China’s Waning Rare Earths Advantage – GPF

Beijing won’t be able to threaten to cut off adversaries from critical supplies of the commodities for much longer.

February 22, 2021 Stu Turley ENB Pub Note, International News, Political, Rare Earth Minerals
Geopolitical Futures

Energy News Beat Publishers Note: George Friedman’s group the Geopolitical Futures is a first-rate thought leadership pool of world politics and the potential outcomes. In my interview with George last year we covered his book “The Storm Before the Calm” and the cyclical nature of politics. There are many factors in the world right now and China is at the forefront of almost every discussion. Excellent article by Phillip on the GPF team.     

In 1992, during a visit to Inner Mongolia, Chinese leader Deng Xiaoping quipped: “The Middle East has oil, China has rare earths,” referring to 17 elements on the southern end of the periodic table that are essential to the manufacturing of everything from light bulbs to smartphones to fighter jets. China indeed has rare earth metals, oxides and permanent magnets in spades, as well as a preponderance of the world’s rare earth refining operations. As recently as 2010, an estimated 97 percent of rare earths came from China. And Deng, who made rare earths a central part of his plans to turn China into a high-tech powerhouse beginning in the mid-1980s, saw this as “of extremely important strategic significance,” calling explicitly for China to fully exploit this advantage.

Subsequent Chinese governments in Beijing have never seemed quite sure of how to do so. But last week, the Financial Times reported that Chinese officials were investigating whether a ban on exports of certain rare earths could cripple U.S. production of F-35s and other weapons systems. A few days later, Bloomberg reported that Beijing was considering a ban on rare-earth refining technology. China’s hawkish state-owned Global Times then said something to the effect of, “We’re not threatening export controls, except maybe we are.” Curiously, on Friday, China announced a 27 percent increase in rare earths production quotas.

China has periodically threatened to weaponize its dominance over the rare earths industry by banning exports in such a manner. It’s rarely followed through, though, and its export controls have often backfired. But Beijing may be facing a “use it or lose it” moment since, one way or another, China’s stranglehold on the industry is coming to an end.

China’s Dominance

The first thing to understand about rare earth elements is that they’re not particularly rare. They can be found in vast quantities throughout the world, including in the countries most worried about Chinese dominance over the industry. The United States and Australia have more than enough untapped reserves to be self-sufficient. In a single deepwater discovery in 2013, Japan found enough rare earths to meet its needs for centuries (provided it can find a cost-effective way to extract them, anyway).

However, mining operations are exceedingly rare outside of China. Australia is the world’s second-largest producer, and it didn’t have an active mine until a decade ago. There’s only one operational mine in the U.S., and it’s been mothballed more often than not since the end of the Cold War.

Rarer still are rare earths processing operations. Refining rare earths is expensive, complicated and environmentally (and thus politically) problematic. The only major processing plant outside of China is a facility in Malaysia run by Australian rare-earth developer Lynas, and production there has routinely been bogged down by regulatory and political issues. When immense state support began to pay off in the form of Chinese vertical consolidation over the industry in the early 2000s, no one put up much of a fuss, in part, because no one wanted to deal with the headaches of trying to process rare earths themselves.

But rare earths play a role in nearly every aspect of geopolitical competition among modern-day powers. They’re used in hard drives, in telecoms infrastructure, in oil refining, in nuclear rods and wind turbines, and in missile guidance systems. A single F-35 requires some 920 pounds of rare earths elements, according to the Pentagon. An Ohio-class submarine is built with 9,200 pounds of them. China’s dominance over the REE supply chain was always going to generate alarm eventually.

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Phillip Orchard
https://geopoliticalfutures.com/author/porchard/
Phillip Orchard is an analyst at Geopolitical Futures. Prior to joining the company, Mr. Orchard spent nearly six years at Stratfor, working as an editor and writing about East Asian geopolitics. He’s spent more than six years abroad, primarily in Southeast Asia and Latin America, where he’s had formative, immersive experiences with the problems arising from mass political upheaval, civil conflict and human migration. Mr. Orchard holds a master’s degree in Security, Law and Diplomacy from the Lyndon B. Johnson School of Public Affairs, where he focused on energy and national security, Chinese foreign policy, intelligence analysis, and institutional pathologies. He also earned a bachelor’s degree in journalism from the University of Texas. He speaks Spanish and some Thai and Lao.

 

About Stu Turley 3384 Articles
Stuart Turley is President and CEO of Sandstone Group, a top energy data, and finance consultancy working with companies all throughout the energy value chain. Sandstone helps both small and large-cap energy companies to develop customized applications and manage data workflows/integration throughout the entire business. With experience implementing enterprise networks, supercomputers, and cellular tower solutions, Sandstone has become a trusted source and advisor.   He is also the Executive Publisher of www.energynewsbeat.com, the best source for 24/7 energy news coverage, and is the Co-Host of the energy news video and Podcast Energy News Beat. Energy should be used to elevate humanity out of poverty. Let's use all forms of energy with the least impact on the environment while being sustainable without printing money. Stu is also a co-host on the 3 Podcasters Walk into A Bar podcast with David Blackmon, and Rey Trevino. Stuart is guided by over 30 years of business management experience, having successfully built and help sell multiple small and medium businesses while consulting for numerous Fortune 500 companies. He holds a B.A in Business Administration from Oklahoma State and an MBA from Oklahoma City University.

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