Get Ready

The race for Rare Earth Elements is just getting started — and China has a big lead

The most important recent investments in U.S. and allied security might not have been made by the Defense Department, but by Intel and Taiwan Semiconductor Manufacturing, which are building huge new semiconductor factories in Arizona and Ohio.

Semiconductors, which are less enthusiastic about conducting electricity than copper wire but more willing than insulators such as glass, are to today’s world what steam engines were to the Industrial Age. But as the world races to harness the latest technologies, it’s easy to overlook something that hasn’t changed since the dawn of civilization.

Agricultural civilizations grew on arable land and water. The Age of Reason was written on paper and ink made from trees and soot. The Industrial Age was forged from iron, coal, oil, and rubber; and the Age of Engineering was assembled from copper, glass, and bauxite.

It’s not as catchy as the Stone Age, the Iron Age, the Bronze Age or the Industrial Age, but this is the Lanthanide Age. It, too, rests on raw materials from the earth, especially the 15 metallic Rare Earth Elements (REEs) in the periodic table’s Lanthanide series, their chemical cousins scandium and yttrium, and more familiar and pronounceable elements such copper and lithium. 

Competition for reliable sources of erbium for fiber-optic cables and europium for computer monitors is being driven skyward by advancing technologies and by the political, ecological and consumer demand for solar energy and electric cars. Ford alone is betting $30 billion on electric cars.

In 1990, the U.S. was home to 37 percent of the world’s semiconductor manufacturing capacity, but today it’s down to about 12 percent, according to the Semiconductor Industry Association. Now Intel is investing $20 billion in two new chip factories in Arizona and Ohio, and Taiwan Semiconductor is planning six near Phoenix.

Technology’s visionaries, however, have succumbed to the temptation to move fast and break things without pausing to look back. Without reliable and affordable access to neodymium, samarium, dysprosium and the other 12 REEs, their tools and toys will be as useless as Gutenberg’s printing press without paper.

Today’s supply chain woes are only the beginning. While they are not rare, the Rare Earth Elements and their chemical cousins are not distributed equitably within or among nations. So along with climate change, pandemics and more old-fashioned factors, REE geography will help shape international relations, especially between the United States and China.

The People's Republic was quicker to recognize the political as well as the economic value of rare earths. Twenty nine years ago, Chinese leader Deng Xiaoping said that while the Middle East had oil, China had rare earths.

The government-owned Global Times was more pointed, calling REEs “an ace in China’s hand”. Beijing has played that card, in 2010 halting a shipment of the minerals to Japan amid the two nations’ dispute over the Senkaku Islands, which China calls the Diaoyu.

Beijing has threatened to do so again. Two years ago, a Communist Party policy commission addressed the question of a possible ban on rare earth exports by asking: “Will rare earths become China’s counter-weapon against the U.S.’s unwarranted suppression?”.

From 1965, when the spread of color television began boosting the demand for europium, the sole source of red color in monitors and screens, until the mid-1980s, California’s Mountain Pass in the northern Mojave Desert was the world’s main source of REEs, according to the U.S. Geological Survey. Today, China has the world’s largest reserves of rare earths, some 40 percent, according to Steve Hanke at Johns Hopkins University.

At least equally important, China has invested heavily in mining its rare earths, manufacturing permanent magnets and other essential equipment from them, and training engineers to harness them, Hanke told the National Review last August.

“The United States is in danger of losing its longstanding leadership in many areas of REE technology,” the U.S. Geological Survey warned in a fact sheet. “Transfer of expertise in REE processing technology and REE applications from the U.S. and Europe to China has allowed China to develop a major REE industry, eclipsing all other countries in production of both ore and refined products.”

That was written almost 20 years ago.

Last June 8, in a rare bipartisan moment, the Senate passed the $250 billion Innovation and Competition Act in an effort to catch up with China, but it’s not clear how much of the money will be invested in mining the earth and refining its products, rather than in scientists’ brains and corporate profits, and whether it will make a dent in China’s lead.

Although using its leverage would hurt Beijing’s economy at a time when it can ill-afford another blow, China’s dominance in REEs has great military significance.

The most advanced American jet fighter, the F-35, contains about a half-ton of REEs. Last June 29, Army Gen. Paul Nakasone, the head of the National Security Agency and the U.S. Cyber Command, told the WEST 2021 Conference of the U.S. Naval Institute and the Armed Forces Communications and Electronics Association that the Defense Department’s information networks alone have 4 million computers, 180,000 mobile devices, 84 Internet Access Points and more than 600 million daily requests for website access.

The U.S. is not without assets, however.

China’s lead in REEs doesn’t extend to manufacturing the most advanced semiconductors, especially those with military applications, and Intel’s and Taiwan Semiconductor’s investments may prove to be more productive than throwing more money at the F-35 or the Navy’s new Ford-class aircraft carrier — both of which rely on semiconductors, anyway.

In a belated step in the right direction, an amendment to Section 303 of the 1950 Defense Production Act adopted under former President Donald Trump designated REEs as strategic minerals important to national security.

President Biden signed an executive order in February 2021 that established a study of the gaps in the U.S. rare earth supply chain, and a month later the Department of Energy announced that it would spend $30 million on research into securing the U.S. supply of rare earths. The Defense Department’s Industrial Base Analysis and Sustainment program has awarded another $35 million to MP Materials to process heavy REEs in Mountain Pass.

If it isn’t short-circuited in Congress, Biden’s $2 trillion infrastructure bill includes more money to recharge the nation’s rare earth industry.

Last September, Energy Fuels, Inc., based in Lakewood, Colorado, announced that it had begun production in Blanding, Utah of an intermediate rare earth element called mixed rare earth carbonate, which the company said will be shipped to a plant in Estonia, another NATO member, to be processed.

Other planned projects include a joint venture between USA Rare Earth and Texas Mineral Resources for a processing plant in Colorado and the creation of a refining plant in Texas, also with some DOD funding, according to Jamil Hijazi of the Payne Institute for Public Policy at the Colorado School of Mines.

Second, while China has a vast lead in mining and refining REEs, dominating some 70-80 percent of the industry globally, it does not have a monopoly. That puts a premium on U.S. relations with other nations that have reserves. According to the USGS and excluding Russia, those are Vietnam, Brazil, India, Australia and Greenland, a self-governing dominion of NATO member Denmark where the Chinese have been trolling. Perhaps Trump’s vain attempt to buy the island was less inane than it first appeared.

Last month, Prime Minister Scott Morrison announced that in an effort to encourage greater self-reliance, the Australian government will help fund the refining of rare earth elements needed for high-tech batteries and other applications.

The new U.S.-EU Trade and Technology Council, formed to address semiconductor supply chains and other challenges China’s state-driven economic model poses to Western market economies, held its first meeting in Pittsburgh last year.

Finally, there is money to be made. The demand for REEs is outstripping supply by about 3,000 tons per year, according to Julie Klinger, the author of Rare Earth Frontiers, and the prices of neodymium and praseodymium, needed to make permanent magnets, increased more than 40 percent last year. Gadolinium and terbium were up by the same amount, and dysprosium by more than 50

One factor, however, appears everywhere that REEs and other Lanthanide Age elements are extracted and refined. Many of the elements are hiding inside radioactive materials, and separating and refining rare earth oxides into metallic alloys generally requires water that must be decontaminated. After all, it makes little sense to destroy the planet in order to save it.

Because national security, political, military and intelligence issues are such serious business, this post, like most others on Making Sense of a Mad Mad World, includes a few references to old songs, just for fun. Catch them if you can.