The US and its allies are grappling with significant challenges in their efforts to reduce dependency on China’s rare earths monopoly. Despite substantial investments and ambitious projects, China’s strong grip on this critical market remains a formidable obstacle.
China currently controls approximately 70% of global rare earth output and more than 90% of refining capacity, giving it a substantial foothold in the market.
National security concerns and the need for technology are driving efforts to overcome Chinese dominance. Rare earth elements, despite their name, are not rare but are often found in insufficient concentrations to justify environmentally hazardous extraction processes.
These minerals are essential for advanced technologies, including electronics and military equipment. As a result, the US and its allies are investing heavily in projects aimed at reducing this dependency, but the path to success is fraught with difficulties, reported Bloomberg.
One notable effort is the development of a new rare earth processing facility near Houston, Texas, led by Australia-based Lynas Rare Earths.
This plant, supported by over $300 million in Pentagon contracts, aims to process rare earth and, once operational, could potentially account for up to 25% of the world’s supply of rare earth element oxides.
However, the project faces delays and financial uncertainties exacerbated by a slump in rare earth prices since 2022.
James Litinsky, CEO of MP Materials, which operates the only rare earth mine in the US, has expressed skepticism about the viability of these new projects.
“These market conditions have now destroyed most of the hoped-for projects from just a couple of years back,” Litinsky noted. He highlighted the persistent challenge posed by China’s near-total control over the supply chain.
The market dynamics are not favorable for new ventures. Since 2022, a significant drop in rare earth prices has raised doubts about the financial feasibility of many planned projects.
This downturn has led to setbacks and delays, undermining efforts to build a competitive alternative to China’s entrenched position.
In Australia, similar efforts are encountering hurdles. Arafura Rare Earths, for instance, has secured an AUS $840 million ($560 million) government loan but has yet to commence construction on its Nolans project.
CEO Darryl Cuzzubbo noted the struggle to secure the necessary equity, which is crucial for moving forward. The company aims to raise half of this equity from cornerstone investors and the remainder from broader market sources.
Iluka Resources, another key player in Australia’s rare earths sector, has encountered hurdles. The firm’s AU$1.25 billion loan for developing an integrated rare earth refinery has been overshadowed by escalating costs, with estimates rising to AU$1.8 billion.
CEO Tom O’Leary has accused China of manipulating prices to control the industry, reflecting broader concerns about China’s monopolistic influence.
Japan’s experience highlights the challenges of reducing reliance on Chinese rare earths. Over a decade ago, Japan invested $250 million in Lynas to mitigate its reliance on Chinese rare earths after Beijing briefly cut off supplies.
The process was slow and costly, with Lynas only turning a profit in 2018 despite substantial Japanese support.
Lynas CEO Amanda Lacaze underscores the importance of patience and long-term investment in building a resilient supply chain.
“Patient capital in mining and also in an area where you’re doing something for the first time is really important,” Lacaze said.
She noted that while progress has been made, the global effort to develop an independent rare earths industry remains a long-term challenge, requiring sustained commitment and strategic investment.
China’s Dominant Position in Rare Earth Elements
China currently holds a dominant position in the global production of rare earth elements (REE). China controls rare earth alloys and magnets, which are essential for various advanced technologies, including missiles, firearms, radars, and stealth aircraft.
China Is Rapidly Monopolizing Rare Earth Elements, Why The World Must Act Now To Stop The Dragon
In 2019, China threatened to include certain rare earth-containing products in its technology-export restrictions as a countermeasure to the Trump administration’s pressure on Huawei.
Fearing that Beijing might actively and frequently deny access to these critical materials, the US and its allies started working to cultivate alternative sources and develop refining techniques that align with more environmentally sensitive standards.
However, Beijing has started implementing various measures to control the supply of rare earths. In July, China introduced new regulations aimed at improving traceability within its rare earth sector to prevent sanctioned American firms from accessing these valuable resources.
The State Council announced new rules, effective October 1. which prohibit any organization or individual from misappropriating or destroying rare earth deposits, as these resources are deemed state property.
These regulations are intended to enhance supply-side reform, ensure the stability of the strategic resource industry, and bolster China’s bargaining position in international high-tech competition.
In February 2022, the Chinese Ministry of Commerce banned Lockheed Martin and Raytheon Technologies from purchasing Chinese rare earths after accusing them of selling arms to Taiwan.
China has also accused some foreign institutions of using legal fronts to covertly recruit numerous Chinese technical experts via third countries.
This, according to China, facilitates the transfer of rare-earth mining, separation, and other export control technologies and industrial processes. The country claims that the problem of core technology leakage in these areas remains severe.
Moreover, China is preparing to bolster its rare earth element reserves by approximately 5 million tonnes amid growing international competition, particularly with the United States.
This move follows the discovery of a significant deposit in the southwestern Sichuan province. At a symposium organized by China Rare Earth Group last week, experts revealed that 4.96 million tonnes of rare earths were found in the Liangshan Yi autonomous prefecture, one of China’s most impoverished regions.
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