The US Department of Defense is embarking on an innovative journey to develop an artificial intelligence-based program aimed at estimating prices and forecasting supplies for critical minerals, reports Reuters
This initiative, which emerged with little fanfare after its announcement on a Pentagon website in October, represents a significant stride towards augmenting market transparency.
The program, a component of Washington's broader initiative to stimulate US production of critical minerals essential for weapons manufacturing and the energy transition, seeks to mitigate the US's lag behind China in output.
The effort is spearheaded by the Pentagon's Defense Advanced Research Projects Agency (DARPA) in collaboration with the US Geological Survey.
Together, they plan to develop an artificial intelligence-backed model to construct a metal's 'structural price', considering factors like production location, labour, supply costs and others, as detailed in documents including a DARPA slide deck presented to prospective contractors last November.
"Fundamentally about transparency"
"The OPEN program is fundamentally about transparency," a DARPA spokesperson stated, emphasising the initiative's goal to counteract "opaque and flawed pricing data" that poses "substantial barriers to US commercial competition".
Despite the potential for confusion within metals markets due to the introduction of a different price determination structure, the Pentagon clarifies that the program does not aim to set an official US government metals price or replace established markets like the London Metal Exchange (LME).
The initiative responds to concerns over "endogenous market dynamics and anti-competitive practices" that can undermine the reliability of futures markets as a source of price information, referencing the LME’s 2022 nickel pricing turmoil.
Looking ahead
The AI model, set to be developed in three phases over two years, also aims to predict supply disruptions from market shocks, excluding predictions of natural disasters or specific market events.
DARPA's ambition with this program is to "revolutionize the construction and dissemination of price, supply, and demand predictions and forecasts in critical materials markets," potentially offering strategic insights for Pentagon officials in timing national stockpile purchases.
This novel approach, however, raises questions about its reception among mining companies, their customers, and metals exchanges, all of whom have developed the existing market structure over centuries.
The program's success and its impact on the global metals market remain to be seen, as it ventures into uncharted territory with the promise of enhanced transparency and security in critical mineral supplies.