China employs "weaponized pricing" by offering refining services at a negative cost, effectively paying countries to process their copper. This tactic makes it impossible for Western refiners to compete, ensuring China maintains its stranglehold on the critical midstream supply chain.
The AI race is a national security imperative, akin to the Cold War arms race. However, the US is critically dependent on China for the copper, rare earths, and other materials required to build and power AI data centers, creating a massive strategic vulnerability.
China's global dominance isn't in owning mines, but in controlling the midstream refining and smelting processes. This creates a critical choke point for the West's supply of essential materials for defense, AI, and electrification, as they control 50-98% of processing capacity for key metals.
The Fed's policy of raising interest rates to combat consumer inflation has the unintended consequence of making long-term, capital-intensive industrial projects unviable. This hollows out the manufacturing base and prevents the reshoring of critical materials processing essential for US security.
Building AI data centers or nuclear plants is pointless without the massive transformers needed to connect them to the grid. With lead times of 4-5 years for these components, which rely on Chinese rare earths, this hardware bottleneck is the critical constraint on energy and AI infrastructure expansion.
Western leaders mistakenly focus on securing raw material sources ('feedstock'), believing mining rights equal supply chain control. The reality is that China's dominance in midstream processing makes the mine's location irrelevant, as they control the ability to turn ore into usable material.
Contrary to popular belief, silver's value is increasingly tied to its industrial applications, not just its correlation to gold. It is essential for AI data centers (8 tons per center), missiles, and robotics. With China controlling 60% of its refining, silver represents a significant strategic vulnerability.
The most promising investment opportunities for securing critical materials aren't in new mines, but in innovative companies processing e-waste and industrial byproducts like coal fly ash. These ventures, often backed by government funds, create a circular economy and represent the future of a resilient, onshore materials supply chain.
China could leverage its dominance in rare earths by requiring payment in offshore Chinese Yuan (CNY). This move would force Western defense, AI, and industrial companies to source CNY, creating significant new demand for the currency and challenging the US dollar's role in global commodity trade.