China is rapidly monopolizing rare earth elements, why the world must act now to stop the dragon

By Vaishali Basu Sharma

US Energy Secretary Jennifer Granholm recently warned against China’s “bigger” renewable energy technology and supply chains. Global interest in rare earth elements (REE) to advance science, technology and innovation (STI) interventions and emerging geopolitical realities has increased.

Given that China is by far the world’s largest materials producer and has displayed a willingness to use its exports as a punitive geoeconomic tool, the strained relationship between the countries draws attention to supply chain disruption. worldwide in the rare earth industry.

China’s REE monopoly

In 2021, China produced 168,000 tons of rare earths and the United States imported nearly 78% of its rare earth compounds and metals from China.

Declining domestic production means the U.S. rare earth import bill is growing every year. In 2021, the United States imported rare earth materials worth $160 million, a significant increase from $109 million in 2020.

While the value chain of REEs and their applications have been widely mapped, China’s actions of using rare earth sourcing as economic leverage for geopolitical purposes have given the topic some urgency.

Trade and geopolitical frictions between the United States and China are impacting rare earth investment prospects. China, the United States, Australia, Myanmar and India have the largest known reserves of REE. And according to some projections, India may even have more rare earth resources than Australia.

Lately, India produced less than a ton of rare earth materials in the domestic market and sold from its inventory. Over the period 2021-2030, Australia’s rare refined production is expected to grow by 69% per year, with possible separation facilities in other countries.

Its Nolans projects, a mine and processing facility, north of Alice Springs, aim to produce nearly 5% of global demand for neodymium and praseodymium (NdPr), used in high-power magnets in the early stages . Australian companies have also indicated their willingness to pursue opportunities in critical minerals in India.

Trade and geopolitical frictions between the United States and China are impacting rare earth investment prospects. Given recent developments, collaboration between the United States and Australia in the mining and production of rare earths appears to be increasing.

Australian company Lynas Rare Earths, one of the largest in the world outside of Chinese companies, is in talks with the US Department of Defense to build a multimillion-dollar processing plant in the United States.

File Image: Xi Jinping

REEs and their many uses

Because they are not confined and concentrated in specific areas, their geological exploration and extraction is an arduous task, a set of 17 metallic elements are classified as REE. They are “rare” because they do not occur anywhere in sufficient quantities to extract cleanly and economically.

Some rare earth minerals are more abundant in the earth’s crust than copper, and all 17 rare earth minerals are found more frequently in the earth’s crust than silver. Since they occur together, separating them chemically is a highly specialized and expensive undertaking.

chinese rare earth elements
Representative image (Pexels.com)

Apart from their mysterious occurrence, these closely related metallic elements have nuclear, metallurgical, chemical, catalytic, electrical, magnetic and optical properties that make them indispensable and non-replaceable in endless modern applications.

Without these ETRs, ordinary life as we know it today would not be possible. In 2018, the US Geological Survey released a list of 35 minerals and metals critical to progress and national security. Along with rare earth elements, the list includes other vital minerals that are essential and irreplaceable in powering most modern technologies.

Of the 35 critical minerals and metals identified by the US Geological Survey, China ranked first among producers of 16 elements with a monopoly in global production of yttrium with 99% share, gallium with 94% , magnesium metal with 87% share. , tungsten with 82% share, bismuth with 80% share, antimony with 72% share and REE with 80% share of world production.

China also produces around 60% or more of the world’s graphite, germanium, tellurium, indium, antimony, vanadium and fluorspar.

The United States is a leading producer of only two of the 35 critical minerals, namely beryllium and helium, with no primary production of 22 minerals and five mineral by-products on the critical minerals list.

Every advanced weapon in the US arsenal today, from tomahawk cruise missiles to F-35 fighter jets, Aegis-equipped destroyers, precision-guided weapons to stealth drones, and everything in between, depends on components made from REE and materials that are almost exclusively made in China.

Each F-35 aircraft produced jointly by 14 allied nations contains 920 pounds of rare earth elements of Chinese origin.

Should more countries increase REE production?

The global rare earth market is now controlled by China. Given that the PRC has drastically reduced its exports of rare earths, it is perhaps not an exaggeration to imagine that it will soon impose a total embargo on exports of these metals.

The disruption in the availability of rare earths will affect the manufacturing of strategic assets, from semiconductors and batteries to defense systems.

With abundant rare earth resources, India was one of the first nations to give proper importance to rare earth elements by making organizational arrangements to regulate and develop them.

Unfortunately, over time, global developments combined with national inertia have weakened any competitive advantage India had in the exploration and exploitation of rare earths over other countries.

India aspires to become a world leader in technologies such as advanced ballistic systems, industrial machinery, semiconductors, electric vehicles and clean energy systems. Although it has the world’s 5th largest reserve of rare earth elements, India imports most of its rare earth requirements from China in finished form.

Several structural issues within the Indian rare earth ecosystem have inhibited the evolution of a spectrum from exploration and mining to production of rare earth materials. It has failed to exploit these resources due to strict regulations and excessive government control.

India has almost 35% of the world’s total beach sand mineral (BSM) deposits. Unfortunately, for rare earth research in India, the main constituent of BSM is monazite, the mineral from which radioactive thorium is extracted. Because of this connection from the start, rare earth research became associated and tied exclusively to the Department of Atomic Energy.

If India can exploit its BSM deposits, it can capture a good chunk of the global rare earth supply chain. The Modi government has prepared a proposal to open up two restricted sectors – beach sand minerals and offshore mining for exploration activities by private actors.

Critical minerals dominated by a single producing country include niobium from Brazil, cobalt from the Democratic Republic of Congo, and platinum group metals from South Africa. Chinese producers have successfully negotiated long-term supply agreements in these countries.

In the past, China has demonstrated its ability to directly affect the global supply chain with these items. In 2020, in response to a US defense deal with Taiwan, China threatened to cut rare earth supplies to three US defense manufacturers, including F-35 producer Lockheed Martin.

Recently, in a move that is sure to bring new challenges to the global rare earth supply chain, China merged three state entities to form the China Rare Earth Group Co. Ltd to form a mega-corporation. which will represent nearly 62% of its national market. earth supplies.

The stock merger will have implications for pricing power and production efficiency, further increasing China’s global competitiveness in the rare earth sector.

Critical minerals and metals affect strategy and geopolitical considerations between nations, and China has precisely grasped this and acted accordingly. It is high time that other countries actively pursue REE production – beyond academic interest – to contribute significantly to its value chain.

  • Vaishali Basu Sharma is a Strategic and Economic Affairs Analyst. She worked as a consultant to the National Security Council of India (NSCS) Secretariat for almost a decade. She is now associated with the Policy Perspectives Foundation. PERSONAL VIEWS
  • You can reach the author at postvaishali (AT) gmail.com

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