Using the Defense Production Act to Stockpile Minerals – What Does It Do?

Author: Gregory Vischer Morgan Bazlianjahara Maticek

On December 3, 2024, China imposed an export ban on antimony, gallium and germanium, three elements with important defense applications. Antimony is used in more than 200 types of Department of Defense ammunition, ranging from 5.56 mm ammunition to 155 mm artillery shells. Gallium is used in cutting-edge radar systems such as low-level air defense and missile defense systems. Germanium is also used in night vision and thermal imaging infrared lenses on naval ships, combat vehicles and aircraft. In addition to defense applications, these minerals are critical to U.S. industrial and commercial technologies such as fiber optic cables.

Since the United States relies heavily on China for these minerals, China's new export ban could delay the manufacturing of defense platforms and munitions, exacerbate already depleted defense inventories, and further weaken U.S. warfighting capabilities. The United States also relies heavily on China for other minerals. For example, for minerals where the U.S.’s net import dependence exceeds 50%, China—the Pentagon’s “rhythm challenge”—is the main source of imports for 24 minerals. Crucially, China could ban the export of these other minerals, such as bismuth (used in defense alloys) and tungsten (required for armor-piercing ammunition).

Therefore, the U.S. government must stockpile strategic minerals to ensure a reliable and resilient supply for the defense industrial base.

However, the government's current mineral stockpile – the US defense stockpile – is “not intended to impact market prices or insulate private industry from supply shocks”. These stocks can only be used during “national emergencies” (i.e. times of war). Procurement and release of defense stockpiles also requires approval from the Strategic and Critical Materials Directorate. These restrictions are detrimental to protecting the defense industrial base of global mineral markets, which are at risk of supply shocks from China.

Notably, however, the Trump administration could use the Defense Production Act (DPA) to establish an independent stockpile of minerals that could be used outside of national emergencies and wars. These stocks not only enable the sale of minerals to the defense industrial base in the event of supply shortages, but also enable the acquisition of minerals from domestic mineral producers to stimulate domestic production.

Previous presidential administrations did use DPAs to build large mineral inventories. For example, in December 1963, the DPA mineral inventory was $1.5 billion (worth over $10 billion in 2024 dollars). The government then sold some of its stockpiles of minerals to domestic companies to ease supply shortages. In the first half of 1965, amid global supply constraints, the U.S. government released more than 20,000 tons of copper from DPA inventories to domestic companies. Successive governments have also sold DPA stocks to support defense manufacturers facing tight mineral supplies. For example, in view of limited commercial supplies, the DPA stockpile was authorized in 1963 to release 30,000 tons of titanium sponge for a major Navy contract.

Government agencies have also used the powers of the DPA to incentivize domestic mineral production. During the Korean War, the U.S. government effectively set a price floor for domestic tungsten in 1951: a commitment to purchase all domestically produced tungsten at $63 per unit over five years, or until inventories reached 3 million units. U.S. tungsten production increased from 2,000 tons in 1950 to nearly 8,000 tons in 1955, almost all of which was sent to the national stockpile. The U.S. government adopted the same policy for aluminum, which helped increase U.S. production from about 720,000 tons in 1950 to nearly 1.6 million tons in 1955.

Under the DPA, the incoming Trump administration has broad unilateral authority to create new DPA mineral inventories and acquire and sell those minerals at its discretion. The DPA explicitly includes stockpiling in its “defense” plan and declares that U.S. government policy must consider stockpiling strategic materials. Under Title 50, United States Code, Section 4533(a), the President has statutory authority (this authority is delegated to the heads of agencies) to purchase or commit to purchase industrial resources, including materials needed for the defense industrial base.

Importantly, the National Defense Authorization Act for Fiscal Year 1993 transferred the DPA inventory to the defense inventory. However, this transfer only applies to minerals in the inventory as of June 30, 1992, so minerals acquired for the new DPA inventory do not need to be transferred to the defense inventory.

The Trump administration can use $1 billion in unearmarked funds from the Defense Production Act to stockpile minerals. Under the final defense appropriations bill for fiscal year 2025, the incoming administration may use more funds, possibly an additional $450 million to $900 million.

The Trump administration can immediately Use these funds to purchase or commit to purchase inventory minerals as current US President Joe Biden has signed a DPA procurement waiver for critical minerals. This action waives statutory requirements for presidential determination, terms of sale, spending limits, and congressional notification and authorization.

This DPA inventory should contain minerals currently in use in the defense industrial base, including minerals already in the defense inventory, as well as excluded minerals, including copper and bismuth. However, the incoming administration should also acquire minerals needed for future Pentagon programs, such as those used in quantum computing.

When releasing these minerals to domestic companies, the President should sell these minerals to approved domestic manufacturers in critical areas and prioritize the defense industrial base. The president can also release these minerals to government consumers, such as Department of Defense laboratories that conduct materials research.

Stored minerals should also be in a form that can be integrated into defense manufacturing with minimal additional steps. For example, DPA inventories should contain tungsten metal powder, rather than the tungsten ores and concentrates that defense inventories currently contain. Importantly, the list should exclude overly specialized materials that have a narrow range of applications and may become obsolete (for example, aluminum panels tapered to a specific degree).

Similar to the Cold War era, stockpile minerals can be stored at a variety of government and commercial facilities, with priority given to existing military warehouses and other government-owned facilities. If additional storage space is needed, the U.S. government can use DPA funds to lease commercial warehouses.

Just as the Eisenhower administration used DPA funds to stockpile minerals during the Cold War, the incoming Trump administration has reason to do the same in the U.S.-China mineral war.

Gregory Wischer is a fellow at the Payne Institute for Public Policy at the Colorado School of Mines.

Morgan Bazilian is director of the Payne Institute for Public Policy at the Colorado School of Mines.

Lieutenant Colonel Jahala “Frankie” Maticek is a professor of military affairs in the Division of National Security Affairs at the U.S. Naval War College and a fellow at the Payne Institute for Public Policy. Opinions are his own.

This article was originally published by RealClearEnergy and provided via RealClearWire.

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