At a time when the U.S. still dominates the rare earths industry chain, the Mountain Pass mine in California alone met more than half of the world’s demand for rare earths. Once the world’s largest rare-earth mine, Mountain Pass has long since disappeared, and since the U.S. has no processing capacity, the only remaining rare-earth mine has to ship its ore to China every year, where it is refined into compounds and products and then sold back to the U.S. The U.S. has no processing capacity.
In an effort to end its dependence on Chinese rare earths and revive its rare earths processing capacity, the United States recently announced (November 17) the allocation of nearly $13 million to fund three companies to build rare earths facilities. The U.S. Department of Defense was authorized late last year to invest directly in separated rare-earth capacity. This is the first financial investment by the U.S. military in commercial-scale rare-earth production since the Manhattan Project of World War II produced the first atomic bomb.
No U.S. Processing Capacity
Although China has the largest known reserves of rare earth resources of any country in the world, rare earths are not rare. The U.S. Geological Survey says in its 2020 annual report that nearly 20 countries around the world are currently mining rare earths, including the U.S., Australia, and Myanmar, reporting that these elements, originally thought to be rare, are “relatively abundant in the Earth’s crust.
The U.S. has enough rare-earth deposits on its soil alone to last the country 100 years. Experts point out that China dominates the international rare-earth supply chain because it is almost alone in having the ability to purify, refine, and convert rare earths into precious minerals, magnetic powders, and other high-value products.
Felix K. Chang, a senior fellow at the Center for Foreign Policy Research, says, “Rare-earth production is a two-step process: first there’s mining, then there’s processing. Processing has been the gap, and China has dominated rare-earth production through this process. “
“Martijn Rasser, a senior fellow at the Center for a New American Security (CNAS) Science, Technology and National Security Program, said the U.S. is also mining rare earths, but only for beneficiation, and relies on China’s production capacity to produce the final product from rare earth elements. He said, “China is now dominating rare-earth mining, but this is not a big problem because there are many deposits in many parts of the world, and the crux of the problem is processing capacity, which is basically controlled by China.
U.S. Painful Loss of Dominance
In 1949, three American geologists stumbled upon a sample of a highly radioactive ore in Muntinpah. The near-miraculous element’s ability to change the properties of metallic materials spawned a new industry and eventually became an essential element in today’s cutting-edge high-tech applications. In the half-century history of the rare-earth industry, American rare-earth companies such as MoIycorp and Magnequench have dominated the entire chain of mining, processing, and refining, from color television graphics to the production of the most sophisticated and advanced materials. From europium in phosphors to permanent magnets in U.S. cruise missiles and stealth coatings for the F-117 stealth bomber, these two companies were the source of everything.
However, to the lament of observers, one of the two companies has now collapsed under the impact of China and the other has been acquired by China.
In 1995, a little-known investment firm, the Sextant Group, joined forces with two Chinese companies – Zhongke Sanhuan and China Nonferrous Metals Import and Export Corporation – to launch a tender offer for Magquan Magnetics. The U.S. could have blocked the offer based on national security concerns, but both the Clinton administration and the Committee on Foreign Investment in the U.S. (CFIUS) that year found no “compelling evidence” that a Chinese takeover of Magquan Magnetics would pose a risk to U.S. national security. The company, once the pride of the U.S. rare-earth industry, moved to China in 2000 and has now been renamed “Magquan Magnetics Tianjin”. The magnetic powder and magnet technology formerly owned by General Motors is now owned by China, and the U.S. has lost one of the pearls of the rare-earth industry chain.
The decline of the rare earth industry in the U.S. is not limited to this.
According to the U.S. Geological Survey, China began to rapidly dominate the international rare earths market at the end of the last century. In the mid-1990s, China mined about twice as many rare earths as the U.S., but just five years later, by 2000, China had mined 14 times as many as the United States.
Having already had a firm grip on international rare-earth prices, China abolished quotas and export tariffs in early 2015, which had been in place for years. It declared bankruptcy that year. As a result, the U.S. lost almost all of its rare earth production capacity.
U.S. Wants to Revitalize Supply Chain
Since China sanctioned Japan in 2010 by restricting exports of rare earths in a dispute over sovereignty over the Senkaku Islands (known in China as the Diaoyu Islands), the U.S. community has taken a heightened interest in the issue of overdependence on China for rare earths.
President Trump issued an executive order in September declaring that the overdependence of rare earths on foreign adversaries constituted a national emergency and ordering accelerated mine development. The Executive Order requires the Secretary of the Interior and other heads of government to investigate this dependence and to establish a domestic supply chain for the critical mineral by simplifying and expediting the approval process for new mines and using the Defense Production Act, among other measures.
In addition, some members of the U.S. Congress are working on legislation to reduce and end dependence on Chinese rare earths. Republican U.S. Representative Lance Gooden of Texas and Democratic U.S. Representative Vicente Gonzalez of Texas introduced the Reclaiming American Rare Earths Act in early September, a bill that is similar to the Republican Rare Earths Act. Similar bills introduced earlier by Senator Ted Cruz (D-Calif.) called for tax breaks for the U.S. rare earths industry to fund experimental rare earths projects.
The U.S. is currently working with Japan, Australia and other countries to re-establish a chain of rare-earth supplies independent of China. In July of this year, the U.S. Department of Defense provided funding for Lynas, a major Australian rare-earth company, to partner with Blue Line to build a rare-earth processing plant in Texas.
In addition, although Muntin Pass is not what it used to be, the United States still has high hopes for this mine in California’s Mojave Desert. Of the three companies recently awarded grants by the U.S. Department of Defense, MP Materials, the operator of Muntinghouse, received the largest grant, approximately $9.6 million.
On the other hand, public records show that even if Muntinpais ever gets back on its feet, there will be companies in China that will benefit as well. Chinese rare-earth manufacturer Shenghe Resources Holdings owns less than 10 percent of MP Materials. In May, Reuters, citing sources with knowledge of the matter, reported that the U.S. Department of Defense once reversed its decision to fund two rare-earth processing projects because of controversy over one of them’s ties to China.
Observers point out that building a rare-earth supply chain from scratch that is not dependent on China can be a daunting task, including the potential for serious pollution from toxic emissions from rare-earth processing.
A study by the U.S. NGO Citizens Alliance for National Security shows that regulations have increased significantly since the days when the U.S. still dominated the rare-earth industry, and many federal lands are no longer open to mining. Dr. Saxton, president emeritus of the organization, the Association for Intelligence Officers, says one of the biggest obstacles is the environmental challenge.
We can mine it, but we can’t process it because there are several problems, one of which is toxic waste,” he said. We need to overcome resistance from environmental groups and government agencies.”
Under the current permitting process, Dr. Saxton said, it can take as many as seven to 10 years to obtain a permit to mine and process a new mine.
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