Rare Earth Exchanges

Calls for Urgent USA Diversification of Rare Earth Supply China Yet In Reality serious Decoupling could be a Decade Away

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Highlights

  • China has banned exports of critical minerals like gallium, germanium, and antimony to the United States, escalating trade tensions.
  • China controls 80% of rare earth element production, potentially causing significant economic impact with an estimated $3.4 billion annual GDP reduction.
  • Rebuilding a domestic rare earth supply chain could take up to 15 years, highlighting the complexity of reducing dependence on Chinese mineral resources.

China’s recent ban on exporting critical minerals such as gallium, germanium, and antimony to the United States marks a significant escalation in the ongoing trade tensions between the two nations.  Even the Wall Street Journal today referred to a mounting trade war.  However, China’s leverage has arguably strengthened since the last Trump presidency. This is because of that nation’s control over the processing and production of 80% of the world’s rare earth elements (REE).  These materials are essential for manufacturing advanced semiconductors, military technologies, and various high-tech applications. China’s dominance in the production and processing of these minerals—controlling a substantial share of the global supply—amplifies the potential impact of this ban on U.S. industries.

As reported in a recent MIT Technology (opens in a new tab) Review by Casey Crownhart, piece The ban is widely viewed as a direct response to the U.S. government’s recent restrictions on exporting advanced semiconductors and related technologies to China, actions intended to curb China’s technological advancements in sectors deemed sensitive for national security. By leveraging its control over these critical minerals, China aims to exert pressure on the U.S. and highlight the vulnerabilities in American supply chains.

What are the implications of this export ban? Profound, and potentially disrupting the U.S. semiconductor industry and other sectors reliant on these materials. A U.S. Geological Survey report estimates that a complete ban on Chinese exports of gallium and germanium could reduce the U.S. gross domestic product by $3.4 billion annually.

Rapid Diversification?

The MIT Technology Review piece suggests the unfolding developments underscore the urgent need for the U.S. to diversify its sources of critical minerals and reduce dependence on Chinese supplies.

Efforts to strengthen domestic production and collaborate with alternative international partners are essential to mitigate the risks associated with such geopolitical tensions. The situation also highlights the broader strategic competition between the U.S. and China, where control over critical resources plays a pivotal role in technological and economic security.

However, as Rare Earth Exchanges has elucidated, diversifying the U.S. REE supply chain to mitigate risks from potential trade conflicts with China is a complex endeavor that could span several years.

The United States 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 that could affect worldwide supply and prices, as reported by the Government Accountability Office (opens in a new tab).

Recent initiatives indicate progress toward establishing a domestic REE supply chain. For instance, MP Materials began constructing a rare earth magnetics factory in Fort Worth, Texas, in April 2022, with plans to produce approximately 1,000 tons of neodymium-iron-boron magnets annually.

However, the timeline for such projects to become fully operational and capable of meeting domestic demand is uncertain. The U.S. Department of Energy has acknowledged the challenges in developing a resilient REE supply chain, citing market volatility and geopolitical sensitivities.  See the link. Energy.gov (opens in a new tab)

Additionally, the Government Accountability Office (opens in a new tab) noted that rebuilding a U.S. rare earth supply chain could take up to 15 years, depending on various factors such as permitting processes, technological development, and investment levels.

In summary, while efforts are underway to diversify and strengthen the U.S. rare earth supply chain, achieving a robust and independent system is a long-term endeavor that may take a decade or more to realize fully. So, in the short run, it will be interesting to review and differentiate propaganda from real facts.

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