US Faces Uphill Battle Against China’s Rare-Earth Dominance, Experts Say
© AP Photo / Andy Wong
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WASHINGTON (Sputnik) - The US will be hard-pressed to break its rare-Earth dependence on China, a reliance of which the Biden administration has deemed a national security threat due to steep regulatory hurdles along with a lack of capabilities and technologies, the types of which Beijing has developed for over 30 years, experts told Sputnik.
China has a virtual monopoly on nearly all of the 17 rare-Earth elements (REEs) on the periodic table - critical minerals used in a wide-range of advanced applications, some of which are indispensable for developing green technology like electric vehicle motors. The US Geological Survey (USGS) listed sixteen of the REEs among 50 critical minerals - critical being defined as essential to US economic and national security and highly vulnerable to supply disruption.
The Biden administration has allocated or invested billions on developing critical mineral capabilities with demand for some metals expected to rise as much as 400% in the next two decades amid the green transition.
A US State Department official in early December said the US is looking at funding about a dozen mineral projects overseas to mine resources used in low-carbon technologies. The official said the United States will need an "exponential" amount of rare-Earths. The funding may come through a mineral security partnership program with about ten allies, including Australia, Canada, Japan, and the EU.
In terms of domestic production, the United States currently has one active rare-Earth mine, owned and operated by MP Materials. However - the company must send 100% of the rare-Earth oxide (REO) mined to China for processing to deliver finished products.
Marina Zhang, an associate professor of research at the Australia-China Relations Institute, University of Technology Sydney, believes the Asian giant’s edge will not be easy to overcome. Beijing, she added, has developed massive capacity and technical capabilities that have allowed China to control 90% of rare-Earth metallic production and 85% of refined production.
"China has clear structural advantages over its competitors, if any, for the next 10-15 years," Zhang told Sputnik. "Such advantages include lower mine and factory permit and licensing costs and timelines, and relatively lower labor and environmental costs, as well as advantages in talent and patent accumulations."
The US is particularly concerned with reliance on imports of Neodymium-Iron-Boron (NdFeB) permanent magnets used in critical products like electric vehicle (EV) motors and guided missile actuators. In September, the Commerce Department ruled that dependence on China for this product constituted a national security threat, but stopped short of imposing tariffs.
The Biden administration has invested at least $200 million to boost domestic production to close this permanent magnet gap. MP Materials, which secured $35 million of the funding, forecasted that it could produce the magnet - from cradle to grave - at a newly-built facility in Texas by the end of 2023.
Zhang, however, said even if MP Materials delivers NdFeB magnets, the US still lacks access and know-how to incorporate two key rare-Earth elements - terbium (Tb) and dysprosium (Dy) - which are necessary to ensure high heat resistance.
"Standard NdFeB magnets, without Tb or Dy, cannot be used in high-temperature applications such as EV drive motors, wind turbine motors, elevator motors, industrial robotics and advanced weapons systems," Zhang said. "No other country can make a high-temperature NdFeB magnet without Chinese inputs of separated Tb and Dy. China is, so far, the only source for a guaranteed, uninterruptable supply of high-energy NdFeB magnets."
Zhang also pointed out that if the Americans close the capability gap, they at some point will again face a dearth of raw rare-Earths.
"Another hurdle: US regulatory and permitting process for opening a new mine typically exceeds a decade or more, which will limit MP Materials, for example, to explore new mine sites," Zhang said.
The MP Materials mine in California sits on top of a mere 2.1 million tons of rare-Earth reserves while China has at least 44 million tons. The company, in its most recent quarterly filing with the Securities and Exchange Commission (SEC), conceded there is a risk environmental regulations will impede development of resources.
Zhang also underscored that, as the US takes steps to enhance capabilities, China will not stand idly by.
"China will not stay still for its competitors to catch up," Zhang said. "Instead, it continues to use industrial policy to support both state-owned and private enterprises to strengthen its entire RE value chain, including preserving its RE reserves and developing technological capabilities in applications for high-end RE products, such as high-energy NdFeB magnets."
In addition to minerals, the US has fueled a trade war with China on the microchip front by blacklisting over 30 entities last week in a bid to deny them advanced equipment needed to make high-end semiconductors.
Professor Sunitha Raju of the Indian Institute of Foreign Trade in New Delhi told Sputnik that China could respond by indigenizing the entire microchip value chain and boosting its already-dominant position in the lower node chip domain. Moreover, a number of US tech giants might resist because they rely on China for a substantial portion of revenue, Raju added.
Raju also said China could "weaponize" its dominance in rare-Earth materials that are used for chip manufacturing. At that point, she warned, the US-Chinese trade confrontation could take an "ugly turn."
Deeper Security Concerns
In addition to the economic and supply chain impact, Washington is also worried about more sinister threats posed by Chinese critical minerals - especially those that can be found on thousands of US weapons systems.
Earlier this year, the Pentagon halted delivery of F-35 jets upon discovery that a subcontractor used a Chinese-origin rare-Earth magnet on an engine part.
In October, the Defense Department issued a waiver allowing Lockheed Martin to resume deliveries of the jets while setting about looking for alternative sources. The Pentagon confirmed that the component was not transmitting sensitive information back to China and did not affect the safety or airworthiness of the fighter jets.
The crisis prompted lawmakers to introduce a bill in early December that calls for investing $1 billion to ensure the Pentagon secures "critical mineral independence" from China by 2027.
A member of the US Defense Policy Board, Brookings Institution Senior Fellow Michael O’Hanlon, indicated that although a full blown trade war with China is not necessary, caution should be taken with respect to security-related materials.
"It’s not crucial that we decouple from China on basic commodities. I just wouldn’t want exclusive sourcing from China," O’Hanlon told Sputnik. "On components, however, we don’t want Chinese input in case it’s doctored."
China has repeatedly pushed back against US anti-trade policies and rhetoric, accusing Washington of economic coercion, unfair market segregation, and hindering cooperation.
