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We have been staggeringly blind to China’s rare earth dominance

February 18, 2021

By Paul Homewood




With the US chips down, Beijing is hitting back.

That’s one way of looking at news that, almost two years after the Trump administration began restricting supplies of advanced silicon chips to its rival superpower, China is considering export controls of the rare earth metals vital to two industries of global strategic importance – defence and renewable energy.

The metals are only needed in tiny quantities by comparison to other commodities – according to the US geological survey, the value of the rare earths America imported last year was just $110m (£79m). The problem is how important they are and who they are being imported from.

China controls 80pc of US supplies, with Estonia, Japan and Malaysia making up most of the rest. And though America does dig up some rare earth ores locally, it actually has to ship them to China, whose tolerance for the incredibly polluting process of refinement means it has an iron grip on the supply chain.

None of which makes for happy security chiefs at the Pentagon or the CIA, given that ballistic missiles and drones as well as fighter jets, including the fabulously expensive F-35, rely on rare earths.

Nor is it comfortable reading for those betting big on renewable energy, like the Biden administration, with its $2 trillion plan, or the UK, which is currently developing an offshore wind farm on the Dogger Bank reliant on the world’s biggest turbine – GE’s Haliade-X, which can power a house for two days with a single rotation of its blade and stands 260m tall – two-and-a-half times the size of Big Ben.

An almighty own goal

Such turbines also depend on the rare earths – tonnes of them in the giant magnets that sit atop each vast machine.

Such formidable magnetism makes rare earths central to all electric motors too. Ever driven an electric car and been impressed by the kick of its acceleration, despite the weight of its battery pack? That’s delivered by rare earth magnets, which are many multiples more powerful, by weight, than traditional counterparts.

The threatened export ban, then, sounds like an almighty own goal for the West, if an entirely foreseeable one following the US exploiting China’s own strategic weakness in the production of semiconductors.

After all, as Guillaume Pitron, author of the recent book The Rare Metals War, points out, no sooner had the Huawei ban been imposed in 2019 that  Chinese Premier Xi Jinping was photographed on a tour of JL Mag RareEarth, a rare-earths magnet producer.

“The message was crystal clear,” notes Pitron. “Should the trade conflict between the two world powers continue to escalate, Beijing could retaliate by suspending rare-earth exports to its rival.” Just in case anyone was still in any doubt, the state press agency New China News Agency added at the time: “By waging a trade war against China, the United States risks losing the supply of materials that are vital to sustaining its technological strength.”

It’s not just China’s actions. The West has been staggeringly complicit in its own position of weakness – ignoring warnings and flogging off rare earth companies to Chinese buyers.

Incompetence and yo-yo pricing

The case of the F-35 is instructive. US defence firms are banned, under a 1973 law, from sourcing speciality metals abroad. But in 2012, Lockheed Martin, maker of the F-35, realised that magnets used in the aircraft’s radar were actually supplied by Chengdu Magnetic Material Science and Technology.

The Pentagon demanded Lockheed find a solution. But it couldn’t, even for magnets worth just a few dollars, and which some view as inherently untrustworthy, potentially even Trojan horses, in a programme worth hundreds of billions. So the Pentagon was forced to sign a supply waiver for Chengdu and the F-35.

Of course, such incompetence has been exacerbated by China’s longstanding yo-yo pricing and supply policy on rare earths, allowing it by turns to undercut Western producers then, once they are out of business, deploy its monopoly as a weapon.

All of which has put it in a significant position of strength. But for how long? It is one thing to hold a trump card, another to play it. (And for all their significance, rare earths are just one “tech” trump, with AI, chips, compute power, space and satellites among several others).

  1. Tim Leeney permalink
    February 18, 2021 6:21 pm

    It’s worse than that: see “The Rare Metals War” by Guillaume Pitron. Just finished my first read of this, available on Amazon. China is appropriating masses of technology as part of the same operation.

  2. Paul Prescott permalink
    February 18, 2021 6:34 pm

    Despite their name, Rare Earths aren’t rare and aren’t earths. There are plentiful supplies outside China, but it costs significantly more to extract them using western wage rates and conditions. That will further worsen the economics of renewables.

    • February 18, 2021 6:41 pm

      Precisely Paul

    • Gamecock permalink
      February 18, 2021 10:36 pm

      Yes. The West hasn’t developed the industry because it has been too cheap to buy from China. If this triggers us to develop our own supplies, it is a GOOD thing.

  3. Tim Leeney permalink
    February 18, 2021 6:36 pm

    Sorry, Paul, a closer reading of your messsage renders mine completely unnecessary.

  4. Mack permalink
    February 18, 2021 6:39 pm

    Who knew? Well most visitors here have for years whilst our political masters, with the exception of Trump, have either been blind to the potential train crash coming down the line or willingly complicit in the Western train smashing into the proverbial buffers. We are in desperate need of a ‘Casey Jones’ to come to the rescue but, with the current direction of travel, best brace ourselves for impact. (Think I may have completely murdered the railway metaphor!)

    • Harry Passfield permalink
      February 18, 2021 10:24 pm

      Who knew? Well, I have to assume the Deben and his highly educated staff, not to mention his committee, are sufficiently well-educated to know. They really do take the people of this (and other) country for fools. We know they are lining their pockets courtesy of Chinese capitalism and that they don’t give a toss for this country. Sadly, PM Mr Symonds won’t do anything about it.

  5. markl permalink
    February 18, 2021 6:47 pm

    “Rare earth” is not that rare. The only reason China is the leading exporter is their lack of environmental controls and labor costs in mining them. Costs may rise and immediate availability may drop but it’s not a catastrophic situation. In the end it’s only a political ploy that will fail because the West can afford to pay more, can profit and increase employment from the mining, and possibly compete with China’s dominance. Like their coal embargo with Australia they are on the losing end. China has more to lose with playing the bully than the ROW because it needs continued economic growth to satisfy its’ populace that the government can provide food and living security.

    • Mack permalink
      February 18, 2021 11:32 pm

      Mark, I admire your optimism. You are, indeed, right in that ‘rare earth’ metals aren’t as rare as is often made out but, on current political trajectories, the obstacles to mining and processing the retrievable deposits under the overly burdensome and restrictive regulatory and environmental rules in the West, on top of a complete lack of political will, are commercially unviable. Just look at the recent wailing and gnashing of teeth amongst the great and good over a fairly innocuous mining coke scheme in Cumbria. In the short term, there is no chance that we can be remotely competitive to a ‘slave state’ that doesn’t play by our rules and whom our leaders constantly indulge to our own detriment.

  6. Broadlands permalink
    February 18, 2021 6:54 pm

    We have also been blind to China’s increases in new and more efficient coal-fired plants and their opening up of new coal mines. They pay dutiful lip service to the ‘green’ demands for lower carbon emissions, but little else. Add the strategic mineral situation to the energy situation and the West is slowly disappearing? How many more wake-up calls will we need to actually wake us up?

    • Robert Christopher permalink
      February 18, 2021 8:34 pm

      Who are ‘we’?

      Most of what you have written has been known by many, in the industry and outside it, for many years, but, like many of the occasions where wealth creating industries meets Green idealism, only one side is airred on TV and in the Press. Just look at UK Shale Hydrocarbons and Coking Coal developments as examples. After years of study, these entrepreneurs are now battling people who don’t care what the consequences of their own ignorance will be. And they will feel they are morally superior while they are preventing much needed development.

      The last thing ‘we’ want is to be told we never realised, when we see the evidence of useful idiots preventing those who want to create wealth in a responsible way from doing so, near enough every day.

  7. Robert Christopher permalink
    February 18, 2021 8:12 pm

    “We have been staggeringly blind to China’s rare earth dominance”

    Well, Harry, you might have been ‘staggeringly blind’, and at the Telegraph, and the Legacy Media, but it has been common knowledge in the industry for some time.

    For example, around 2014 Vatukoula Gold Mines, Fiji, was bought out by the Chinese using their immense financial fire power that allowed them to look very long term. Given who was in the Whitehouse at the time, and in Number 10 🙂 , it wasn’t a surprise that it wasn’t an isolated incident. Who cared? No one in government thought it was of any importance. They probably weren’t even aware of the problem and, if they were, wouldn’t have understood the implications without a full briefing.

    IIRC, China lowered the price of Rare Earths until the competition found that they were uneconomic to produce. Again, not a surprise, given the escalating environmental controls that were accumulating in the West. So, not much different to the UK’s current shale and coking coal opportunities that are being hindered by ‘well meaning’ activists, aided by the BBC, and the Press, like the Daily Telegraph!

    The problem with Rare Earths is that they haven’t been concentrated in convenient deposits. Instead, they are scattered about, which makes exploiting them much less convenient.

  8. Ian Miller permalink
    February 18, 2021 9:15 pm

    China, clearly but quietly intent on world domination has cleverly given us 1) Climate Change propaganda to cause dissipation of western resources, 2 ) Sars first experimentally, then Covid with which to wreck Western economies. 3) Supplied the battery market to power the compliant Electric vehicle market and others, while simultaneously commandeering all Rare Earth material and other supply chains. Have we not been totally snookered!
    We in the West need to wake up and see the big picture.
    1) Our Welfare State is well established 2) We are in the process of surrendering all factors of production (Energy) to Government 3) Final step towards surrender of Democracy in favour of Totalitarian Communist controls..

    • Harry Passfield permalink
      February 18, 2021 10:28 pm

      Well said.

  9. It doesn't add up... permalink
    February 18, 2021 9:16 pm

    Potential US contribution:

    Will it really work on windmills in Texas though?

  10. Phillip Bratby permalink
    February 19, 2021 6:37 am

    Does anybody know where there is a list of which technologies use which rare earths?
    Wind turbines
    Solar panels
    Li-ion batteries for grid storage and EVs

    • mikewaite permalink
      February 19, 2021 9:45 am

      Add LED lighting, the phosphors in them use Ce3+ or Eu2+ as activators.

    • Tim Leeney permalink
      February 19, 2021 11:25 am

      The appendices of Pitron’s book list quite a few.

  11. Chris Davie permalink
    February 19, 2021 10:51 am

    As mentioned above, the rare earths are not particularly rare; it is not scarcity that drives the economics of rare earth production but the complexity of separating the different elements, each of which requires a different thermal and/or chemical process, some of which might be considered to cause pollution.

    Many of the rem’s occur together, often in geologic formations called carbonatites. What can be achieved relatively easily is a concentrate of a number of the elements by relatively conventional metallurgical processes. Because of the small scale of processing of that concentrate into the discrete elements, it makes technical and economic sense to do that in a central location in order to give some benefit of economy of scale. The Chinese recognized this early on and committed both the capital and environmental risk necessary to establish that capability.

    Western producers have tended to achieve a shippable concentrate at fairly low cost and ship it to China for downstream processing (as they do, for example, with zinc, copper and tin concentrates). This gave the Chinese control of the market for the end product, so surprise, surprise, the prices fell and put western producers out of business. Now the price, both economically and strategically, has gone way up.

    One of the operations that went out of business was the major US producer the Mountain Pass mine. (You pass it on the road from Los Angeles to Las Vegas). An unsuccessful attempt was made to reopen it a few years ago and I understand it might now be being considered for reopening on a strategic basis. There are a number of other producers in, for example, Canada, South America and elsewhere but few of them produce the final product.

    The rem business might also be the tip of the iceberg in the metals markets. There is plenty of western production of eg zinc and copper but minor metals are more and more being produced in China from western concentrates, while Chines parastatal companies are flooding the mining industry with cash in the form of equity, debt and corporate takeovers.

  12. Vernon E permalink
    February 19, 2021 10:59 am

    Another point, not so far mentioned, is that the rare earth group metals are largely to be found in Africa over which China has total control.

  13. February 19, 2021 3:53 pm

    The USA has rare earth deposits to match or equal China’s. We can’t utilize our own resources because the environmentalists have made it impossible to extract them affordably. Compliance with the rules is too expensive and sometimes impossible. Getting the permits to begin extraction is well nigh impossible.

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