Gerardo Del Real
Aug. 25, 2022
The (pardon me while I laugh) “Inflation Reduction Act” may be the one of the most funny/not funny names for a bill in quite some time.
We are supposed to believe that a bill that uses tax dollars to inject more money into the green economy is supposed to reduce inflation.
This comes from the same people who were inflation deniers… then labeled it transitory… then tried changing the meaning of the word “recession.”
But despite the name of the bill, it actually has many very worthwhile provisions. Among those is a consumer tax credit for electric vehicles that requires a percentage of the battery minerals be extracted or processed in the United States or from free-trade partner countries.
The requirement isn’t arbitrary or inconsequential. The most significant provision is that electric vehicles that qualify for the tax credit must contain a battery built in North America with minerals mined or recycled on the continent.
The legislation stipulates that by 2024, at least 50% of EV batteries must come from the U.S., Canada, or Mexico, with that figure rising to 100% by 2028. Meeting these requirements is going to require a lot of friendly lithium, cobalt, nickel, graphite and other metals.
There is a concerted global effort to diversify critical metal supply chains away from China. The mostly Democratic bill provides not just financial capital but political capital that will need to be accompanied by a focus on expediting permitting for exploration and development of critical metals projects.
Whether you believe in climate change or believe it’s all a hoax, the new law is very real with $360 billion being allocated to climate change-related provisions.
Marc Coltelli, e-mobility and energy leader for Ernst & Young, a consulting firm said, “For mining companies, it’s essentially creating a new industry in the U.S.”
Indeed it is.
It also presents a hell of an opportunity to profit from a commodity bull cycle that is going to last for many years.
Gerardo Del Real
Editor, Daily Profit Cycle