The Biden administration is reportedly exploring the possibility of implementing a federal price support mechanism for US critical minerals projects in an attempt to curb the impact of low-priced Chinese imports on the domestic market, which have put several US mineral processing projects at risk.

A Department of Energy official told Politico the plan would establish a price floor for critical minerals produced in the US. If market prices fall below this threshold, the government would compensate miners for the difference.

The potential move comes in response to ongoing difficulties faced by US critical minerals projects, many of which have been delayed or canceled despite US$1 billion in grants promised by Biden’s government.

The policy would also represent a continuation of Biden’s efforts to strengthen the domestic supply chain for minerals essential to clean energy technologies, such as lithium, nickel and cobalt.

Chinese oversupply has led to a significant drop in global prices for key minerals, making it difficult for US projects to compete. Despite the availability of federal grants and other incentives, many US mineral processing ventures have struggled to secure necessary financing, prompting the consideration of additional government intervention.

The Department of Energy official explained to Politico that the Biden administration’s goal is to provide a temporary financial safeguard that would enable US producers to weather the current market conditions.

The official, who was speaking on condition of anonymity, also emphasized that the policy is intended to stimulate the domestic critical minerals industry, not to create a long-term subsidy for specific companies. The proposal has reportedly not yet been finalized, and details regarding its implementation and cost are still under discussion.

The fact that the Department of Energy is considering this policy highlights the broader challenges the US faces in building a robust domestic supply chain for critical minerals. Market conditions have changed since the Biden administration’s efforts kicked off, with prices for minerals like lithium falling sharply over the past year.

Industry stakeholders have been advocating for more comprehensive government support, arguing that current measures are insufficient given the scale of the challenges companies are facing. Some have expressed concerns about the US’ ability to compete with Chinese producers, which benefit from extensive state support and lower production costs.

“High interest rates, inflationary pressures and oversupply of minerals from China put a lot of additional burden on these companies, who have the monumental task of raising or finding private capital for three quarters of these investments,” Ben Steinberg, executive vice president at Venn Strategies, told Politico.

Securities Disclosure: I, Giann Liguid, hold no direct investment interest in any company mentioned in this article.