Vincent Fernando, CFA
Aug 2, 2010
How can we put this without sounding alarmist?
Most of America’s key military technologies require rare earth elements, whose production China holds a near-monopoly over.
It’s thus perhaps no surprise that China has made the threat of rare earth export restrictions a new political bargaining chip.
While the U.S. technically has large sources of rare earth elements within its territory, the U.S. rare earth mining industry died over ten years ago:
The Pentagon and the US Energy Department are still scrambling to work out what this means for US security. An interim report from the Government Accounting Office (GAO) has laid bare just how delicate the situation has become.
‚ÄúThe US previously performed all stages of the rare earth material supply chain, but now most rare earth materials processing is performed in China, giving it a dominant position. In 2009, China produced about 97 percent of rare earth oxides. Rebuilding a U.S. rare earth supply chain may take up to 15 years,” it said.
The GAO report said the US had been self-sufficient in rare earth minerals for most of the post-War era. The key mine at Mountain Pass in California shut down in the 1990s when China flooded the market with exports and drove Western mines out of business. One by one, US-based processing plants owned by German and Japanese firms switched operations to China. There are none left.
Cutting-edge weapon technologies are classified, but the GAO said the M1A2 Abrams tank and the Aegis Spy-1 radar both rely on chinese samarium. The US Navy’s DDG-51 Hybrid Electric Drive Ship needs neodymium, which enhances the power of magnets at high heat. The Hell Fire missile requires Chinese components, as do a host of functions in satellites, avionics, night vision equipment, and precision-guided munitions.
We’ll admit that we previously didn’t consider China’s rare earth global monopoly, at 97% of global production, a major issue, given the U.S. has massive rare earth reserves within its borders.
Yet if it would really take 15 years to re-start a homegrown rare-earth industry, then surely China’s monopoly is worrisome, not just militarily, but also economically since rare earth metals are a part of many new consumer technologies, from iPads to hybrid cars.
This article was posted: Monday, August 2, 2010 at 10:08 am