The Biden administration has taken strong action to address risks to America's supply chains and economic security posed by overreliance on imports from China, particularly for critical materials. On May 14, President Biden announced plans to increase tariffs on Chinese imports valued at $18 billion, citing China's "unfair, non-market practices" that threaten U.S. economic security.
Securing domestic supply chains for key materials has been an ongoing priority. Even before the new tariffs, the U.S. Department of Defense (DoD) launched a major initiative to re-establish U.S. production capabilities for 22 essential chemicals used in defense applications like munitions as well as vital commercial sectors such as agriculture and pharmaceuticals. This includes energetic materials, non-energetic chemicals, precursors and stabilizers/moderants that had previously been solely sourced from China. The DoD launched the program through its Defense Production Act Title III Program in collaboration with the American Center for Manufacturing and Innovation (ACMI) in Austin, Texas.
Can you provide some background on this initiative and how both of you became involved?
Boelscher: ACMI finds and evaluates DoD needs, and then we help facilitate that process with folks who may not have been in the DoD space before. It helps companies in multiple ways. We help them with the speed of contracting with the DoD; that's normally not a very quick process. And we help fulfill the DoD’s need of anchoring, reshoring and onshoring critical technology that's been out of the country for sometimes a decade or more. That is a serious security risk to the defense industrial base.
Erickson: Almost all of the critical chemicals used by the DoD now are from China. If China were to shut down its exports, the United States would be really in a bad way. We sort of saw that during the COVID-19 pandemic when suddenly, a whole pile of medicines that we thought were just ordinary day-to-day sort of things disappeared. The same thing happened in the chemical world. So, we're very dependent on China for the backbone of our defense department, as well as our day-to-day basic chemicals. This initiative is aimed at bringing back those critical chemicals that the defense department needs. But there's a bigger picture of that, too. I think when you look at just the day-to-day household chemicals, they're all coming out of China, too. So while this initiative is focused on defense, there's a wider world out there.
Can you explain what type of chemicals you’re developing for the DoD?
Erickson: Right now, we’re making 1,3,5-trichlorobenzene. The DoD uses this material and can only source it from Asia. So, we've developed a batch route to start with, and we're successfully making high-purity, good-quality material. We’re now converting that to a continuous process.
Why wasn’t this particular material already being produced in the U.S.?
Erickson: As offshoring increased, manufacturers of these intermediate-scale raw materials could not compete with overseas manufacturers with their lower costs, often associated with lower labor costs and lower environmental regulations. With this competition, they closed their doors or switched product offerings. Lacamas' chemistry expertise allowed us to develop a manufacturing process that is both commercially viable and meets the more stringent environmental regulations of the United States.
When you talk about scalability challenges, what's significant about the way you're manufacturing the product?
Erickson: We've looked at old chemistry and adapted it to the present day. So, in the old days, this kind of chemistry was done, but without all the instrumentation and things we have today. Using the instrumentation and the knowledge that we have, we've been able to take a chemistry that was fairly dirty in the old days, clean it up and cut down on the environmental footprint of this material. We really cut down on the use of chlorinated hydrocarbons and, at the same time, delivered a high-quality material in an economical fashion.
You said you've been able to do it more sustainably. Are you talking about material substitution or is that something to do with the actual manufacturing process?
Erickson: Well, I think it's both. We're looking at using solvents that are environmentally benign instead of ones that are long-lasting sort of beasties. At the same time, when you run a continuous process, it seems you can recycle a lot of things back around, so you just don't have this huge pile of trash at the back end, as well as your product. You want to take everything you can and just recycle it back into the origin of that. And then, if you can get your processes to be higher yielding, that means they make less trash. Everybody wants to make higher-yielding projects because that reduces costs and also means lower environmental impact.
What are the next steps for this project?
Erickson: The DoD has given us more money to take this forward. We made the samples. We took that to the pilot plant. We've made 50 to 100 kilos of good-quality material in that pilot run, and now we're taking that forward. That's a batch process we've made, and now we're backing up and doing further research on that, trying to convert that into a continuous process. Continuous processes are higher yielding and more sustainable, but they're more work. Typically, you start off with a laboratory batch process. You go to a pilot batch process, and you scale to the plant batch. Then, once that's all working, you'll take what you've learned and make it into a sustainable continuous process.
What’s your timeline for scaling production?
Erickson: That's going to happen this year, and shortly after that, we will be building a plant to make this material here in Portland, Oregon. Then, the DoD will start taking that material in about a year or two. But I'd like to point out that ACMI put us on the track to do this. Without them, I don't think we would've gone down this path. The defense industry is contracted into a few large companies that aren't interested in taking on these relatively small projects. ACMI has been able to parse these things out and then alert us to these opportunities, and then we took that and ran with it.
Do you see partnerships like that being increasingly important in the chemical industry to secure domestic supplies?
Boelscher: The Lacamas program was a pilot for us. It was a critical-chemicals pilot. We identified three chemicals to go on trial. This is a $5 million contract. Because of the success we had there, we were awarded a $15 million contract to continue it, and that's going to include at least 10 more companies, depending on what we can fit into the budget. And so, this idea of finding a DoD need and then looking to see how commercially available it is, and then bringing folks in that aren't familiar in the DoD space, make it easy for the DoD to contract instead of going through a huge file of proposals. We do that work, and then we partner, and Lacamas is one of the initial success stories.
Erickson: These government proposals are typically 100 pages long. ACMI goes through them and then cuts them down to English. They gave us sufficient cash in that grant to get us off the ground. And then, that's moved forward into an actual plant for the DOD.
Do you see applications beyond defense? Are there potential consumer applications for this as well?
Erickson: One of the things that drove us in this direction was that we were sourcing out of Asia for an intermediate we make for the pharmaceutical world. It's one of the major pharmaceutical companies here for a major pharmaceutical need. So, we're expecting that a substantial amount of material that we make here will go not just to the DoD but also into the pharmaceutical world.
