JOHANNESBURG Reuters - Mining companies and governments in Africa are calling for stronger trade ties with the United States after a new climate law set out incentives for U.S. carmakers to source battery materials from trade partners.
The $430 billion Inflation Reduction Act IRA has been criticised by the European Union and South Korea, who say it could hurt their car industries.
It could negatively affect African nations that produce battery materials.
The United States has a Free Trade Agreement with only one African country, Morocco. The Democratic Republic of Congo is the key copper producer and producer of most of the world's cobalt.
At the U.S. Africa Leaders' Summit in Washington next week, President Joe Biden will meet presidents of African countries, including Congo.
Indigo Ellis, managing director at consultancy Africa Matters Limited, said the IRA was intended to push out China, but what it ended up doing is pushing out the DRC, the EU, and South Korea.
Under the IRA, the U.S. carmakers will get tax credits if they source at least 40% of battery materials from American free-trade partners. Carmakers could replace Congolese cobalt with Australian, Canadian, Moroccan, or U.S. cobalt.
According to a Cobalt Institute report, Congo produced 74% of the world's mined cobalt last year, while Australia was responsible for only 3% of the world's mined cobalt.
An adviser to Congo's President Felix Tshisekedi said that a USA-DRC Free Trade Agreement is an option for the medium to long term, but other avenues will be explored in the short term. A USTR spokeswoman said that we look forward to discussing ways to strengthen and strengthen our trade and investment ties with our partners throughout Africa during the summit.
The IRA wants to boost U.S. mining and processing, which some companies fear could come at the cost of value-added processing in Africa.
George Roach, CEO of Premier African Minerals, said the West needs to work with us to build value-add.
He is one of many projects in sub-Saharan Africa aiming to produce battery materials like lithium, nickel and graphite.
Joe Walsh, the managing director at Australia-listed Lepidico, said that the IRA makes the United States more attractive for a second plant, because it is building a lithium mine in Namibia and a chemical plant in Abu Dhabi.
The US is not going to be able to incentivize the development of a significant battery raw material production base of its own without ruffling a few feathers along the way.