By Irina Slav
Dominance is not a word that the Pentagon and the White House like to hear when it’s not preceded by “U.S.” Right now, amid a trade war with Beijing, it is a word that officials want to hear even less when it’s preceded by “Chinese”. Yet in one strategic area, there is a true Chinese dominance that has many people worried.
Rare earths are a group of 17 chemical elements crucial for a variety of products, from magnets to batteries, including EV batteries—a nascent battlefield for various battery technologies. China is home to 85 percent of the world’s rare earths production capacity, and unlike other countries, it has spend decades developing the most efficient technologies not just for extracting them but for processing these seventeen metals as well.
The United States, on the other hand, imports most of the rare earths it needs—with 75 percent of these imports coming from China—and there is a fear if China decides to use its rare earths monopoly as a weapon in the trade war, the damage could be significant.
There is a sound reason for this fear, because there is precedent of China weaponizing its rare earths production and processing capacity. Eight years ago, a trade dispute with Japan irritated Beijing enough to embargo rare earths exports to Japan. The frantic stockpiling sent prices sky-high.
Luckily, China is not the only place that has rare earths. In fact, there is at least one untapped deposit of these elements in the United States itself, and now two companies are preparing to tap it. USA Rare Earth and Texas Mineral Resources Corp. recently joined forces to develop the Round Top deposit in Texas, which, according to the companies, has abundant reserves of 15 of the 17 rare earths along with other minerals deemed critical for U.S. national security. What’s more, developing these reserves would be cheap enough to make it competitive. The joint venture of the two companies envisages capex of $350 million initially and estimates the payback period on this capex at just 1.4 years. Annual production is seen at over 2,000 tons with the economic life of the mine estimated at 20 years, to mine 14 percent of the existing resource estimate. Since expectations are that there will be more extractable resources, the mine’s potential life could span 140 years. Startup is scheduled for 30 months from now.
Meanwhile in Australia, the federal government recently selected 15 rare earths mining projects that it will support as part of a joint effort with the United States to stand up to the Chinese dominance. Together, these would require funding of US$3.9 billion (A$5.7 billion), The Financial Times reported recently.
“The critical minerals sector is vital for defence, with many of our advanced capabilities depending on them. That means it is essential we have a secure source of supply, especially given the current geopolitical headwinds,” Australia’s defense minister, Linda Reynolds, said as quoted by the FT recently.
Rare earths are vital for developed economies not just because of their defence industry applications, but because they are in every electronic device. Recycling is not an option because they are used in minute amounts, which makes extracting them for reuse too expensive for the time being. Beginning local production makes the best sense, even if it comes with a delay.