The “One, Big, Beautiful Bill” (OBBB), signed into law on July 4 by US President Donald Trump, allocates a substantial amount of funding for critical minerals production, with industry participants and advocacy groups alike seeing it as being bullish for the industry.

How the OBBB boosts critical minerals funding

“You don’t know exactly how OBBB will affect the industry; there are so many nuances” a US-based trader said.

“The bill allocates a massive incentive for critical minerals; it is a massive ‘carrot,’” Stephen Empedocles, chief executive officer of Clark Street Associates, said. Clark Street Associates is a government strategist and advisor to technology companies, focused on securing large customized federal and state government funding.

The OBBB appropriates a total of $7.5 billion to the Department of Defense (DOD) for critical minerals direct funding under Section 20004 Enhancement of Department of Defense Resources for Munitions and Defense Supply Chain Resiliency.

Strategic use of critical minerals funding under the DOD

“The problem is not the amount of money, it is making sure [that money] is spent in ways that make a difference,” Empedocles said.

The US has the resources for the critical minerals it needs, but it is missing the ability to extract and process them, he said.

“That’s where most of the funding should go,” he said, adding that the government should allocate the funds efficiently, so they have the most impact and, to achieve this, it is essential for the government to have engagement with the industry.

Other available funds

“In addition to amounts otherwise available,” the OBBB also appropriated $1 billion for the fiscal year 2025 under section 50403, “Energy Dominance Financing.” The funds will remain available through September 30, 2028.

“Our understanding is that supporting brownfield projects and preventing early retirements of existing fossil fuel generation will be part of the uses of this funding. The office is given authority to invest in ‘identification, leasing, development, production, processing, transportation, transmission, refining, and generation needed for energy and critical minerals,’” Leslie Hayworth, senior vice president of public affairs at the nonpartisan energy advocacy group SAFE, said. 

Another $1 billion is appropriated under section 30004 of the Appropriations for Defense Production Act, which will remain available until September 30, 2027.

“[The Defense Production Act] has been used to fund minerals projects by both [former President Joe] Biden and Trump,” Hayworth said.

Targeted minerals

With the majority of funding available under the DOD, “early signs predictably point toward a focus on materials with a strong defense nexus,” Hayworth said.

“The [MP Materials and] DOD deal is the first project to receive support from [the Defense Production Act] since OBBB topped off this pot of funding,” she added.

On Thursday July 10, the only rare earths producer in the US, MP Materials, announced it had entered an agreement with the DOD for a comprehensive, multi-billion-dollar long-term package of investments that includes convertible preferred equity, warrants, loans and price floor and offtake commitments. The company will use the proceeds from the agreement to build its second magnet production facility in the country.

“This partnership will facilitate the expansion of MP’s rare earth magnets manufacturing capabilities, for which both defense and commercial sectors currently rely overwhelmingly on [China]-controlled supply chains,” Hayworth said.

“The deal will also help them build out heavy rare earth (HREE) separation capacity. The [Chinese Communist Party] currently controls 99%+ of global HREE separation capacity, and HREEs are particularly important for defense applications (including for use in permanent magnets),” she added.

45X Advanced Manufacturing Tax Credit

Meanwhile, a majority of the proposed cuts under the 45X Advanced Manufacturing Tax Credit were moderated in the final version when compared with the version that had passed the House of Representatives on May 22.

A phase-out of 45X tax credits was introduced under Section 70514 of the OBBB, but the dates were extended when compared with the May 22 version.

The 45X tax credits for critical minerals are permanent under the current law. Under the OBBB, critical minerals produced in 2031, 2032 and 2033 will be entitled to 75%, 50% and 25% of their tax credit value respectively. The program will be completely eliminated for critical minerals produced after 2034.

The OBBB also adds metallurgical coal to the list of critical minerals eligible for 45X tax credit. Tax credits for steel-making coal terminates after 2029 under the OBBB.

In a move celebrated by Battery Council International (BCI), the phase-out of 45X tax credits for batteries and battery components was also extended from the May 22 version, like for critical minerals.

“This vote sends a powerful message that America is committed to building and maintaining the world’s most advanced battery manufacturing ecosystem,” BCI president Roger Miksad said in a statement. “These credits don’t just support individual companies — they strengthen our entire domestic supply chain and ensure America remains the global leader in battery innovation.”

Long-term implications of critical minerals funding changes

The timelines introduced for both 45X and 30D credits will influence electric vehicle (EV) demand, but the affect of this on overall battery raw materials demand is likely to be limited, according to policy experts.

“In our view, the loss of meaningful demand signals for US minerals from the automotive sector will be the biggest difference,” Hayworth said.

“The [Inflation Reduction Act] structure of tax incentives for both producers (45X) and manufacturers (30D) purchasing US-based minerals not only gave producers a buffer to compete in a global market dominated by comparatively lower-cost producers in Asia, but also gave manufacturers an incentive to purchase said minerals, even though they came with a higher price tag,” she explained.

“The decreased value and increased compliance costs associated with the OBBB 45X rollbacks and the full repeal of 30D definitely changes the economic rationale for companies to invest in US production and a more secure supply chain,” Hayworth added.

Internal Revenue Code 30D provided a credit of up to $7,500 to qualified buyers of new clean vehicles, including EVs. For the vehicle to be eligible for the credit, the manufacturer had to meet several requirements, including those related to qualifying content of critical minerals and battery components; the vehicles could not contain battery components or critical minerals extracted or manufactured by a Foreign Entity of Concern (FEOC).

Section 70502 of the OBBB repeals credits for new EVs for vehicles acquired after September 30, 2025.

“Certain minerals might be impacted by the EV decision,” Empedocles said.

“Even without [demand for] EVs, there is not enough lithium in the US. Data centers consume a lot of lithium and critical minerals, and the rate of growth in data centers has been greater than the rate of growth in EVs,” he added.

Industry participants agreed that the effect of the repeal of these incentives will be limited.

“The bill is pulling back on some incentives but so much of that is not made in the US, they are mostly imported,” a second US-based trader said.

“It is not like EV sales in the US were driving the [battery raw materials] market,” the first trader added.