Week of May 04, 2021

Rare Earths – A Strategic Assessment


As concerns about open hostilities between China and the US increase, the issue of Rare Earth Elements (REEs) scarcity increases.  For years, China has managed to totally control the mining and refining of rare earths.  Given the importance of REEs in defense technology, it’s time to take a levelheaded look at REEs, defense technology, and whether or not America is facing a critical shortage of the group of elements.

Today, REEs are considered strategic minerals of the 21st Century.  This is a dramatic change for a group of elements that were once considered merely chemical curiosities.  China is threatening to use rare earths as a “nuclear” option in their growing trade riff with the US.  China accounts for more than 70% of global output of rare earths and it has actively restricted exports of rare earths to the US as the threat of a trade war has waxed and waned.

Two years ago, the Commerce Department released a report requested by President Trump to investigate US access to rare earths in an emergency.

The report said, “The United States is heavily dependent on critical mineral imports…If China or Russia were to stop exports to the United States and its allies for a prolonged period – similar to China’s rare earth embargo in 2010 – an extended supply disruption could cause significant shocks.”

Rare Earth Elements are relatively unknown to the average person.  Names like europium, praseodymium, neodymium, lanthanum, samarium, cerium and gadolinium rarely get mentioned in chemistry classes, much less normal conversation.  Although called “Rare Earths,” they are abundant in the Earth’s crust.  It was the fact that they were hard to extract and purify that led early scientists to think they were rare.  Before World War Two, the world’s supply of many of these elements was measured in grams and merely laboratory curiosities.  And the lack of samples guaranteed that scientists didn’t spend much time studying their properties.

The growth in electronics in the post WW II age changed all that.  Today REEs are critical for optics and electronics.  Europium, for instance provides the red phosphor in color cathode-ray tubes and liquid crystal displays used in computers and televisions.  There is no known substitute.

Rare earths are not just important for our cell phones, computers, and DVD players.  They are increasingly important in America’s national defense, which leaves the Department of Defense concerned that the United States may not have enough rare earths to wage a war, especially if China cuts off our supplies.

U.S. military technologies such as anti-submarine warfare, smart bombs, and night vision rely heavily upon rare earth elements.  But rebuilding an independent U.S. supply chain to protect the country from foreign dependency could take up to 10 years, according to a recent report by the U.S. Government Accountability Office (GAO).  The GAO report was commissioned to look at national security risks that could arise from our dependency upon rare earth elements.

These are some of the military technologies that could be hurt with a rare earth embargo.

Rare earth elements are a critical part of devices such as lasers, radar, missile-guidance systems, satellites, and aircraft electronics. And many military systems also rely upon commercial computer hard drives that use rare earth magnets.  Specific examples of rare earth-driven technologies include the navigation system for the M-1 Abrams battle tank, and the electric drive for the Navy’s DDG-51 destroyers.   The GAO report states, “Defense systems will likely continue to depend on rare earth materials, based on their life cycles and lack of effective substitutes.”  The rare earth element neodymium, for instance, is very magnetic and is used in everything from computer hard drives to wind turbines and hybrid cars.

But is it as bad as the US Government makes it?  In many ways, it is like looking at a glass of water – is the glass half full or half empty?

The US has world class REE mineral reserves, and the infrastructure is in place to exploit them.  The U.S. once supplied most of the global supply of rare earth elements, and manufactured rare earth products such as the neodymium magnets.  But rare earth processing has largely shifted to China since the 1990s.

The key to America producing enough REEs soon lies in the REE mine at Mountain Pass, California.  Mountain Pass is perhaps the largest non-Chinese rare earth deposit in the world.  For years, the United States was self-sufficient in the mining of REE thanks to the Mountain Pass deposits which were discovered in 1949.  Two prospectors were looking for uranium deposits, when their Geiger counter detected high radioactivity in a rock outcropping.  The prospectors staked a claim and sent off ore samples.  When the assay results came back, they discovered that they had discovered a rare earth mineral called bastnaesite, which was worthless at the time.

Mountain Pass was developed at a critical time.  By the 1960s color televisions were finding their way into every American household and europium was critical for their television tubes.  As the mine developed more efficient solvent extraction processes to extract europium, they produced in turn more REEs, which allowed scientists to find new uses for them.  Many of these new applications were in defense industries.


The problem for REE mining in the US

The Chinese have used their chokehold on REEs to maintain their dominant position in the industry, while discouraging development of a competitor that could mine REE ores and then turn them into “consumer ready” products.  For years, the Chinese would manipulate REE prices to maximize profits, while preventing development of a competitive REE sector in the US.  Even when the US managed to mine REE ores, the concentrate still had to be shipped to China for final refining.

That has changed.  MP Materials, which owns Mountain Pass Mine has acquired all the equipment for refining and is in the process of constructing a refinery on site.  The refinery is expected to be in operation next year.

“Our mission is to fully restore the [rare earth] supply chain to the United States of America,” said James Litinsky, MP Materials CEO.  “We are going to invest that capital.”

He continued, “We will ultimately, over time, make the magnets ourselves in the United States.”

Mountain Pass clearly can meet those goals.  The mine is the largest producer of REEs in the Western Hemisphere and produces 15% of the world’s production of REEs.

In September, President Trump signed an executive order to encourage REE production in the US.

The US government has also stepped in to ensure a constant supply of orders for the mine.  In November, the DoD gave the company nearly $10 million to begin refining the REEs on site.

Another factor that may help encourage mining at Mountain Pass is the recall election for Democratic Governor Newsome, whose environmental policies have discouraged mining in California.  If the California governor is recalled, a new governor may move to encourage REE mining.


But will that be enough?

While REE uses are critical in many defense technologies, it is easy to forget that REE demand is dominated by commercial demand – from electric vehicles to cell phones.

Litinsky noted that although Defense orders will be important, only about 1% of the REE demand is defense oriented.  The other 99% will be used for communications, wind turbines and electric vehicles.

So, is the US critically short of REEs?  No, it is not as bad as some articles make it out to be.  Not only is Mountain Pass producing REE ore, it will soon be producing refined REE products.  There is also the government’s strategic reserve of REE material.

There is also the option of recycling.  The rare earth element neodymium is used in powerful magnets is easily separated from consumer electronics.  The same is true for other REEs.

As we noted, rare earths are not rare.  There are mineral deposits across the world and China would be hard pressed to control all of them in a crisis.  Soon REEs would find their way from other countries to the Mountain Pass refinery.

Clearly, the REE crisis is a case of a glass that is half empty.  China still dominates the REE sector, but the US is moving quickly to establish itself as a major producer.  However, while it can supply defense needs, it still has a problem meeting all the consumer demand.

There is also the REE shortage outside the US, but still found in Western nations.  One must wonder if EU nations, without REE reserves, will modify their foreign policy towards China to keep the REEs coming.  Would German auto manufacturers, anxious to produce electric vehicles, push the government to make concessions to China?

That may be a bigger threat.