The U.S. rare earth minerals strategy should. . . Composed of certain national reserves of rare earth elements, the processing of rare earth minerals in the United States will be resumed through the implementation of new incentives and cancellation of incentives, and [research and development] around the processing and alternative forms of new clean rare earth minerals. We need your help.
-Deputy Secretary of Defense and Defense Ellen Lord, testimony from the Senate Armed Forces Preparation and Management Support Subcommittee, October 1, 2020.
The day before Ms. Lord’s testimony, President Donald Trump signed an executive order “declaring the mining industry will enter a state of emergency” aimed at “incentivizing domestic production of rare earth minerals vital to military technology, while reducing the United States Dependence on China". The sudden emergence of urgency in topics that have been rarely discussed so far must have surprised many people.
According to geologists, rare earths are not rare, but they are precious. The answer that seems to be a mystery lies in accessibility. Rare earth elements (REE) contain 17 elements that are widely used in consumer electronics and defense equipment, and were first discovered and put into use in the United States. However, production is gradually shifting to China, where lower labor costs, reduced attention to environmental impact, and generous subsidies from the country make the People's Republic of China (PRC) account for 97% of global production. In 1997, Magniquench, the leading rare earth company in the United States, was sold to an investment consortium led by Archibald Cox (Jr.), the son of the prosecutor of the same name, Watergate. The consortium worked with two Chinese state-owned companies. Metal Company, Sanhuan New Materials and China Nonferrous Metals Import and Export Corporation. The chairman of Sanhuan, the female son of the top leader Deng Xiaoping, became the chairman of the company. Magniquench was closed in the United States, moved to China, and reopened in 2003, which is in line with Deng Xiaoping's "Super 863 Program", which obtained cutting-edge technology for military applications, including "exotic materials." This made Molycorp the last remaining major rare earth producer in the United States until it collapsed in 2015.
As early as the Reagan administration, some metallurgists began to worry that the United States relied on external resources that were not necessarily friendly for key parts of its weapon system (mainly the Soviet Union at the time), but this issue did not really attract public attention. year 2010. In September of that year, a Chinese fishing boat crashed into two Japanese Coast Guard ships in the disputed East China Sea. The Japanese government announced its intention to put the captain of the fishing boat on trial, and the Chinese government subsequently took some retaliatory measures, including an embargo on the sale of rare earths in Japan. This could have a devastating effect on Japan’s auto industry, which has been threatened by the rapid growth of cheap Chinese-made cars. Among other applications, rare earth elements are an indispensable part of engine catalytic converters.
China’s threat has been taken seriously enough that the United States, the European Union, Japan and several other countries filed lawsuits with the World Trade Organization (WTO) ruling that China cannot restrict the export of rare earth elements. However, the wheels of the WTO’s resolution mechanism are turning slowly: a ruling is not made until four years later. The Chinese Ministry of Foreign Affairs later denied that it had imposed the embargo, saying that China needed more rare earth elements for its own developing industries. This may be correct: by 2005, China had restricted exports, causing concerns at the Pentagon about the shortage of four rare earth elements (lanthanum, cerium, euro, and and), which caused delays in the production of certain weapons.
On the other hand, China’s virtual monopoly on rare earth production may also be driven by profit-maximizing factors, and during that period, prices did indeed rise rapidly. The demise of Molycorp also shows the shrewd management of the Chinese government. Molycorp predicted that rare earth prices would rise sharply after the incident between Chinese fishing boats and the Japanese Coast Guard in 2010, so it raised a huge sum of money to build the most advanced processing facilities. However, when the Chinese government relaxed export quotas in 2015, Molycorp was burdened with US$1.7 billion in debt and half of its processing facilities. Two years later, it emerged from the bankruptcy proceedings and sold for $20.5 million, which is an insignificant amount when compared with $1.7 billion in debt. The company was rescued by a consortium, and China Leshan Shenghe Rare Earth Company holds 30% of the company's non-voting rights. Technically speaking, having non-voting shares means that Leshan Shenghe is entitled to not more than a portion of the profits, and the total amount of these profits may be small, so some people may question the company's motives. However, given the size of Leshan Shenghe relative to the sum required to obtain 30% of the shares, the company is likely to take a risk. However, influence can be exerted by means other than voting. According to a Chinese document produced by the Wall Street Journal, Leshan Shenghe will have the exclusive right to sell Mountain Pass minerals. In any case, Molycorp will send its REE to China for processing.
Because of the ability to rely on reserves, Japanese industry has not actually been severely affected by the 2010 dispute. However, the possibility of China's weaponization of rare earths has now been recognized. Within a few weeks, Japanese experts visited Mongolia, Vietnam, Australia and other countries with other important rare earth resources to make inquiries. As of November 2010, Japan has reached a preliminary long-term supply agreement with Australia's Lynas Group. Japan was confirmed early next year, and since its expansion, it has now obtained 30% of its rare earths from Lynas. Interestingly, the state-owned China Nonferrous Metals Mining Group tried to buy a majority stake in Lynas only one year ago. Given that China owns a large number of rare earth mines, one might speculate that China plans to monopolize the world supply and demand market. The Australian government blocked the deal.
For the United States, rare earth elements have once again risen in the Sino-US trade war. In May 2019, Chinese General Secretary Xi Jinping conducted a widely publicized and highly symbolic visit to the Jiangxi Rare Earth Mine, which was interpreted as a demonstration of the influence of his government on Washington. The People’s Daily, the official newspaper of the Central Committee of the Communist Party of China, wrote: “Only in this way can we suggest that the US should not underestimate China’s ability to safeguard its development rights and rights. Don’t say that we have not warned you.” Observers pointed out, “Don’t say that we did not warn. The term "you" is usually only used by the official media in very serious situations, such as before China's invasion of Vietnam in 1978 and in the 2017 border dispute with India. In order to increase the concerns of the United States, as more advanced weapons are developed, more rare earth elements are needed. To cite just two examples, each F-35 fighter requires 920 pounds of rare earths, and each Virginia-class submarine needs ten times that amount.
Despite warnings, efforts are still being made to establish a REE supply chain that does not include China. However, this process is more difficult than simple extraction. In situ, rare earth elements are mixed with many other minerals in different concentrations. Then, the original ore must undergo a first round of processing to produce a concentrate, and from there it enters another facility that separates rare earth elements into high purity elements. In a process called solvent extraction, "dissolved materials pass through hundreds of liquid chambers that separate individual elements or compounds-these steps can be repeated hundreds or even thousands of times. Once purified, they can be processed into oxidation Materials, phosphors, metals, alloys and magnets, they use the unique magnetic, luminescent or electrochemical properties of these elements," said Scientific American. In many cases, the presence of radioactive elements complicates the process.
In 2012, Japan experienced a short-lived euphoria, and it was confirmed in detail in 2018 that abundant high-grade REE deposits were discovered near Nanniao Island in its exclusive economic zone, which is estimated to meet its needs for centuries. However, as of 2020, Japan's second-largest daily newspaper, Asahi, described the dream of self-sufficiency as "being muddy." Even for the technologically savvy Japanese, finding a commercially viable extraction method is still a problem. A device called a piston core remover collects mud from the stratum under the ocean floor at a depth of 6000 meters. Because the coring machine takes more than 200 minutes to reach the seabed, the process is very painful. Reaching and extracting the mud is only the beginning of the refining process, and other problems follow. There is a potential danger to the environment. Scientists worry that "due to the action of circulating water, the seabed may collapse and spill the drilled rare earths and mud into the ocean." Commercial factors must also be considered: 3,500 tons need to be collected every day to make the company profitable. Currently, only 350 tons can be collected for 10 hours a day.
In other words, it is time-consuming and expensive to prepare to use rare earth elements, whether from land or sea. China controls almost all processing facilities in the world, and even rare earths extracted from other countries/regions are sent there for refining. An exception was Lynas, which shipped its ore to Malaysia for processing. Although Lynas' contribution to the rare earth problem is valuable, it is not a perfect solution. The content of rare earths in the company's mines is lower than that in China, which means that Lynas must mine more materials to extract and isolate heavy rare earth metals (such as s), which is a key component of data storage applications, thereby increasing costs. Mining heavy rare earth metals is compared with buying a whole cow as a cow: as of August 2020, the price of one kilogram is US$344.40, while the price of one kilogram of light rare earth neodymium is US$55.20.
In 2019, Texas-based Blue Line Corporation announced that it would establish a joint venture with Lynas to build a REE separation plant that does not include the Chinese. However, the project is expected to take two to three years to go live, making potential US buyers vulnerable to Beijing's retaliatory measures. When the Australian government blocked China's attempt to acquire Lynas, Beijing continued to seek other foreign acquisitions. It already has a factory in Vietnam and has been importing a large number of products from Myanmar. In 2018, it was 25,000 tons of rare earth concentrate, and from January 1 to May 15, 2019, it was 9,217 tons of rare earth concentrate. Environmental destruction and conflict caused the ban on unregulated actions by Chinese miners. The ban may be unofficially lifted in 2020, and there are still illegal mining activities on both sides of the border. Some experts believe that rare earth elements continue to be mined in China under the South African law, and then sent to Myanmar in various roundabout ways (such as through Yunnan Province), and then transported back to China to escape the enthusiasm of regulations.
Chinese buyers have also been seeking to acquire mining sites in Greenland, which disturbs the United States and Denmark, which have air bases in Thule, a semi-autonomous state. Shenghe Resources Holdings has become the largest shareholder of Greenland Minerals Co., Ltd. In 2019, it established a joint venture with a subsidiary of China National Nuclear Corporation (CNNC) to trade and process rare earth minerals. What constitutes a security issue and what does not constitute a security issue may be a controversial issue between the two parties to the Danish-Greenland Self-Government Act.
Some believe that concerns about the supply of rare earths have been exaggerated. Since 2010, stocks have definitely increased, which can at least hedge against China's sudden embargo in the short term. Rare earths can also be recycled, and processes can be designed to improve the efficiency of existing supply. The Japanese government’s efforts to find an economically viable way to mine rich mineral deposits in its exclusive economic zone may be successful, and research on the creation of rare earth substitutes is ongoing.
China's rare earths may not always exist. China's increasing attention to environmental issues has also affected production. Although the sale of rare earth elements at low prices may shut down foreign competition, it has had a serious impact on the production and refining regions. Wastewater is highly toxic. The waste water in the surface tailings pond can reduce the pollution of the rare earth leaching area, but the waste water may leak or break, leading to serious downstream pollution. Although there is no public mention of pollutants from rare earth mines caused by the Yangtze River flood in 2020, there are certainly concerns about pollutants. The floods had a catastrophic impact on Leshan Shenghe’s factory and its inventory. The company estimated its losses to be between US$35 and 48 million, far exceeding the amount of insurance. Given that floods that may be caused by climate change become more frequent, the possibility of damage and pollution caused by future floods is also increasing.
An official from Ganzhou in the region visited by Xi Jinping lamented: “The irony is that because the price of rare earths has been at such a low level for a long time, the profit from selling these resources is compared with the amount needed to repair them. No value. Damage."
Even so, depending on the source of the report, China will still provide 70% to 77% of the world's rare earth elements. Only when a crisis is imminent, such as in 2010 and 2019, can the United States continue to pay attention. In the case of Magniquench and Molycorp, the respective consortium can persuade the Committee on Foreign Investment in the United States (CFIUS) that the sale will not adversely affect US security. CFIUS should expand its scope of responsibility to include economic security, and it should also be vigilant. Contrary to the brief and short-lived reactions in the past, the continued attention of the government in the future is imperative. Looking back at the remarks of the People's Daily in 2019, we cannot say that we have not been warned.
The views expressed in this article are only those of the author and do not necessarily reflect the position of the Foreign Policy Research Institute. The Foreign Policy Research Institute is a non-partisan organization dedicated to publishing controversial policy articles on US foreign policy and national security. Priorities.
Teufel Dreyer, Senior Fellow of June’s Foreign Policy Institute’s Asia Program, is a professor of political science at the University of Miami in Coral Gables, Florida.
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Post time: Oct-09-2020