Rare earths at heart of China’s rivalry with US, Europe

Washington, Brussels want to avoid supply cut

What if China were to cut off the United States and Europe from access to the rare minerals that are essential to electric vehicles, wind turbines and drones?

At a time of frequent geopolitical friction among these three powers, Washington and Brussels want to avoid this scenario by investing in the market for 17 minerals with unique properties that are largely extracted and refined in China today.

“The expected exponential growth in demand for minerals that are linked to clean energy is putting more pressure on the US and Europe to take a closer look at where the vulnerabilities are and the concrete steps these governments can take,” said Jane Nakano, a senior fellow at the Washingtonbased Center for Strategic and International Studies.

In 2019, the US imported 80 percent of its rare earth minerals from China, the US Geological Survey says. The European Union gets 98 percent of its supply from China, the European Commission (EC) said last year.

Amid the transition to green energy in which rare earth minerals are sure to play a role, China’s market dominance is enough to sound an alarm in Western capitals.

Rare earth minerals with names like neodymium, praseodymium and dysprosium are crucial to the manufacture of magnets used in industries of the future, like wind turbines and electric cars, and they are already present in consumer goods such as smartphones, computer screens and telescopic lenses.

Others have more traditional uses, like cerium for glass polishing and lanthanum for car catalysts and optical lenses.

The US Senate passed this week a law aimed at improving American competitiveness that includes provisions to improve critical minerals supply chains, following a similar executive order issued by President Joe Biden in February.

Washington aims to boost production and processing of rare earths and lithium, another key mineral component, while “working with allies and partners to increase sustainable global supply and reduce reliance on geopolitical competitors”, National Economic Council deputy director Sameera Fazili said Tuesday.

The best hope for boosting US production can be found at the Mountain Pass mine in California. Once one of the major players in the sector, the mine suffered as China rose and ate up its market share, aided by Beijing’s heavy government subsidies.

MP Materials relaunched the mine in 2017 and aims to make it a symbol of America’s industrial rebirth, saying the concentration of rare earths at its site is one of the world’s largest deposits of highest-grade rare earths, with soil concentrations of 7 percent versus 0.1-4 percent elsewhere.

The company’s aim is to separate rare earth minerals from each other through a chemical process and then, by 2025, manufacture the magnets that industry uses, as market-leading Chinese firms currently do. The project is supported by the US government, while a Chinese firm is a minority shareholder.

Elsewhere, Australian company Lynas has won several contracts in the US, including an ore refinery in Texas for the military that is supported by the Defense Department.

In Europe, Bernd Schafer, CEO and managing director of rare earth mineral consortium Eit Raw Materials, said this month that an “action plan” would soon be presented to the EC on how to boost production.

Europe, however, faces a more complicated path to achieving this goal, said David Merriman, a specialist in batteries and electric cars for London-based consultancy Roskill.

“Europe is expected to rely on importing raw materials or semiprocessed materials and become more a processing base or recycling base,” he said.

China is expected to remain dominant for some time to come, but Schafer said that if recycling were scaled up, “20 to 30 percent of Europe’s rare earth magnet needs by 2030 could be sourced domestically in the EU from literally zero today”.

The desire to accelerate rare earth production comes amid a shortage of semiconductors that are essential for the computing and automotive industries, and which are mostly manufactured in Asia.

The scarcity “has caused global manufacturers to think about their supply chain in a new way, and think about vulnerabilities”, a spokesman for MP Materials said, adding that several European automotive and wind power firms were already in contact with the company.