Transcript The National Minerals Stockpiles-

The National Minerals Stockpiles--Goals,
Issues, Challenges, and Opportunities
W. David Menzie
Chief, International Minerals Section
U.S. Geological Survey
Reston, VA 20191
• Brief History of Concerns about Minerals
Availability
• The National Defense Stockpile (NDS)—Goals
and Operation
• Operation of the NDS
• Issues and Challenges—the Review of the
National Defense Stockpile (NDS)
• Opportunities
Brief History of Concerns--1
• World War I, United States recognizes it is
not self-sufficient in minerals
• Following the war, minerals industries face
excess capacity and low prices
• 1920s U.S. mineral consumption increased
dramatically as did imports.
• 1930s Access to minerals becomes a chief
concern of Germany, Italy, and Japan
• Mid 1930s, Germany and Japan build
stockpiles of materials for their militaries
Brief History of Concerns--2
• Specialists in the United States propose
creating a stockpile of strategic materials
• Suggestions ignored until onset of WW II
• 1939 Congress passes Strategic Materials Act
• 1946 levels of materials in stockpile reduced
• Hostilities in Korea stockpile goals and
purchases increase, government loans for
exploration, Paley Commission
Brief History of Concerns--3
• Following conflict, minerals in surplus-- public
interest ebbs
• Concerns about mineral supplies never again reached
levels of early 1950s
• Late 1970s, unrest in Shaba Province, Zaire (DRC)
cause cobalt prices to rise precipitously
• Tensions with Soviet Union fuel concerns about a
“resource war” and competition for resources
• Strategic and Critical Materials Stock Piling Revision
Act of 1979 reaffirms need for stockpiling,
conservation and development of domestic resources
Brief History of Concerns--4
• Goals for the National Defense Stockpile
reached their highest level during this period
• End of the Cold War, DoD assumes United
States will have easy access to foreign mineral
• DoD begins to sell the NDS
• By 2005, NDS reduced holdings from $15
billion to $1 billion
Mineral Concerns have been Cyclical
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The National Defense Stockpile (NDS)—
Goals and Operation
• Strategic and Critical Materials Stock Piling Act
(50 U.S.C. 98 et seq.), which created the current
NDS enacted “to provide for the acquisition and
retention of stocks of strategic and critical
materials and to encourage conservation and
development of sources of materials in the United
States and to decrease and to preclude dependence
by the United States upon foreign sources for
supplies of such materials national emergency”
• The NDS is to be used only for national
defense purposes; it is expressly not to be
used for economic or budgetary purposes.
United States also maintains
• Strategic Petroleum Reserve
• Strategic Helium Reserve
• National Pharmaceutical Stockpile.
Operation of the NDS
• Every two years DoD recommends to
Congress, requirements for the stockpile
• Includes statement of assumptions used to
derive requirements
• Assumptions must be consistent with
scenarios used for DoD budget and defense
planning
Operation of the NDS
• The Defense Logistic Agency oversees the
process
• Two processes to set the requirements:
large-scale economic models and an
interagency process
• Economic modeling is carried out under
contract with the Institute of Defense
Analysis (IDA)
Operation of the NDS
• IDA uses a model (FORCEMOB) to estimate
demands of the defense scenario on the U.S.
industrial base
• IDA uses two quantitative models to calculate
detailed industry demands for the defense
scenario.
• The models cover 320 industrial sectors.
• Materials needed to supply the goods are
estimated using material consumption ratios
• Next, IDA estimates the materials available from
domestic and reliable foreign sources
Operation of the NDS
• Econometric process used for estimating 36
standard materials
• DLA has used an interagency process to
estimate the requirements of 19 specialty, or
advanced materials
Issues and Challenges—the Review of the
National Defense Stockpile (NDS)
• The Committee on Armed Services of the U.S.
House of Representatives (HASC) noted over 95
percent of materials in NDS designated to be in
excess of DoD needs and were being sold. Also
noted market conditions for titanium and
increasing reliance on foreign materials.
• HASC called for review of policy of disposal and
a study to determine if the NDS should be
reconfigured to adapt to global market conditions.
Issues and Challenges—the Review of the
National Defense Stockpile (NDS)
• DoD recommended the National Research
Council (NRC) be asked to undertake a
study of the NDS
• NRC assembled the Committee on
Assessing the Need for a Defense Stockpile
(CANDS) to evaluate the need for the NDS,
to discuss current defense material needs,
and to develop principles for any future
operation and configuration of a NDS
Conclusions
• First, “design, structure, and operation of the
NDS render it ineffective in responding to
modern needs and threats.”
• CANDS questioned if the economic models
were specific enough to identify actual
military material needs. The committee
suggests broadening the requirement that
contractors keep Bills of Materials for highpriority materials and using this information
in the assessment of critical materials needs.
Conclusions
• Second, CANDS concluded DoD does not fully
understand its needs for specific materials or have
adequate information on their supply.
• CANDS noted operation of the NDS is not timely
or based on up-to-date information owing to a lack
of data on requirements for specific materials.
• CANDS suggested that the requirement that
Congress must approve all acquisitions and
disposals in non-emergencies unless directed by
the President may prevent NDS from responding
to short-term changes in prices and demand.
Conclusions
• The third conclusion of CANDS is that lack
of reliable data and information on the
availability of materials impedes the
management of critical supply chains.
• Although CANDS found the NDS to be
ineffective in its current configuration they
believed the federal government should play
an active role in management of the supply
of minerals for defense systems.
Conclusions
• Finally, CANDS concluded that owing to changes
in the global threats the United States faces, the
changes in the U.S. industrial base, the emergence
of new demands on material supplies, the
ineffectiveness of the NDS and therefore the
potential for disruptions to the supply chains for
materials needed by DoD, that there is a need for a
new approach in the form of a national defensematerials management system.
Recommendations
• The first recommendation is that the
Secretary of Defense establish a new system
for managing the supply of materials for
U.S. defense requirements.
Recommendations
The second recommendation was that the system
• be based upon an ongoing analytical process
• include annual reporting from the services
• start at procurement level and identify the
materials needed and their vulnerability to supply
disruption
• be integrated with current defense planning
• governing policy be integrated with legislation and
policies governing procurement
• use all available tools to support stable supply
changes including holding materials in inventory
Recommendations
• allow partnering with private industry and
obtaining materials from offshore sources
• have improved information on mineral supply and
consumption and include forecasting tools
• design include input from and communicate with
industry, academia, and other stakeholders
• evaluate recycling and substitution as sources of
materials
• include risk assessments to account for
environmental constraints on defense material
availability.
Recommendations
• The third recommendation was that the
federal government improve systems for
gathering data and information on the
availability of defense related materials
from both domestic and foreign sources
Opportunities
• Since the completion of the CANDS report, DoD
has established a Working Group to develop a new
process of determining needs for strategic and
critical materials and to propose a new
configuration of the NDS. Once the Working
Group has completed its tasks, it will prepare a
report for officials in DOD who will in turn report
to Congress.
Opportunities
• The use of DoD wide supply chain management
could change market dynamics for some
commodities. For example, titanium has been in
short supply for defense uses in part because the
leading use of titanium sponge is in commercial
aircraft. Demand for these aircraft is highly
cyclical. Therefore producers are reluctant to add
capacity. DoD has not been able to obtain titanium
for some weapon systems owing to high prices.
Consolidated requirements could provide a larger,
stable demand that could result in a lower overall
price.
Opportunities
• Collection of information on the material
requirements of individual weapons could
allow DoD to move material to high priority
systems during a national emergency. This
could be especially important for production
of specialty materials which are often
biproducts and therefore present more
challenges to supply management
Opportunities
• Collection of material information by
weapon systems could allow more effective
recycling and reuse of material. The Air
Force has a pilot project to “reuse” aircraft
turbine blades. Rather than return used
blades to a general scrap recycling program,
blades are being collected and remelted to
yield high quality material that can go back
into the production of new blades.