The So Far Wrong U.S. Policy on Rare Earth Production

The US Department of Defense recently announced that it has signed a $30.4m contract with Lynas Rare Earths Ltd to increase production of rare ores. The aim of such an effort is to get the US defence industry out of imports from China as quickly as possible.

At the completion of this investment, this company is expected to produce 25% of the world’s rare ore production. A chronic U.S. policy on this issue is slowly and steadily beginning to correct itself.

by Thanos S. Chonthrogiannis

©The law of intellectual property is prohibited in any way unlawful use/appropriation of this article, with heavy civil and criminal penalties for the infringer.

The U.S. Policy Mistakes to Date on the Rare Earth Issue

The problem for the US is that China currently produces almost half of the world’s rare ore production and the US has now ended up importing 80% of its rare earths needs from China. Today China produces and exports almost 85% of the rare ores used by global industry.

About twenty-five years ago, the U.S. had a lot of production in rare ores. But the extraction, processing and production of these rare ores are causing enormous environmental problems, forcing Western governments, including the US, to establish strict criteria that are extremely high cost to protect the environment by making the extraction and processing of these ores commercially unprofitable for companies operating in this sector.

The difficulty for the US lies in the fact that to re-produce rare ores takes at least six to seven years, unless the time for environmental permits is drastically reduced. No mine can produce any kind of rare ore.

The U.S. mine in California-the Mountain Pass Mine-until 1990 was the largest producer of rare earths in the world and today cannot produce the required quantities of HEREEs.

A production in Idaho will take ten years to start, if environmental organisations do not intervene (for more information please read the analysis titled “Why does the President of the United States want to buy Greenland?”).

China’s Rare Earths Strategy

China for decades did not pay attention to such “environmental sensitivities” and did not have strict criteria because its strategy was to obtain the largest possible production that would collect the largest stock and the largest percentage of exports worldwide for China.

A strategy achieved today. China’s goal was to gain the world’s largest proportion of rare earth exports by controlling them globally through price control worldwide (for more in-depth analysis please read the analysis titled “Global recession, Trade War and Rare Earths“).

In 2020 they reopened the mine in California but with a Chinese company participating in the Consortium-Sanghi Industries Ltd, while the processing of raw materials is not done in the USA but in China and since after so many years the workers who possess the know-how of mining and processing rare minerals went to China and Russia to find work.

What should be considered promising for the US is the implementation of a new technology to remove rare earths from coal, specifically from the ash produced by its processing. There is also a high probability that rare earths will be produced from lignite.

The vague U.S. policy

On the issue of rare earths there is also a very vague policy that the new US President Joe Biden wants to implement. On the one hand it wants to lead the US economy into the green transition and on the other hand green growth requires the use of rare ores imported to date mainly from China.

Photovoltaic panels, wind turbines, etc. use rare earths. So, given the lack of US production in rare ores and their imports from China, US President Joe Biden will be forced in practice and in the long run during his Presidency to pursue a looser policy against China and regardless of the aggressive tone he expresses on foreign policy.