Can the U.S. compete with China in the Rare Earth War?

Rare earth materials have shaped modern society’s manufacturing and are irreplaceable; without them we would not have touch screen phones, batteries for electric cars, or the latest engines for our military’s fighter jets.

These unique metals perhaps don’t get the recognition they deserve and there is a lot we still don’t know about them.

The first thing to know is that they are not quite so ‘rare’ but are rather pricey due to their importance in the production of consumer electronics, renewable energy, and national defense. Even though they are abundant, these metals can only be found in particular locations around the world and tucked away inside mineral deposits across country borders. This means that trade in rare earth elements is often dictated by unexpected developments in international relations rather than the ups and downs of the global economy.

The U.S. was the world's largest supplier of rare earths in the previous century and sourced its metals from India, Brazil and South Africa.

In the 1990’s, America started to lose its rare earth crown to China. With a third of the planet's total supply at his disposal, Deng Xiaoping, the leader of the People’s Republic of China from 1978 to 1989, realised how indispensable they would become to future machinery and set out to expand rare earth mining operations. 

The Communist Party started offering rebates on export taxes with the hope it would encourage independent and state-run enterprises to start mining rare earths. It worked – today, China now controls 85 percent of the rare earth materials market.

Now, with so much dominance in the industry, when China threatens to withhold or cut back on exports, the price of rare earth metals escalates. 

Not wanting to rely on China’s unpredictable foreign power over something as essential as rare earths, U.S. policy makers and political commentators are demanding Congress to both protect and rebuild America’s rare earth mining infrastructure. 

Currently, the U.S. has just one operating rare earth mine, Mountain Pass, which was built above a 1.4-billion-year-old carbonatite deposit in southern California, the mine was closed down in 2002 due to environmental concerns. In 2017, MP Materials purchased Mountain Pass and restarted production.

The mine's reopening was the first step in getting America's rare earths industry back on track. In 2020, President Donald Trump signed an executive order calling for an end to U.S. dependence on Chinese suppliers. 

However, the executive order may have done the exact opposite of what it wanted to achieve. While the federal government provided Mountain Pass' primary shareholder MP Materials with over $9 million in funding, an entity partially owned by the Chinese government named Shenghe Resources possesses an 8 percent shareholder stake in the company.

Meanwhile, it would seem China are only looking to expand within the industry as China’s mining corporations make their way into the rare earth industries of other countries as well. At the start of 2021, Shenge made an agreement with Australian mining company RareX to create a joint venture mining operation in the Outback. Whilst on the other side of the world, Shenge has acquired minority stakes in a mining operation in Greenland.  

U.S. lawmakers have now shifted focus onto increasing the nation's output. During the coronavirus pandemic, California Congressman Eric Swalwell formed the Congressional Critical Minerals Caucus, a bipartisan attempt to "help the United States develop the technical expertise and production capabilities to assure a long-term, secure, and sustainable supply of energy critical elements."

A few weeks ago, the "Rare Earth Magnet Manufacturing Production Tax Credit Act" was introduced by the Caucus that would incentivize the production of rare earth magnets used in electric vehicles and clean energy generators. USA Rare Earth, an investment company financing domestic mining operations, has welcomed the legislation, with CEO Pini Althaus claiming it could enable domestic producers to mine as much as 17 percent of the American economy's demand for permanent magnets.

Founded less than two years ago, USA Rare Earth has already established itself in restoring America's rare earth industry. The company owns 80 percent of a joint venture mining operation set to take place in Hudspeth County, Texas. And with Biden administration's hope to get half of Americans driving electric vehicles by 2030, USA Rare Earth created a 20-year mining plan that could make this benchmark achievable.

The U.S. is certainly making strong attempts to regain control of its domestic supply of rare earth materials. Time will only tell if they succeed.

Noam Chomsky said of the present situation: "If China gains a near-monopoly over rare earths, they will be in a powerful position to influence choices and policies of other states. From China's point of view, it certainly makes sense to gain as much control as they can."

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Source: Big Think