AI-driven price estimation in global critical minerals markets: comparative analysis of the Pentagon's OPEN programme and potential implications for India

In a world increasingly reliant on advanced technologies, securing a stable supply of critical minerals has become a strategic imperative for nations globally. The United States Department of Defence has taken a pioneering step by unveiling the Open Price Exploration for National Security (OPEN) program. This initiative utilises artificial intelligence (AI) to estimate prices and predict supplies of essential metals like nickel and cobalt to boost market transparency and fortify national security. As the OPEN programme charts a course towards revolutionising the critical minerals landscape in the U.S., the question arises: Could India benefit from a similar approach to address its challenges in the production and procurement of critical minerals?

 

The Pentagon's OPEN programme: closer look

 

The OPEN programme, announced in October and managed by the Defence Advanced Research Projects Agency (DARPA), aims to construct a metal's "structural price" through an AI-backed model. The programme seeks to address the challenges faced by the U.S. in lagging behind China in the critical mineral production gap, attributed in part to the influence of commodity price swings on the establishment of new mines. The OPEN programme is designed to enhance market transparency, predict supply trends, and counter perceived risks to national security posed by opaque pricing data in commodity purchase transactions.

 

DARPA's role and the OPEN programme's objectives

 

DARPA, known for its groundbreaking contributions to technological advancements, oversees the OPEN programme's development. The programme intends to hire private contractors to create an AI model that considers various factors, including production location, timing, labour, and supply costs, to estimate a metal's structural price. The programme is structured to unfold in three phases over two years with the ultimate goal of transforming the construction and dissemination of price, supply, and demand predictions in critical materials markets.

 

Market dynamics and potential implications

 

Traditionally, metals prices are determined by futures markets and pricing agencies, reflecting supply, demand, and other factors. However, the introduction of an official rubric for estimating metal prices by the U.S. government could potentially create duelling structures for determining prices, according to sources. This raises concerns about how the programme's data and estimates would be integrated into the existing global metals markets, where pricing agencies and futures exchanges play a central role. 

The OPEN programme aims to bring transparency to government agencies and commercial entities, addressing what the Pentagon sees as "substantial barriers to U.S. commercial competition" caused by "opaque and flawed pricing data." The U.S. Geological Survey, in collaboration with DARPA, is seeking private contractors to develop the AI-backed model, with potential bidders including financial information firm S&P Global and defence contractor Lockheed Martin.

 

Implications for India's critical mineral industry

 

As the Pentagon forges ahead with the OPEN programme, India stands at a crossroads in its pursuit of securing a stable supply of critical minerals. The potential benefits of adopting a similar AI-driven pricing model are multifold and could significantly impact India's critical mineral industry.

Adopting an AI-driven pricing model in India could lead to increased market transparency, offering accurate and reliable information for strategic decision-making. This transparency would be invaluable for both government entities and commercial players in India's critical mineral industry.

The AI-backed programme could encourage the domestic production of critical minerals in India. By providing a stable and predictable pricing environment, the programme might make mining ventures more attractive to investors, fostering the development of local mines and reducing dependence on imports.

Predictable pricing and supply forecasts could assist India in reducing its dependency on imports of critical minerals. The industry could gain a competitive advantage by optimising local production and contributing to India's self-sufficiency in key materials.

The AI programme could aid the Indian government in strategic resource planning, optimising procurement strategies, and ensuring a stable supply of critical minerals for various industries. 

Similar to the U.S., India's defence and energy sectors could benefit significantly. Informed decision-making regarding the acquisition of critical minerals is essential for both national security and the ongoing energy transition in India. 

The adoption of an AI-driven pricing model could enhance the competitiveness of the Indian industry globally. Predictable pricing and transparent market dynamics could attract foreign investments, fostering partnerships and collaborations.

Anticipating market shocks through the AI programme could assist in mitigating risks for the Indian industry. Proactive measures could be implemented to minimise disruptions and ensure a consistent supply of critical minerals.

The data generated by the AI programme could serve as a valuable resource for formulating effective government policies related to the mining and utilisation of critical minerals in India. Informed decision-making based on accurate price and supply predictions could contribute to the sustainable development of the industry.

 

Challenges and considerations for India

 

While the potential benefits are evident, India would need to address the challenges associated with implementing such a programme:

Implementing an AI-driven programme requires a significant technological investment. India would need to allocate resources for the development and maintenance of the AI model.

Collaborating with private entities, including the financial and defence sectors, is crucial for the success of the program. Establishing effective partnerships would ensure the programme's alignment with industry needs. 

Developing a robust regulatory framework is essential to governing the AI-driven pricing model. Clear guidelines and regulations would contribute to the responsible and ethical use of the technology.

India must ensure that the programme aligns with international market dynamics. Coordinating with global pricing structures and avoiding conflicts with established systems is critical for seamless integration.

As the Pentagon takes strides with the OPEN programme to revolutionise critical mineral markets in the United States, India stands on the brink of a transformative opportunity. The potential benefits of adopting a similar AI-based pricing model are substantial, offering the Indian industry a pathway to enhanced transparency, reduced dependency on imports, and strategic resource planning. However, careful consideration of challenges and alignment with global market dynamics is crucial as India explores the possibility of transforming its critical mineral industry through artificial intelligence. The impact of such a decision could reverberate across sectors, influencing domestic production, international competitiveness, and the overall resilience of India's critical mineral supply chain.