One Year In: Advancing Economic Security and Resiliency

Doug Petno · JPMorganChaseBullish

The MP Materials public-private deal created a US rare earth magnet supply that would not otherwise exist.

Petno cites the MP Materials transaction as the example that sparked a series of similar public-private deals. He argues that without government involvement the US would not have been able to create a rare earth magnet supply source in the way it did in that case. Stance is inferred from his praise of the deal's effect; he gives no explicit view on the stock's price or valuation.

“I think the MP Materials example sort of lit the fire in many respects... absent government involvement, we wouldn't be able to create a supply source for rare earth magnets in the way we did in that situation.”at 8:17

Doug Petno · JPMorganChase

Supply-chain resilience will need capital far beyond current levels, with JPMorgan's $1.5T ten-year target.

Petno calls the challenges of the security and resiliency effort enormous, citing the large amount of capital that needs to be raised. JPMorgan has a $1.5 trillion financing goal, which it expects to facilitate or originate over ten years, and it is partway through an original $10 billion equity pool. He says that equity number could be much greater, which signals he sees capital needs in this area as large and growing.

“the challenges that we're facing in SRI are enormous. The amount of capital that we need to raise, the obstacles in front of us,”at 7:36

Doug Petno · JPMorganChase

Securing supply chains requires government at the table; public-private deals have been essential so far.

Petno says the challenges of raising capital, overcoming obstacles, and dealing with mercantilist competitors make government involvement necessary. He points to a series of public-private transactions designed to solve these problems. He argues that without government involvement, rare earth magnet supply would not have been created, and cites policy work on workforce development, shipbuilding and advanced manufacturing as central to outcomes.

“You're gonna need the government, full stop, to be at the table and part of the solution.”at 8:01

Doug Petno · JPMorganChase

Military struggles to procure new defense technologies through the existing procurement process.

Petno says the world's remilitarization in response to geopolitical events means weapons and equipment must reflect the changed character of war, relying heavily on defense tech and new technologies. US military officials contacted JPMorgan saying they were having trouble securing these technologies through procurement, which led JPMorgan to launch its initiative.

“And military officials had actually reached out to JPMorgan and said, we're having a hard time. We're having a hard time securing those types of technologies with the procurement process.”at 2:11

Doug Petno · JPMorganChase

China's rare earth magnet export control exposed a critical US single point of failure in supply chains.

The US has rare earth deposits but lacked rare earth refining and rare earth magnet production domestically. When China imposed an export control on rare earth magnets, this gap showed how one item could bring the US industrial base to a halt. Magnets are central to US industry and the economy, and Petno says the same problem extends to a long list of critical minerals and chemicals, including inputs to pharmaceuticals.

“I think the one that stands out to me is when the Chinese, put an export control on rare earth magnets. We have rare earths in The United States, but we didn't have rare earth refining and certainly didn't have rare earth magnet production in The US.”at 3:30

Doug Petno · JPMorganChase

Some trading competitors act like mercantilists, potentially keeping prices low to win market share.

Petno argues that some competitors and trading counterparties are behaving like mercantilist competitors, potentially keeping prices low. He presents this as one of the obstacles that makes government involvement necessary to build resilient supply chains. The claim is stated with a hedge ('potentially') and supported only by the broad pattern he describes, without specific data.

“the fact that some of our competitors, and and trading counterparties are behaving like mercantilist competitors where they're potentially keeping prices low.”at 7:51