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Stimulus windfall for miners left in limbo as Democrats split on budget bill

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Sunrise hits the U.S. Capitol dome on Sept. 30, 2021, in Washington, D.C. A same-day vote in the U.S. House of Representatives on a large infrastructure bill was pulled from the schedule after progressive Democrats publicly opposed its passage.

Source: Chip Somodevilla /Getty Images News via Getty Images

A bipartisan $1 trillion infrastructure bill stuffed with billions that would boost U.S. iron and steel production and deploy billions to stimulate a domestic battery supply chain is in jeopardy, as Democrats in Washington fight over competing priorities.

If the bill passes, steel and iron demand would likely skyrocket, thanks to a massive build-out of transportation infrastructure and other projects. The package includes billions in research money, regulatory changes to permitting and "made in America" requirements, all of which would boost domestic miners. Nickel and lithium producers would gain from an increase in spending on battery supply chains.

But the bill is in doubt. House Speaker Nancy Pelosi scheduled a Sept. 30 vote on the $1 trillion bill but delayed it due to a rift within the party: Progressives are unwilling to support the infrastructure bill without assurances that a $3.5 trillion budget bill filled with party priorities also gets a chance at passage, while moderates are leery of such a big expenditure. It is the second time in 2021 that a large public industrial policy investment has been held up in the U.S. House of Representatives, following the Senate passage of a $250 billion package in June aimed at strengthening U.S. semiconductor production.

For U.S. steel and metallurgical coal producers, the bill could be crucial insulation against fluctuations in the economy.

"It might mean the next time there's a downturn, the impact of the downturn might be muted," Moody's Investors Service analyst Ben Nelson said in an interview.

Money, money, money

The bill would be a boon for steel demand by funding a massive infrastructure build-out and by mandating that projects use U.S. iron and steel. According to the American Iron and Steel Institute, every $1 billion of federal infrastructure investment would require 50,000 tons of steel, and every $100 billion in investment would increase domestic steel demand by 5 million tons, equivalent to about 5% of annual domestic steel consumption. Metallurgical coal would also gain from the need for domestically produced steel.

Battery metals such as lithium and nickel would also unquestionably see a boost in demand from billions in federal dollars for a domestic lithium-ion battery supply chain. The bill would provide assistance specifically to coal producers by cutting 20% of the fees paid by miners to the Abandoned Mine Reclamation Fund. In addition, the bill would give $6 billion to the U.S. Energy Department to fund domestic battery processing, manufacturing and recycling projects, a key demand driver for minerals production at home.

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The bill would hasten the federal environmental review process, a plus for U.S. mines typically sited on federal lands, addressing a frequent complaint of the industry. It would also codify the existence of the Federal Permitting Improvement Steering Council, a program that sets two-year time frames for completing environmental impact statements for qualified infrastructure projects, including work on mines.

Worst-case scenario

If the infrastructure legislation ultimately fails, the U.S. metals and mining sector will miss out on what would be a windfall of federal cash. However, the industry could weather failure to pass the bill, according to Andy Leyland, head of strategic advisory at Benchmark Mineral Intelligence.

Incentives are already driving new investments in U.S. battery metals extraction, including electric vehicle production announcements by U.S. automakers and state-level grant programs, according to Leyland. Failure to pass the bipartisan bill "may slow" progress down "a little, but it's not going to have a major impact."

"It helps. It helps build the momentum that you're starting to see in the U.S. battery supply chain. But it's not the be-all end-all," Leyland said.

There are high stakes in the infrastructure fight for steel and raw steelmaking inputs such as metallurgical coal, Moody's Investors Service's Nelson said in an interview. Passing the infrastructure bill could bring some idle metallurgical coal mines back online and help the coal industry through the next market downturn, Nelson said.

However, the bill is not a cure-all.

"It's certainly beneficial but I don't think it's a game-changer," Nelson said.

However, for advocates worried about U.S. critical minerals, the bill's failure would hurt.

"This would be a painful loss," said Alex Hutkin, director of government relations at Securing America's Future Energy, a nonprofit backed by the transportation sector lobbying Congress to finance construction of a U.S. battery supply chain. "Unless we're able to build up a domestic supply chain, we will continue a dependence on China."