The Chinese communist regime has recently signaled that it could leverage its dominance in rare earth minerals, raising alarm bells in the United States. The threat has prompted the Biden administration to take action to reduce U.S. reliance on China for rare earth metals that are used in everything from smartphones to electric vehicles to fighter jets.
In 1992, Chinese leader Deng Xiaoping predicted the importance of rare earths to China’s future when he famously said, “The Middle East has oil. China has rare earths.”
Today, China is the dominant global supplier of rare earths, a group of 17 chemical elements used in the production of critical components of key technologies, which could easily be used as a weapon against other countries in a trade war or a conflict.
Beijing has already demonstrated that it could use rare earth elements as a retaliatory tactic. In 2010, China abruptly cut off exports of these elements to Japan during a conflict over a fishing boat. And at the height of the U.S.-China trade spat in 2019, Beijing sought to use rare earth exports as a “counter-weapon” against the United States.
And most recently, the Chinese regime officials reportedly explored whether curbing the export of rare earth minerals to the United States could cripple its production of F-35 fighter jets.
Faced with the threat of losing access to rare earth materials, the Biden administration is now seeking ways to reduce America’s deep reliance on China. President Joe Biden on Feb. 24 signed an executive order to “help create more resilient and secure supply chains for critical and essential goods.”
The order focuses on choke points in the supply chains of four key products, including rare earth minerals, semiconductor chips, large-capacity batteries for electric vehicles, and pharmaceutical ingredients.
It directs federal agencies to immediately conduct a 100-day review to identify supply chain risks and vulnerabilities for these key products.
These are the products where the vulnerability has become very clear, according to Julie Swann, a supply-chain expert who heads North Carolina State University’s department of industrial and systems engineering.
“We don’t even know the full extent of the vulnerability, or the potential impact. I think this is just the beginning,” Swann told The Epoch Times.
According to her, there are likely other products and supply chains that will come under review as the administration continues to detect more vulnerabilities.
It’s unclear what actions the administration will take following the review; however, there are different options depending on the product.
Speaking at a press conference, Peter Harrell, senior director at the National Security Council for international economics and competitiveness said “all tools are on the table” for the administration.
“We’re expecting we’ll be using a mix of incentives to encourage production here. We’re looking at ways to ensure there’s surge capacity available for things that might need to be ramped up quickly—stockpiling,” he said.
He added that the administration would also consider working with allies and partners to take collective actions to address future supply shocks.
According to Swann, it is expensive for any country in the world to try to be self-sufficient, and have all of the specializations and capabilities.
“What is likely to be a more sustainable approach is to make sure that a supply chain is robust to disruptions,” she said rather than just focusing on becoming entirely self-sufficient.
Rare Earths Are Abundant
Rare earth minerals are critical to the U.S. economy and national security. They play a vital role in many industries including consumer electronics, green technologies, medical tools, and defense. Rare-earth magnets, for example, are used in many hybrid and electric vehicles. These metals are also key to the production of weapon guidance systems, jet engines, sonar devices, and laser weapons.
Rare earth elements are abundant and easy to mine, nonetheless, they are called “rare” because they are difficult to separate and refine into a usable form.
In the 1980s, the United States was the world leader in the production of these elements and almost all U.S. production was coming from the mine operated near Mountain Pass, California, which was closed in the 1990s. The mine was reopened in 2013 after China restricted supplies.
In recent decades, China has gradually become the dominant power in both the mining and the refining of these elements. Today, China controls about 80 percent of the global supply of rare-earth minerals even though it contains only a third of the world’s reserves, according to U.S. Geological Survey (USGS) data.
Currently, the United States is fully dependent on imports of rare earths, with 80 percent directly coming from China.
China can “absolutely” limit exports of rare earths to the United States, according to Lewis Black, CEO of Almonty Industries, a Canada-based mining company that is specialized in tungsten, a rare metal.
“The mechanism to do so has always been in place and was recently strengthened in December 2020 with new laws that allowed the state to stop exports if deemed in the national interest,” Black told The Epoch Times, referring to Beijing’s new export control law, which came into effect on Dec. 1, 2020.
To counter this threat, the United States has the potential to catch up and expand the mining and refining domestically.
“Rare earths are plentiful but it’s really a question of whether local communities would welcome a mine opening up nearby,” Black said.
The processing required to produce these rare earth minerals is environmentally challenging and it also threatens human health.
“Mining left the United States in part not just because of cost but also for the optics as communities often objected to the presence of a mine,” Black said.
The biggest hurdle, he noted, would be reassuring the public that these mines can operate safely and environmentally responsibly.
“Most people have heard or seen horror stories regarding older mines and given mining has not been a dominant industry in the USA for a generation this reeducation of the public regarding modern methods will take time,” he said.
While rare earths are critical to the economic and national security of the United States, it’s unclear whether the Biden administration may promote ramping up domestic production and processing due to environmental challenges.
Japan Conflict
Beijing abruptly cut off rare-earth exports to Japan during a diplomatic clash in 2010 after a Chinese fishing boat collided with two Japan Coast Guard ships in the East China Sea. The export ban sent the prices for raw materials through the roof. The huge price spike worked against Beijing, as it encouraged new production in countries such as Australia and destroyed demand for Chinese rare-earth metals.
The resulting supply chain disruption led Japan, the United States, and the European Union to jointly launch a dispute settlement case through the World Trade Organization in 2012, which was ruled against China two years later.
An increase in prices led to an influx of capital in the rare earth mining industry, which helped kick-start mining projects in other parts of the world. However, this exploration boom was short-lived as the supply threat passed and the prices came down.
“That’s also the case now,” according to Harvard Business School professor Willy Shih.
“The real question is whether domestic sources will be economically sustainable over time,” he wrote in a recent op-ed in Forbes.
Shih believes the biggest challenge the United States faces in becoming self-sufficient in rare earths is economics.
A group of investors in 2018 restarted limited production of at least two rare earth elements at the mine in Mountain Pass. As a result, the domestic production of critical rare-earth mineral concentrates jumped 44 percent in 2019, making the United States the largest producer of rare-earth mineral concentrates outside of China, according to USGS. But almost all raw materials had to be shipped to China for processing because it creates toxic wastes that make it hard for the United States to deal with it.
In July 2019, President Donald Trump determined that rare earths are “essential to national defense” and activated Section 303 of the Defense Production Act to allow the U.S. military to fund private-sector efforts to build a domestic refinement capability.
The U.S. Department of Defense on Feb. 1 awarded more than $30 million to Australia’s Lynas Rare Earths Ltd. to build a Texas processing facility.
“Upon completion of this project, if successful, Lynas will produce approximately 25 percent of the worlds’ supply of rare earth element oxides,” the Defense Department stated in a press release.
Last year, the U.S. firm MP Materials also received the Pentagon funding for its rare earths separation facility in California.
To redevelop the U.S. rare earths supply chain, a bipartisan group of House and Senate lawmakers introduced proposals last year aimed at boosting domestic capabilities through tax incentives.