- The US Department of Defense is developing a plan called “National Security Open Price Exploration” (OPEN) that uses AI to estimate prices and predict the supply of important minerals.
- The goal of the OPEN plan is to increase market transparency and address challenges faced by the US in producing these minerals, while also enhancing national security.
In an effort to boost market transparency, the U.S. Department of Defense (DoD) is developing a program to estimate prices and predict supplies of critical minerals using artificial intelligence (AI). This move aims to address the challenges faced by U.S. production of these minerals, which has been lagging behind global leader China. The program, known as Open Price Exploration for National Security (OPEN), was announced on a Pentagon website in October but received little attention at the time.
Challenges in U.S. critical mineral production
One of the main obstacles in U.S. critical mineral production is the influence of commodity price swings on the construction of new American mines. For instance, Jervois Global suspended construction of an Idaho cobalt project last year due to low market prices, while Chinese cobalt miners backed by Beijing announced plans to increase production. This discrepancy in approach highlights the need for a standardized framework to determine the cost of specific metals.
The role of AI in estimating prices
The Defense Advanced Research Projects Agency (DARPA), a division of the DoD, is leading the Pentagon’s efforts to develop the AI-backed model. DARPA aims to construct a metal’s “structural price” based on various factors, including production location, timing, labor costs, supply costs, and other relevant factors. The program seeks to enhance price transparency for both government agencies and commercial entities, as well as mitigate the perceived risks associated with futures markets and pricing agencies.
Addressing market opacity and national security concerns
According to DARPA, the current pricing data used in commodity purchase transactions is deemed “opaque and flawed,” posing significant barriers to U.S. commercial competition. By providing accurate and transparent pricing information, the OPEN program intends to minimize disruptions in the supply chain and bolster national security. It is vital to note that the program does not aim to replace existing futures markets like the London Metal Exchange (LME) or set an official U.S. government metals price.
Contractors and implementation phases
To develop the AI model, DARPA and the U.S. Geological Survey plan to hire one or more private contractors. Companies such as financial information firm S&P Global and defense contractor Lockheed Martin have reportedly applied for the project. Bids were submitted in late November, and a decision on the selection of contractors is expected soon. The implementation of the program will occur in three phases over a two-year period, with the goal of revolutionizing price, supply, and demand predictions in critical materials markets.
Potential implications for the industry
While the introduction of a U.S. government “structural price” for metals may raise concerns among mining companies, their customers, and metals exchanges, OPEN’s objectives do not clash with existing market structures. Most metal sales occur through long-term contracts, with the physical market acting as a reference point. The LME, for instance, stated that its prices are based on real-world transactions executed by market users worldwide, ensuring they reflect shifts in physical market fundamentals.
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The future of AI in metals market analysis
The use of AI to analyze metals supply and demand is expected to grow, according to the LME. However, any potential conflicts between a U.S. government “structural price” and futures exchanges and pricing providers are beyond the scope of OPEN’s aims. The program’s main focus remains on enhancing transparency and mitigating risks to national security. Both DARPA and the U.S. Treasury Department declined to comment, while the White House referred inquiries back to DARPA.
By leveraging AI technology, the Pentagon’s program aims to estimate prices and predict supplies of critical minerals, thereby enhancing market transparency. The OPEN program seeks to address challenges faced by U.S. production of these minerals and boost national security. While concerns remain about potential conflicts with existing market structures, the program’s primary goal is to provide accurate and transparent pricing information. The upcoming selection of private contractors and subsequent implementation phases will be crucial in achieving these objectives.
