Articles in Category: Public Policy

I had originally intended to write a post countering some of the “panic/hysteria/fill in the blank coverage of the nuclear reactors in earthquake/tsunami-stricken Japan. But the headlines of the past three days have placed more than a kernel of doubt in my mind whether Japan’s nuclear reactor(s) would escape the fate of a TMI (Three Mile Island) or Chernobyl. So instead, I reached out to some experts in the nuclear industry to either a) make myself feel better or b) turn that kernel of doubt into something much stronger. I’m going to make a feeble attempt at turning kernels of doubt into some data points. Perhaps by stringing some of these points together we can collectively make some informed impressions about the future of the nuclear energy industry and place this event in context with others as well as comment on the notion of “Black Swans.

To try and make sense of the various reports coming from western media, I turned to John D Metzger, Director of Nuclear Engineering at the University of Pittsburgh Swanson School of Engineering and asked him several questions. After the first where does he go for accurate information on the nuclear situation? John suggested two sites: The Nuclear Energy Institute and the International Atomic Energy Agency.

Here are ten key takeaways I gathered from our conversation:

  1. Every country that has deployed nuclear power has had some “incidents
  2. These Japanese plants will never operate again
  3. At Chernobyl and TMI, operators did not react correctly. Chernobyl operators didn’t follow procedures and the plant had major design flaws. But the situation in Japan has nothing to do with a faulty design or improper procedure or response. This earthquake (natural disaster) represented the fifth largest in modern times
  4. We can’t design for 1000-year events (Ed. note: we will revisit this point later in this post)
  5. The containment vessels may have a breach — but not a wholesale breach
  6. The culture of safety in the nuclear industry remains so strong and so prevalent that we have to relate this situation into the context of this specific natural disaster. Furthermore, the argument goes, the loss of life due to the nuclear power plants so far appears minuscule in comparison to the loss of life from the tsunami and earthquake. The nuclear power industry still remains one of the safest of all power industries
  7. Even Chernobyl had a small loss of life. The failure of Chernobyl also involved the errors of the Soviet government to quickly distribute potassium iodine pills to minimize instances of thyroid cancer. Few died from the actual radiation effects; however, upwards of 35 people died fighting the initial fire. The real death toll occurred when pregnant women aborted their fetuses as a result of the press accounts of the potential dangers of radiation. TMI also had little-to-no loss of life. Click here to see then-governor Dick Thornburgh’s account of health risks from TMI
  8. Lessons learned from TMI have greatly improved the integrity of nuclear power plants. For example, pressurized water reactors are no longer built with once-through steam generators because they do not have a large enough water inventory. According to Dr. Metzger, the industry adopted both procedural changes as well as design changes. About that time, a GE engineer quit the firm and publicly raised some design concerns about boiling water reactors. The industry went through a lot of changes to address the concerns. With this situation, we’ll also see procedure and design changes
  9. With regard to the observation that the US nuclear industry is “old and outdated, Metzger said this, “We have 104 reactors operating. All are in the process or have been licensed for an extra 20 years. They are in great shape. TMI unit 1 has all new steam generators and a new reactor vessel head. The overhaul cost approximately $1 billion. We see constant upgrading of these plants to ensure safety.”
  10. In terms of materials, we won’t see any wholesale changes, but the DOE continues to fund the development of new materials. Many of these materials will go into the next generation of reactors but they are looking at fuels and cladding with better and higher temperature capabilities. We’ve seen funding go into ceramics. Changing materials becomes challenging because operating history with current materials gives us a performance record and confidence in how the materials work in operation

Yesterday, my colleague Taras suggested the magnitude and combination of the earthquake with the tsunami and the effects of nuclear plant breakdown perhaps equate to a Black Swan. Dr. Metzger suggested we can’t design for a once-in-a-thousand-year event. But certainly we had a thousand-year event in 2004 with the Sumatra earthquake and the ensuing tsunami. Black Swan or not, the future will require a re-examination of risk scenarios. Certainly a Japanese “big one couldn’t have had tiny statistical odds. But rather than a knee-jerk overreaction calling for an across the board shut-down of the nuclear industry, perhaps the NRC will take a page from the risk officers out there and really “run the odds of various climatic or natural disaster possibilities by plant site location. Then we can weigh the economics against the risk scenarios.

What do you think? Leave a comment.

–Lisa Reisman

Postscript: Click here to see the US Industry Nuclear Response Sheet

As MetalMiner continues looking into the effect the Japan earthquake and ensuing tsunami have on the metals supply chain, the nuclear power question seems to be taking a considerable portion of aftermath news. While the natural disaster spurs nuclear worries in Japan, especially in the wake of the Fukushima Daiichi nuclear power station failures, the reporting coming out of it paints a picture of imminent radioactive catastrophe. But does the tsunami make the case that nuclear power should be curtailed, or even shelved entirely, as a global energy source?

According to an enterprising Reuters report on the subject, the news organization quotes an executive at state-run utility Korea Electric Power Corporation (KEPCO) as saying, “The nuclear power industry is likely to shrink due to Japan’s nuclear accident¦Rising opposition is seen in developed countries, although developing countries may see less opposition due to their shortage of power unless they reside in earthquake zones.

The last phrase strikes us as the particularly logical if your country and/or your existing or planned nuclear campuses are near earthquake prone-zones, fault lines, or near the ocean shores, then yes, you should plan accordingly. According to Reuters, Taiwan, another island nation in the Pacific arena, mentioned that its state-run energy company Taipower is looking into cutting its nuclear power output. Although Japan’s famously advanced (read: sturdier than most) infrastructure helped prevent even more catastrophic results from the earthquake which seems rather unfathomable, given the unequivocally horrible aftermath — the entire country remains in perpetual danger of tsunamis because of their geographical placement. Admittedly, Japan wasn’t about to stop its path to world’s No. 3 economy due to its geologically volatile island location, just as no one could convince New Orleans not to rebuild because of its prime address in Hurricane Alley.

But do Europe and the US really need to halt or reverse course entirely on nuclear power development and production? The Reuters article cites that Switzerland, Germany and the US all indicated uncertainty in the nuclear sector. Swiss Energy Minister Doris Leuthard “suspended the approvals process for three nuclear power stations for safety standards to be revisited, while German Foreign Minister Guido Westerwelle said that “a government decision to extend the life of the country’s nuclear power stations could be suspended following the crisis in Japan. Even US Senator Joe Lieberman weighed in, saying we should “put the brakes on domestic power plants until the “impact of the Japanese disasters “became clear.

The UK’s Guardian newspaper quoted Professor Gerry Thomas, chair of molecular pathology at Imperial College London, as playing it much cooler than American media outlets when it came to the imminent dangers posed by the reactors. “”One thing to note is that there has not yet been a significant release of radiation from this nuclear plant – the reactor core is currently still intact,” he had said, according to the Guardian. “There has been very little release of radiation and there is unlikely to be a significant release. My advice would be not to worry¦I am afraid there is far too much scaremongering! Granted, Professor Thomas was responding to citizens worried about personal effects from radiation, but this lesson could apply to the global especially American media.

The reality is nuclear power has a relatively steady safety track record over the years when compared with other energy sources. These political heads’ comments likely only serve the stock price rises of green energy companies; of course we all need to diversify our energy production sources, but how about we focus on the task at hand, help Japan, put out the fires, and then move forward with green?  The US and Europe don’t seem to be faced with imminent danger when it comes to regular earthquake activity that could trigger massive tsunamis. Sure, the US probably shouldn’t build more nuclear reactors on the California/Oregon/Washington coasts, and should re-evaluate/renew safety procedures in case of future tsunamis but perhaps all-out nuclear freeze should be a last resort.

Human error and shoddy development and maintenance will always exist no one need to look further than the Chernobyl debacle, which is still fresh in many people’s minds nearly a quarter century on. (The 25th anniversary, on April 26, is nearly upon us.) But scaremongering in the fresh face of disaster might not serve anybody well hype does not equal tangible action.

–Taras Berezowsky

(Continued from Part One.)

Shouldn’t compromise, on a broad and fundamental level, be the new normal? I don’t mean political compromise that’s an intangible dog-and-pony show that gets citizens nowhere. I mean personal sacrifice from the bottom up. Shouldn’t everyone admit that it’s not the 1950s anymore? That no one is really, necessarily “owed a house, two cars, standard vacation times, etc., anymore? That no one is really “owed limitless credit card spending that mostly supports cheaply made Chinese goods? How did we get to a point where we — as public or private sector workers and anyone in between completely refuse to reduce our own consumption or take a bit of a hit to a relatively luxurious lifestyle so that that lifestyle has some chance of continuing in the future? (And yes, speaking from personal experience, in my book any country where the majority of the population has access to shelter, running water and a Wal-Mart has no idea how good it has it.) We live in a world where lighting-fast global trade and information exchange is changing everything we need to change along with it.

Now, I hesitate to revert to Nucor as an example (since it’s a valued MetalMiner sponsor, therefore close to the company) but I can’t resist simply because it’s a great example. When faced with the recession and declining orders and revenues, the company which paradoxically does not employ a union workforce yet is proven to have some of the most engaged, committed and dedicated employees in the steel industry didn’t issue massive layoffs; instead, it lowered everyone’s wages for an indefinite period everyone, from the CEO to floor workers. Did hundreds of people lose their jobs? No. Did hundreds of people experience hardship? You bet. But the individuals who make up the company realized, as a whole, that sacrifices needed to be made now, so that the lifestyle and economy that we knew and loved can hopefully return.

So yes, many public unions are bloated, and yes, some of those jobs could likely be cut entirely. But is it the only bogeyman scapegoat that we should be focusing on? No. Should collective bargaining be totally stripped? Probably not. Could it benefit from being scaled back? Maybe. Ultimately, the focus should be on individual and, when added up, institutional compromise and sacrifice so that unions are not leveraged for the wrong reasons, and so that old jobs are not only retained, but new ones have the potential to be created. That way, cities like Vallejo and states like Illinois (where I live and from where I write) can get back to solvency sooner rather than later.

–Taras Berezowsky

Just this morning, while reading about cities being broke, I realized that MetalMiner hasn’t really weighed in on the public union debate, mostly stemming from the Wisconsin / Gov. Scott Walker debacle, what with the need for spending cuts and curbing the right to collective bargaining, let alone how public employee unions factor in to the looming bankruptcies of cities and states.

So here’s my own personal take.

Consider the lead paragraph from this piece in last Sunday’s Times Magazine:

“Vallejo, a city about 25 miles north of San Francisco, offers a sneak preview of what could be the latest version of economic disaster. When the foreclosure wave hit, local tax revenue evaporated. The city managers couldn’t make their budget and eliminated financing for the local museum, the symphony and the senior center. The city begged the public-employee unions for pay cuts ” all to no avail. In May 2008, Vallejo filed for bankruptcy. The filing drew little national attention; most people were too busy watching banks fail to worry about cities. But while the banks have largely recovered, Vallejo is still in bankruptcy. The police force has shrunk from 153 officers to 92. Calls for any but the most serious crimes go unanswered. Residents who complain about prostitutes or vandals are told to fill out a form. Three of the city’s firehouses were closed. Last summer, a fire ravaged a house in one of the city’s better neighborhoods; one of the firetrucks came from another town, 15 miles away. Is this America’s future?

Clearly, cities and states are screwed because they are super-short on revenue. Tax bases have eroded why? Liberals may point to Bush-era tax cuts for the wealthy, and conservatives may call out massive overspending by local, city, state and federal governments on “frivolous line items, most notably public sector unions and Social Security/Medicare/Medicaid, etc. But both groups, including those in the middle, likely agree that the dearth of well-paying jobs is not helping any citizen contribute to their respective tax bases, be they in Detroit, Harrisburg, Pa., or Vallejo, Calif.

Now, I don’t think collective bargaining is to blame for all the ills facing municipal budgets; nor are unions the be-all, end-all evil that many farther-right conservatives make them out to be. Indeed, I’m sure many hard workers exist in the public sphere, those who pull their weight for their salary and benefits. And I also concede that many middle class blue- and white-collar workers, be they in the public or private sectors, are pissed off at the Wall Street banks and hedge funds that played so carelessly with money and mortgage securities that led to the taxpayers bailing them out. It makes me livid to think that CEOs and top managers walked away with million-dollar bonuses when the economy shafted the majority of Americans (the worst offenders, in my opinion, should be sitting side by side with Bernie Madoff behind bars) and I’m not even a union worker. But it sets a terrible example for those who actually do work hard to make mid-five-figures and simply want basic benefits for their families. (The utter disparity in economic conditions between the richest and poorest in the US is another post entirely, and no matter what anyone says, the markets are not really built to close the gap they thrive on that disparity.)

But as I see it, however, there is only one long-term solution.

(Continued in Part Two.)

–Taras Berezowsky

Over a year and a half ago we reported on a major trade dispute between the US and Mexico, specifically over a US ban on Mexican origin trucks crossing the border into the US. Mexico retaliated with US/Mexico truck dispute punitive tariffs that totaled $2.4 billion annually, according to the Wall Street Journal. The US, in disallowing Mexican trucks to cross the border, has violated the North American Free Trade Agreement. But no more — the two countries have brokered a deal in which half of the tariffs would get eliminated upon signing of the treaty (expected in 60 days, according to the story) and the other half of the tariffs would get eliminated when the first Mexican trucks pass a series of tests including drug tests, English language tests and safety tests.

Jim Hoffa, president of the International Brotherhood of Teamsters Union, had argued for the ban suggesting that, according to the WSJ, the new law “caves in to business interests at the expense of the traveling public and American workers.”

The punitive tariffs have harmed industry and stifled job growth according to US Chamber of Commerce President Tom Donohue: “This delay put more than 25,000 American jobs at risk, and retaliatory tariffs have been in place for two years on many U.S. products entering Mexico.

The argument for lifting the trucking ban, however, extends far beyond the jobs issue as well. From a US-import perspective, the existing process of essentially forcing every single inbound truck to change over to an American carrier adds nothing but hassle and extends the inbound supply chain. Crossing into the US border already creates potential excessive delays particularly due to the drug wars raging throughout Mexico (and some US cities). In a time-motion study from 2004, analyzing Northbound traffic (Mexico-US) truck re-loading times within Mexico can equate to 17 percent of the total time of moving goods from the border through to the US side.

But the biggest shocker of the time motion study involves the inherent efficiencies (or inefficiencies) of the US side of the equation (not the Mexican side). If you look at the time it takes to process the inbound or outbound truck from the US and Mexico, one might expect that to be about equal. If you made that assumption, you’d be dead wrong. Consider this:

  1. Leave out the time it takes to truck goods from Chicago to Laredo (it is what it is). The time study concluded that all of the remaining procedures (inspections, drayage, warehousing, congestion, wait time, etc.) ranged from 12 hours to 81 hours (in other words, to export US made goods, it takes 12 -81 hours at the border)
  2. On the import side of the equation it takes 1.3 to 10.5 hours

The Mexican side of the equation (e.g. the time it takes for the procedural aspects of border crossing) from Mexico to the US is 2.8 6 hours and from the US to Mexico 2.6 5.3 hours.

And here I thought the President wanted to double exports in five years!

–Lisa Reisman

In part of our continuing coverage of rare earth metals and related minor metals, MetalMiner is pleased to welcome Mr. Lawrence Heim, Director of The Elm Consulting Group International, LLC, an independent environmental, health, and safety consulting practice, as a guest contributor. According to their website, Elm was engaged by a leading US-based electronics manufacturing industry association to conduct the first independent third-party Conflict Minerals supply chain traceability audits, supporting the association’s “Conflict-Free Smelter designation for tantalum.

Up until recently, substantive efforts related to conflict minerals have focused on “bag and tag programs at mines and voluntary procurement standards based on reputational risk concerns. In 2010, a leading US-based industry association of electronic manufacturers began field trials of a conflict minerals audit program based on tools developed by the association and an international non-governmental organization. Our firm, The Elm Consulting Group International LLC, was one of three firms invited to participate in the field trials; we subsequently conducted the first tantalum supply chain traceability audits encompassing sites in the US and Japan. We also had the opportunity to evaluate an additional site a scrap metal company in the US.

The major takeaways from our experience include:

  • Supply chain auditing takes careful planning. The audit process is far more efficient if it begins close to the point of materials origin and works forward. Starting at the consumer/end use results in the audits being incomplete until all the preceding supply chain links are audited. Once the full chain is completely audited, all the open/incomplete reports must be amended.
  • Even though the SEC’s jurisdiction is limited to publicly-traded companies, the conflict minerals audit mandate will directly impact non-publicly traded companies as they are likely to be part of the supply chain of directly-regulated companies. Information and audit requests will flow through the entire chain, which is the goal of the law.
  • New information sources beyond facility/company files are needed. Some of this information is to be developed by the US government under the Law, but much will be left to the companies and auditors to locate on their own. SEC and other stakeholders have expressed concern about the veracity of the information regarding activities near the point of extraction/export. This information need creates an opportunity to leverage emerging information management technologies such as Sentiment360
  • Material buyers are already demanding third party audits/evaluations, demonstrating hesitation to rely on self-declarations by suppliers. This indicates that, although SEC standards allow companies to conduct and rely upon internal due diligence activities and representations, market forces may push companies to engage third party auditors for all its conflict minerals evaluations and related statements. Read more

In part of our continuing coverage of rare earth metals and related minor metals, MetalMiner is pleased to welcome Mr. Lawrence Heim, Director of The Elm Consulting Group International, LLC, an independent environmental, health, and safety consulting practice, as a guest contributor. According to their website, Elm was engaged by a leading US-based electronics manufacturing industry association to conduct the first independent third-party Conflict Minerals supply chain traceability audits, supporting the association’s “Conflict-Free Smelter designation for tantalum.

Additional proposed elements of the Conflict Minerals law include:

  • Due diligence process not prescribed. Neither the law nor the SEC’s proposal specifies the requirements for the scope or execution of a due diligence process for the Conflict Minerals Report. Instead, the SEC’s opinion is that it would be inappropriate for them to prescribe any specific guidance on the due diligence efforts. This allows companies/industries to develop a framework reflecting their own unique circumstances, products and supply chain. However, the scope of the effort and the information relied upon must be specifically described in the Report.
  • Applicability to scrap. The proposal establishes a separate standard for scrap materials. The SEC stated that if companies “obtain conflict minerals from a recycled or scrap source, they may consider those conflict minerals to be DRC conflict free. However, the preamble provides confusing if not conflicting language on this point.
    • Companies claiming the use of scrap/recycled material “would be required to disclose in their annual report, under the ËœConflict Minerals Disclosure’ heading, that their conflict minerals were obtained from recycled or scrap sources and that they furnished a Conflict Minerals Report regarding those recycled or scrap minerals. Based on this statement, a full third-party Conflict Minerals Report is required for scrap that is deemed DRC conflict-free.
    • The SEC does not plan to define what is recycled or scrap material. Companies are left to establish their own definition, with supporting explanations and associate due diligence efforts to be provided in the Conflict Minerals Report for the scrap/recycled material. In addition to creating ambiguity for auditors, this will likely result in companies defining “scrap one way for purposes of the SEC, and another way under EPA regulations. See 40 CFR 261.2(c).

The actual regulations are less ambiguous, stating clearly that Forms 20-F, 40-F and 10-K must contain a Conflict Minerals Report for scrap/recycled conflict mineral materials.

Number of companies affected. Two groups of companies will be directly impacted by the Conflict Minerals Law: companies that are directly regulated by the SEC, and companies that are not SEC-regulated, but are suppliers to impacted companies. For the first category, the SEC estimated that 1,199 companies will require a full Conflict Minerals Report. The methodology for determining this number is worthy of mention. The SEC began by finding the amount of tantalum produced by the DRC in comparison to global production (15% – 20%). The Commission selected the higher figure of 20% and multiplied that by the total number of affected issuers, which they stated is 6,000. (75 Fed. Reg. 80966.)   Clearly, this methodology does not consider many additional factors and the actual number of companies that will require the full audit is certain to be higher. For the second category the suppliers no estimate has been made.   But if one anticipates 10 suppliers (we have data indicating that the number of suppliers ranges from one to well over 100 for a single directly-regulated company; an average of 10 suppliers may be conservative, especially given the wide range of conflict mineral-containing products) for each company directly regulated, the number of additional companies impacted would be 12,000.

The next guest post will review the proposed requirements in comparison to three of the first-ever Conflict Minerals supply chain traceability audits, conducted from AugustNovember 2010 by independent third-party professional auditors.

–Lawrence Heim

Click Below to Read More in the Series:

Part 1

Part 2

Part 4


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:

Register for the live simulcast today!

As a former metals trader (not ring, mind you, but import/export), I learned many tricks of the trade, so to speak. Unscrupulous traders once (perhaps still) easily circumvented US law in a variety of ways by creating false companies, transshipping products (knowing full well the products would end up in the hands of US adversaries) and outright falsifying the actual “end use of said product.” Nonetheless, sometimes laws get circumvented legally because the language of the law lacks specificity. But as an ex-Arthur Andersen consultant, I can appreciate the difference between the letter of the law and the spirit and intent of the law (Enron anyone?). Our contacts in the rare earth metals world tell us that tantalum scrap traders have found profitable ways to skirt the new Dodd-Frank Conflict Minerals Law.

These scrap dealers have followed market developments closely, attending any/all meetings and conferences having to do with conflict minerals. According to our source, traders have said to him, “nothing is going to change, African origin material will find a way to get into the market.”

To understand how the scrap supply chain works, we refer to an earlier MetalMiner post covering tantalum forms: “Tantalum comes in basically three forms: tantalum ore and concentrate (where our sources tell us long-term pricing could easily exceed $120/lb with African spot prices at $60/lb, though one can’t actually buy African tantalum at that price), tantalum oxide/salts (which essentially double the ore prices) and finally, capacitor-grade tantalum powder, now at approximately $300/lb, according to our sources. It’s this last grade that finds its way into the electronics we own. With tantalum prices mounting, the lure of finding loopholes in the law may prove too tempting. So we inquired how the tantalum scrap supply chain may operate in comparison to the non-scrap supply chain.

Basic premise: Tantalum oxide concentrate currently in the $120-$150/lb range with Congo ore currently in the $40-60/lb range, an approximate $100/lb difference.

We have identified the following approximate costs and process steps to use scrap and avoid traceability requirements:

  1. Extract metal from concentrate $15/lb
  2. Refine metal to powder $15/lb
  3. Refine metal powder to ingot $15/lb
  4. Chop to ingot $10/lb (this is the only additional cost and is not traceable)

The scrap chain would still allow for an increase in the basic price of Congolese material. From a price perspective, the above-referenced process still undercuts or matches the “clean material.” In other words, the “alternative non-regulated supply chain” can operate profitably at today’s tantalum market prices.

The Enough Project, original advocates of the legislation, along with the NGO Global Witness, are said to have begun work anew with the SEC to explain the loophole within the law. Clause 1502 of the legislation defines what needs to be reported to the SEC, but the portion of the law relating to scrap and recycled materials contains some ambiguity, as our guest blogger Lawrence Heim of The Elm Consulting Group International will elaborate on in a follow-up post tomorrow.

In the meantime, buying organizations will want to pay careful attention to both the new legal requirements as well as this new loophole. For the latest in complying with the SEC conflict minerals law, check out our free resources (including more articles and exclusive white-papers).


(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.

–Taras Berezowsky

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:

Register for the live simulcast today!

While we all know President Obama is excellent at paying lip service to the US manufacturing community, and has indeed signed several substantial acts trying to revitalize domestic job and export growth, we’ll have to wait and see if his initiatives in the federal budget proposal for the 2012 fiscal year 1) get approved and implemented, and 2) spur a sustainable and effective growth pattern in American manufacturing. For now, let’s take a deeper look into the reportedly “slimmed down budget as it relates to industry and manufacturing.

The largest proposal in the new budget is the $556 billion transport plan, to be spread over six years. Reuters reports that the plan is intended to repair the nation’s existing and crumbling infrastructure, while laying the groundwork for a transnational high-speed rail network. Although the administration touts the infrastructure plans as sure-fire ways to create jobs, it’s still unclear how it’ll be paid for. Obama calls for $53 billion for the rail projects alone, and intends to spend 17 percent of the overall $556 billion transportation plan the first year, according to Reuters. The Republican-controlled Congress chafes at this, especially since the initial proposal claims the price tag will be taken care of by a “Transportation Trust Fund (which will swallow up smaller “Highway Trust Funds); aside from Ëœcompetitive grants,’ the revenue stream isn’t clear, much less definitively viable.

Essentially, it’s a more extensive version of an expired act:   the plan’s costs “would be more than 60 percent above the inflation-adjusted levels of SAFETEA-LU (The Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users), which expired on September 30, 2009, and has been kept afloat at the same funding level by a series of continuing resolutions since expiring, writes Jeff Berman in the Supply Chain Management Review.

So the overarching question becomes: is more spending to promote potential jobs and future infrastructure investment more important than attacking near term trade imbalances and drastically reducing the current budget deficit? Is it a “chicken-or-the-egg argument?

The pro of spending now: it helps get the ball rolling on contracting the companies and manufacturers that would be building these rail networks, roads and bridges the Caterpillars, Vulcan Materials, Parsons, steelmakers and prefab materials makers of the world (the American Society of Civil Engineers estimates a price tag of $2 trillion to bring overall US infrastructure up to speed, and a lot of that would go to contracting these companies). The con: the creation of new institutions (with new workers, new management, etc., new budgets, etc.) such as the “Infrastructure Bank that would come out of this plan, described in the Reuters report, in which states and private investment would pour money into the bank to match federal funds, solely to finance transportation.

More on metal-specific manufacturing areas of the budget in Part 2.

–Taras Berezowsky

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:

Register for the live simulcast today!

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