsolete.

Similar to the Cold War, the stockpiled minerals can be stored at various government and commercial facilities, with preference for existing military depots and other government-owned facilities. If additional storage space is necessary, the U.S. government can use DPA funds to lease commercial warehouses.

Just as the Eisenhower Administration stockpiled minerals using DPA funds during the Cold War, the incoming Trump Administration could justifiably do the same amid the U.S.-China mineral war.

This article was originally published by RealClearEnergy and made available via RealClearWire.