The Geopolitics of Rare-earths Elements and a History of Chinese Dominance in the Market
Despite their name, rare-earths elements (REE) are not hard to find at all: they are all over the world. What is difficult is mining them in such a way to make them economically profitable. And in the last thirty years, only one country has managed to succeed in doing so: China. It was, however, far from like this sixty years ago. Then, the leader as far as REE were concerned was the USA, where the “Critical Materials Institute” played a fundamental role.
“Global rare earth reserves as of 2020, in 1000 metric tons REO”, 2020.
How did the situation change so drastically from the 1950s? The reason breaks down essentially to two important factors: the ability of the Chinese government to keep REE’s prices low, therefore always putting them at a competitive advantage, and the state-backed huge investments in infrastructures to mine REE and technologies to produce end-products from them.
The results of these policies are quite extraordinary: today China accounts for 81% of rare-earth elements production and it has supplied 80% of the REE imported by the US between 2014 and 2017. Moreover, it has recently become the world’s biggest importer of the materials as well, making itself practically ubiquitous in the whole process.
“Rare earth metals productions and reserves in Tonnes”, 2018.
“Uses of rare earth elements in the US”, 2017.
Why are they so relevant?
With the Western desire to become carbon neutral by 2050, the topic of rare-earth elements has resurfaced, as virtually every electric vehicle, as well as solar cells or magnets for wind turbines is built employing REE. But the USA has another sector whose ties with China’s REE export is crucial: national defence. For example, Lockheed Martin Corp. and Raytheon Co missiles use REE in their guidance systems and sensors. And it is then not surprising that during the ongoing trade war between China and the US, the latter has yet not imposed tariffs on Chinese exported REE.
With that in mind it is clear why President Biden at the end of February has included in the “Executive Order on America’s Supply Chains” the topic of REE, following more or less the same strategy that former President Trump had put in place when in charge. The idea is pretty straightforward: the US cannot be so dependent on a crucial product such as rare-earth elements on China, it needs to develop his own parallel supply chain in order not to collapse should another Chinese export-ban occur. In order to reach this goal, the US needs support from his Asia-Pacific allies, first of all Australia, which is the only other relevant player in the REE market, accounting for roughly 11% of it. The Australian rare-earth miner “Lynas” will be in fact supported by the US Department of Defence in building a processing facility in Texas, and more and more cooperation is expected in the future.
Could we envision a future of REE without China’s influence?
The short answer is no, what we can nonetheless forecast is possible less dependency on China. How? By looking at Japan for example. Being the clear target of the Chinese export ban in 2010, the nation has quickly learned the lesson and started to develop his own strategy. The then and ongoing governments have moved in various directions to ensure they would not find themselves in the same weak position they experienced ten years ago.
First of all they have, also for environmental reasons, started to recycle the REE whenever possible. Second of all, they have heavily invested in research in substitution of REE, and thirdly they have promoted international diversification with grant programs. The results have been promising: by 2017 30% of REE imports came from Asian countries other than China, therefore putting Japan in a situation much better than the one it was facing in 2010, making then possible for the country to cope significantly better should China decide to switch to a more protectionist strategy.
The “green revolution” will be the geopolitical chessboard of the next decade; if the US want to -as they have done in the past- write the rules of the game and win it, they need to reindustrialize the nation, finance research and education to rebuild expertise in the field and cooperate closely with Japan and the other allies against China’s immense power.
References:
https://worldview.stratfor.com/article/geopolitics-rare-earth-elements
https://twitter.com/alearesu/status/1364672597829509130
https://www.nbr.org/publication/chinas-control-of-rare-earth-metals/
https://www.wired.com/story/rare-earths-next-pawn-us-china-trade-war/
https://www.reuters.com/article/us-usa-china-rareearth-explainer-idUSKCN1T00EK
“Le potenze del capitalismo politico, Stati Uniti e Cina”, Alessandro Aresu, 2020
