Rare Earth Exchanges

Outflanking China in the Rare Earth Race: Strategies for the USA

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Highlights

  • The U.S. currently relies heavily on China for rare earth processing, with China controlling over 80% of the global market.
  • Strategic recommendations include:
    • Developing domestic mining
    • Partnering with allies
    • Advancing recycling technologies
    • Creating policy reforms
  • The goal is to reduce dependency on China by:
    • Bolstering domestic capacity
    • Engaging in international collaborations
    • Fostering groundbreaking technological innovations

Rare earth elements (REEs) are critical to many modern technologies, including electric vehicles, wind turbines, and advanced defense systems. Despite having significant reserves, the United States relies heavily on China for processing and refining, as China controls over 80% of the global rare earth processing market. With China recently banning certain rare earth exports to the U.S., the stakes have risen, making it imperative for America to develop creative strategies to secure its supply chain. The incoming Trump administration should consider creative programs, much like what was done during the COVID-19 pandemic, but more targeted, directed, and lean.

Breaking Down the Rare Earth Value Chain

The REE value chain can be segmented into the following activities:

  • Mining: Extracting rare earth ores from the ground. The U.S. has notable deposits, such as those in Mountain Pass, California.
  • Processing: Separating rare earth elements from ore. This stage is energy-intensive and environmentally challenging, an area dominated by China due to its advanced infrastructure.
  • Refining: Purifying rare earth elements for industrial use. Refining requires sophisticated chemical expertise and facilities.
  • Manufacturing: Turning refined materials into usable components like magnets is essential for various technologies.
  • Recycling: Recovering rare earth materials from used electronics and batteries reduces the need for mining.

To regain control, the U.S. needs to focus on innovations, partnerships, and policy changes across the entire value chain.

But what can the U.S. do to expedite more independence?

Obviously, a key part of the answer remains domestic development.   A boost in U.S. mining operations is necessary. That is increased investment in domestic mines like Mountain Pass. The recently passed Inflation Reduction Act offers subsidies for critical mineral production, which could spur further development. Under the incoming Trump presidency, further creative support, including access to capital, will be necessary.

The key will be disruption, geopolitical connectivity, and program innovation, like what was accomplished during the pandemic.

Specifically, innovative processing technologies need to be developed to bring cleaner, cost-effective processing methods to the market. Examples include membrane-based separation or bioleaching.  These could help address at least some environmental concerns and reduce reliance on traditional, pollutive techniques.

However, onshore refining capacity also becomes critical to the mission.  The government needs to support and incentivize companies to build domestic refining facilities by offering tax credits, government contracts, and streamlined permitting. It needs to be part of national security legislation, ensuring adequate long-term bipartisan support.

However, there are other ways to become more independent, including partnering, recycling, and other innovations.

What does partner programming look like? First and foremost, we envision a network of aligned allies, a “friendshoring” REE network.  We must intensify collaboration with nations like Australia, Canada, and Brazil, which have abundant reserves. Joint ventures can help finance new mines and processing plants in friendly countries.

The U.S. must move to bolster support for Southeast Asian producers. That is,  to encourage nations like Vietnam, which have emerging rare earth capabilities, to become alternative suppliers while finding ways to support other nations in locally sensitive ways.

Core strategic alliances are also key. The forming of partnerships with the EU, Japan, and South Korea, which also seek to reduce dependency on China, to co-develop rare earth supply chains and share technological innovations.

We cannot overstate the importance of disruptive recycling and innovation. 

The focus on reclaiming rare earths from discarded electronics, wind turbines, and EV batteries emerges as an important source for disruption. Companies like RecycLiCo Battery Materials are pioneering processes to recover materials like lithium and cobalt, which could be adapted for rare earth elements.

Also imperative is the advancement of substitution technologies. The incoming Trump administration should invest in R&D for alternatives to rare earths, such as new types of magnets that rely on more abundant materials or improved battery chemistries that use fewer critical minerals.  

Don’t discount the potential of disruptive refining technologies. Explore emerging techniques like plasma separation or AI-driven chemical processing that could bypass China’s cost advantage.

Finally, consider an abbreviated version of Operation Warp Speed for rare earth processing dependence.

The Geopolitical Landscape

Myanmar, a significant producer of rare earth minerals, is mired in a civil war, with resistance forces disrupting mining operations. As Myanmar supplies much of China’s rare earth feedstock, instability could hurt China’s dominance in this sector. This presents an opportunity for the U.S. and its allies to build alternative supply chains and exploit China’s reliance on unstable regions. But as Rare Earth Exchanges has expressed, the U.S. should be delicate regarding China, not working to provoke that nation militarily. Rather, America must beat China in the market via superior strategies based on all the factors above.

The U.S.-China Rivalry

China’s export bans reflect growing geopolitical tensions. While China seeks to leverage its rare earth dominance as a geopolitical tool, the U.S. must respond by fast-tracking domestic and allied supply chains.  But much like China’s ascendency avoids warfare (at least thus far), so should America. Catching up and becoming rare earth magnet independent is achievable via research and development and the market, with policy support.

Policy Recommendations

  • National Stockpiles: Establish strategic reserves of rare earths and other critical minerals to buffer against supply disruptions.
  • Regulatory Reforms: Streamline permitting for mining and processing operations in the U.S. without compromising environmental safeguards. Rare Earth Exchanges notes the importance of this point.
  • Increased Funding: Expand Department of Defense and Energy programs to fund rare earth initiatives, including refining and recycling.
  • Public-Private Partnerships: Support collaborations between government and industry to de-risk large-scale investments in the rare earth value chain.
  • The incoming Trump administration should consider changes to energy policies that slow down the demand for electric vehicles to a more organic market acceptance and other measures that may disrupt markets for REE. Consider an abbreviated Operation Warp Speed to overcome rare earth dependencies expeditiously.
  • Shake up consumption patterns, slow down electric vehicle mandates, etc.

Conclusion

The rare earth race is not just about resources but also about geopolitics, technology, and innovation. By bolstering domestic capacity, partnering with allies, and advancing groundbreaking technologies, the U.S. can reduce its dependence on China and strengthen its position in the global economy. With a concerted effort, America can turn the rare earth challenge into an opportunity to lead in sustainable, secure, and innovative critical mineral supply chains.

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