The Biden administration should partner with allies and invest in research to ensure the supply of critical minerals.
China’s leverage over the U.S. is real. Rare earths — a family of 17 elements with similar chemical properties — are integral to all manner of 21st-century products, from iPhones to electric vehicles to wind turbines. They’re especially crucial to advanced weapons systems: A single F-35 fighter jet requires more than 900 pounds of the stuff; a Virginia-class submarine, 10 times as much.
While rare earths aren’t especially rare — deposits are found all over the world, including in the U.S. — state-led industrial policies have helped Chinese companies gobble up market share since the mid-1980s. China now accounts for two-thirds of the world’s rare-earth mining, 85% of refining and 90% of production. By contrast, the U.S. has one operating mine and no commercial-scale processing capacity; it imports 80% of its rare-earth compounds and metals from China.
The U.S. can’t rely on the market alone to address this vulnerability. Opening new mining and processing operations is expensive and technically challenging, and China can always make the task harder by ramping up production and driving down prices to unprofitable levels. The Pentagon has recently stepped in, using the Defense Production Act to help fund new processing facilities in California and Texas, while stockpiling both raw minerals and feedstock for permanent magnets. The new projects will require continuing support. If successful, though, they should meet the U.S. military’s needs.
The more difficult question is how to address the risk to U.S. companies if China chokes off supply, as it did during a 2010 dispute with Japan. As the Biden administration proceeds with its 100-day review of vital U.S. supply chains, it should ensure that addressing this threat is a priority.
As a start, the U.S. would be wise to partner with European and Asian allies rather than trying to reshore the entire mine-to-magnet supply chain domestically. Given economic and environmental concerns, for instance, Australia and Canada may make more sense as sites for mining. Japan and South Korea already produce rare-earth compounds and alloys. Stitching together a geographically diverse supply chain spread among friendly nations would make the whole system more resilient to unexpected shocks. It would also help governments avoid wasteful subsidies on duplicated efforts.
At the same time, the U.S. should be looking for ways to reduce its overall demand for these minerals. Congress has allocated $800 million to rare-earth research and development over the next five years, which needs to be spent wisely. Beyond programs aimed at extracting rare earths from coal and coal ash, funds should be targeted at new methods of recycling the minerals from the tons of electronic waste produced every year, as well as the search for either man-made or natural substitutes for the elements themselves. Such efforts would position the U.S. at the cutting edge of the industry and, as basic research often does, give rise to new businesses.
The irony is that China could be one of the biggest customers. As it churns out more electric vehicles, wind turbines and other high-tech products, China’s demand for rare earths is set to grow dramatically; it’s expected to become a net importer by the middle of the decade. As the Biden administration addresses today’s vulnerabilities, it shouldn’t lose sight of tomorrow’s opportunities.
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