Rare Earth Exchanges

The Path to Vertical Integration of Rare Earths Must be Sustainable in a Market Economy – Yet Integrated State Backing Vital in the Short Run

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Highlights

  • Jack Lifton analyzes the significant financial, technical, and logistical hurdles in developing a domestic rare earth supply chain in the United States.
  • Using Lynas Corporation as a case study, Lifton highlights the extensive investments and complexities required beyond simple mining operations.
  • The article critiques current approaches to rare earth production, questioning whether market-driven strategies can effectively compete with China’s state-supported model.

Jack Lifton’s InvestorNews article (opens in a new tab), “Economic Realities of Building a U.S. Rare Earth Supply Chain with Lessons from Lynas,” emphasizes the significant financial, technical, and logistical hurdles facing efforts to create a domestic rare earth supply chain in the United States. Lifton critiques the common practice of “socializing losses,” where taxpayer funding mitigates financial risks in the rare earth industry, pointing out its potential to mask underlying economic challenges. He argues that Original Equipment Manufacturers (OEMs) typically avoid sourcing directly from unproven junior miners due to concerns about reliability, scalability, and financial stability—key factors necessary for fostering a robust rare earth ecosystem.

First, we must note that Mr. Lifton is the Co-Chair of the Critical Minerals Institute (CMI) and a well-respected subject matter expert in this field. InvestorNews continues to provide timely, thought-provoking content. The article draws heavily on the experience of Lynas Corporation, one of the few successful non-Chinese rare earth producers, to highlight the challenges inherent in establishing a vertically integrated supply chain, from mining and processing to manufacturing rare earth permanent magnets.

Lifton’s analysis is bolstered by evidence from Lynas’s operations, particularly its costly pivot from processing ore in Malaysia to relocating operations back to Australia due to regulatory pressures surrounding radioactive waste. This shift, Lifton notes, resulted in nearly $1 billion in financial overruns and exposed the intricacies of environmental compliance, logistical challenges, and political risks. By citing Lynas’s struggles, Lifton underscores that developing a U.S. rare earth supply chain requires more than just mining—it demands substantial investments in refining, processing, and manufacturing infrastructure, alongside expertise to navigate economic, regulatory, and market forces effectively. These, of course, are compelling points made by this expert.

Some Other Points of View

The article makes key assumptions that warrant scrutiny. Lifton assumes that China’s dominance stems primarily from its vertically integrated supply chain without addressing its perpetual state subsidies, controlled pricing, and strategic focus on monopolizing value-added industries like electric vehicles and renewable technologies.  As we have discussed in Rare Earth Exchanges, the Chinese domination of rare earth processing and production is a means to an ultimately far bigger end. Also, a key part of this paradigm is statecraft, the ability to invest and nurture economies around the world while tightly integrating the Chinese states, the party, and, in places often hidden, the military.

Additionally, while Lifton critiques socialized losses in the U.S., he omits the reality that rare earth production globally often relies on state support or market intervention to remain viable. Notably absent is a deeper exploration of how U.S. policies, such as those promoting green technologies or defense procurement, might be leveraged to create demand and foster innovation in domestic rare earth processing.  Or how can the piecemeal ad-hoc approach be improved? Lifton, with wisdom, experience, and knowledge, has much to say on this topic.

Lifton’s conclusion—that the U.S. must innovate a sustainable and profitable rare earth industry—raises critical questions. Can the U.S. reconcile its market-oriented economic model with the state-driven strategies dominating the global rare earth market? Without addressing these systemic challenges, Lifton’s call for a purely market-based solution falls short of what is required to counter China’s entrenched dominance in rare earth supply chains.

So perhaps in the long run, with technological and process disruption, Lifton is correct—that a free market dynamic will prevail–but as the prominent economist John Maynard Keynes declared in a 1923 work, “In the long run, we are all dead.”

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