(This is part 2 of a two-part series; read part 1 here.)
OK, so even though the transportation plan and infrastructure proposal we wrote about in Part 1 has the potential to spur contracts for OEMs and metal suppliers, in all likelihood, the money to fund that endeavor is “less likely to be found than a yeti riding a unicorn, as R.A. wrote in the Economist. Hence, the chances of getting through the Republican House are very close to zero.
Some other budget items, however, may also have implications for manufacturers in the steel and rare earths industries.
The proposed line items most affecting domestic manufacturers include a $143 million allotment for the Hollings Manufacturing Extension Partnership, ostensibly to help companies improve innovation strategies and adopt more efficient manufacturing processes, and a $526 million proposal for the International Trade Administration to continue pushing the National Export Initiative, according to the budget. However, the programs, at nearly $700 million combined, may not achieve long-term economic sustainability for manufacturers.
The Commerce Department will save $43 million dollars, however, after the Emergency Steel Loan Guarantee Program is cut as proposed. The program came out of the 1999 Steel Act, which allowed for monies from private banks and investment firms to go to steel companies suffering from an influx of foreign imports.
Most interestingly, the hubbub over rare earth element (REE) supply constrictions from China has gotten to such a boiling point that the US administration is making budgetary allowances for REE domestic exploration. Generally, press releases about junior mining firm exploration are never all that interesting or newsworthy in and of themselves, but one from Ucore, a Canadian junior REE mining firm, posted on Digital Journal, caught our eye. According to the release, Obama’s budget contains funding for the creation of a rare earth Energy Innovation Hub. (This allotment undoubtedly stemmed from the Department of Energy identifying five rare earth metals that are critical for the US to secure in the short term, in a report last December.) “The hub will bring together top scientists to conduct cross-disciplinary research related to critical materials and rare earth elements in what the US DOE describes as an effort modeled after the “Manhattan Project,” according to the release.
Indeed, the budget document does mention the three new Energy Innovation Hubs (as an addition to the three existing ones), but there is no line item or explicit mention for how much the hubs will cost. For that, one must watch a slideshow of Energy Secretary Chu’s breakdown of DOE spending requests to find that they’re requesting $146 million total to fund all six hubs, and $20 million specifically for the rare earths portion, which they are calling the “Critical Materials hub. (We’ll keep an eye on this as it progresses.)
Ultimately, will throwing more government money at investments like these help secure valuable resources and economic stability? Or should the government’s domestic and international policies take the lead in helping existing private enterprise compete on their own terms? My guess is some mixture of the two would produce the most valuable returns, but one thing is clear: attacking the deficit and preserving fair trade laws and policies should be the federal government’s No. 1 priority, leaving true innovation to the private sector companies that know how to do it best.
MetalMiner and its sister site, Spend Matters, along with Nucor, will host a live simulcast, International Trade Breaking Point on March 1, 2011. If your company sources products from overseas, you will not want to miss this half-day event: