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Without a consistent public policy that increases the added value of critical minerals, the government limits itself to stating that mineral exploration should give way to technology transfer. At the negotiating table, what’s at stake is who has the capacity for processing, refining, and manufacturing high-value-added components (midstream and downstream).
The intense geopolitical dispute over critical minerals places Vale do Rio Doce at the epicenter of the global energy transition, which risks being limited to the role of a mere supplier of raw materials to the most strategic markets today, such as Artificial Intelligence (AI); semiconductors (hardware); cloud computing; cybersecurity, and energy transition, which dominate global infrastructure and account for economic and military sovereignty.
Watchword is immediate access to critical minerals
The current scenario, changing at hypersonic speed, surpasses the structural ‘woes’ of the oil cycle and now operates on a different basis, as the energy security of countries is conditioned on continuous access to the so-called critical minerals (lithium, cobalt, nickel, graphite, and rare earths), which have become the ‘cherry on top’ of international covetousness, aimed at manufacturing electric vehicles, wind turbines, and solar panels, among other items.
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At the negotiating table, what’s at stake is who has the capacity for processing, refining, and manufacturing high-value-added components (midstream and downstream), in which Brazil is a vital piece in the movement undertaken by the United States and the European Union to break China’s hegemony over the critical minerals chain – achieved through strong state subsidies, tolerance of environmental liabilities – a condition that served as an instrument of geopolitical coercion. The Western push against the Asian giant marks the new phase of the energy transition.
Brazil tries to reverse secondary role in strategic sector
Holder of 98% of the world’s niobium reserves and the second-largest rare earth reserves on the planet, Brazil, however, remains in the position of a mere exporter of raw ore and importer of finished technologies, at much higher prices.
In an attempt to reverse this outdated scenario, the National Policy on Critical and Strategic Minerals (PMMCE) was instituted to condition mineral exploration on technology transfer and the implementation of beneficiation industrial plants. At the same time, the country has a comparative advantage over its Asian competitors, as 90% of its electricity matrix comes from renewable sources, allowing for the processing of critical minerals with a much lower carbon footprint.
For it to advance, the agreement made with India requires the Brazilian State’s ability to overcome institutional fragmentation, through the establishment of a regulatory framework that offers legal security to investors, without implying concessions to national interest and the non-negotiable concept of socio-environmental sustainability. As a negative outcome, the country loses the prospect of being at the forefront of the energy transition.
Chinese Economy Slowdown Defines Vale’s Strategy
In the specific case of the Brazilian mining company, its degree of relevance in the external scenario is conditioned by the pace at which the slowdown of the Chinese economy, its main destination market, occurs.
To more consistently explore the leverage potential of the myriad of open businesses for Vale, in the current context, we highlight the following topics:
Rising demand: the rise of artificial intelligence and green technologies has drastically increased the demand for copper, nickel, and rare earths. Vale (via its subsidiary Vale Base Metals) is working to expand the production of these strategic inputs.
Comparative advantage: an almost entirely renewable electric matrix, in addition to the comparative advantage of having a ‘geopolitical neutrality’ stance and the country’s democratic stability, serve as a ‘shield’ for the mining company against sanctions or trade blockades affecting competitors.
Geopolitical Neutrality Serves to ‘Shield’ Mining Company
Asian dependence: responsible for acquiring a volume between 60% to 63% of all its ore, the Chinese economy (with greater demand from the real estate sector and decarbonization targets) is vital to ensure the mining company’s revenue.
Pressure: the Chinese ‘eagerness’ for centralizing purchasing power and logistical control of the mining sector constitute pressure factors on commodity prices and Vale’s profit margins.
Mining Company Prioritizes Fund for Energy Transition
Exceeding the general expectation around critical minerals (copper, nickel, lithium, and rare earths), Vale invested in the creation of the Ore Régia FIP fund, in partnership with BNDES, aimed at financing research and development projects for vital minerals for the energy transition.
This fund, which aims to attract around R$ 1 billion, should prioritize small and medium-sized enterprises, considering the implementation of new mines and the promotion of the strategic minerals chain. Setting the tone for the miner’s disposition, CEO Gustavo Pimenta emphasized in an interview with CNN that the company’s investments will prioritize those segments that offer operational scale or potential for expansion.
“We have been evaluating if there are other commodities in which we should participate. Our focus today is on what we have scale and available mining potential. Our focus today is high-grade iron ore, which is essential to decarbonize the steel chain, copper, and nickel,” said the executive.
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