Remarks as prepared for delivery

Good morning.  I am pleased to be back in Utah for this meeting of the Energy and Environmental Markets Advisory Committee.  I want to thank Commissioner Mersinger for her sponsorship of EEMAC, and her staff and Lauren Fulks for coordinating this event.  Utah will always hold a special place in my heart.  I went to law school at Brigham Young University, had a baby, raised my children when they were young, practiced law in Salt Lake City, two of my children attended the University of Utah, and I met my wife here.  I have skied and hiked Utah mountains; fished, kayaked, and sailed on Utah waterways; and camped under Utah stars.

The Growing Importance of Metals Markets

I very much look forward to the discussion on metals markets today.  I am reminded that metals were always present in my time here in Utah.  I drove by Geneva Steel every day when I was in school, and Kennecott Copper was an ever-present fixture.  Kennecott Copper Mine, one of the largest in the world, is a true testament to American ingenuity and grit.  It is incredible to think about how it has produced over 20 million tons of refined copper and is still slated to produce millions more!  Copper helped previous generations run the millions of miles of wire that brought electricity to every corner of our nation in the 20^th century.  I appreciate the sustainability initiatives by Kennecott, who teamed up with my alma mater BYU for sustainability research.[1]  U.S. mines like Kennecott will continue to play a central role in the electrification of this century.

The metals markets are an important source of commodities and hedging opportunities for the U.S.’s historic investments in electric vehicles (“EVs”) and batteries.  These investments are encouraged by the “triple whammy” of new laws—the Inflation Reduction Act (IRA), the Bipartisan Infrastructure Law (BIL) and the CHIPS and Science Act.  Since the passage of the IRA, companies have invested over $100 billion in EVs and batteries in the United States.[2]

All of this investment means a growing demand for transition-critical metals like copper, lithium, and cobalt, especially domestically, given IRA incentives for domestic manufacturing and processing.  Demand is expected to continue to grow.  A record-breaking 10 million EVs were sold worldwide in 2022, and the International Energy Agency expects that number to reach 14 million in 2023.[3]  In the United States, EV sales were up 45% in the first quarter of 2023, setting a new record.[4]  Even at Kennecott, they are trying out underground battery electric trucks and loaders.[5]

Increasing supply and slower demand in other markets mean that lithium prices have fallen in 2023 after tripling in 2022, with EV prices falling in tandem.[6]  That is a relief to those who, like me, are considering buying an EV.  It’s also a relief for auto manufacturers, many of whom have set ambitious EV sales targets to help meet the Biden administration’s goal of 50% of the car market being EV’s by 2030.[7]

Existing contracts for lithium, copper, and cobalt all saw record volumes in the second quarter of 2023.  It has been publicly reported, and I expect we will hear more about it today, that CME recently launched a contract for molybdenum, another critical battery metal produced at Kennecott,[8] and is planning to launch a battery-grade lithium carbonate contract, its second lithium contract, in July.[9]

The CFTC’s Role

Where markets are developing this quickly, the CFTC has a critical role to play to ensure that markets are working well.  We can, and should engage in vigilant surveillance, and combat any threats to markets’ orderly functioning.

Battery and auto manufacturers can manage risks of price spikes or volatility, as long as those prices are driven by supply and demand, and not fraud, manipulation, or excessive speculation.  Starting in September at the EEMAC meeting, I have repeatedly called for the CFTC to conduct deep dive studies using our data and surveillance program to guard against manipulation and excessive speculation in commodities experiencing volatility or price spikes.[10]  The CFTC should study the rapidly growing critical metals markets to understand which factors are driving volatility and pricing in these commodities, such as what happened with lithium, and to guard against manipulation or excessive speculation.  We should publicly report our findings.

Additionally, given the specific domestic sourcing rules to qualify for IRA tax credits, the CFTC can work with exchanges on listing standards related to sourcing and location of production.  Finally, the CFTC can also use its antifraud authority where appropriate in the metals spot markets.

I look forward to hearing from participants about whether critical mineral markets are serving their needs, and what steps the CFTC can take to help ensure that these markets can work well so that they perform their essential price discovery and hedging functions.

I look forward to the other discussions today, including work on the subcommittees, and I am also interested to learn more about markets for wetlands mitigation credits.

These are timely and complex issues that benefit from all of the EEMAC members’ diverse and informed viewpoints.  I look forward to hearing your thoughts.