YouTube Consultant Peter Zeihan Misses the Rare Earth Element Mark, by Alot

Highlights

• Peter Zeihan’s analysis oversimplifies the challenges of rare earth element processing and global supply dynamics.
• China controls 80-85% of global REE (rare earth element) supply, creating significant national security and market dependency risks.
• Developing alternative REE processing capabilities requires substantial investment, expertise, and long-term strategic planning.

---

​In his recent discussion on YouTube, popular economy consultant Peter Zeihan addresses the common misconception about rare earth elements (REEs), emphasizing that, despite their name, they are not particularly rare and are often byproducts of mining operations for metals like nickel, copper, and uranium. He points out that while the extraction process is technologically straightforward, it is environmentally hazardous and time-consuming, leading many countries to outsource this processing to China, which has capitalized on this by subsidizing its REE industry. Zeihan suggests that the global reliance on China for REEs stems more from economic convenience than from a true scarcity of resources.​

However, Zeihan’s analysis overlooks several critical aspects of the REE supply chain:

First, the YouTube host identifies the toxic nature of rare earth refining and the hazardous nature of REE processing, which involves significant environmental risks, including toxic waste generation. Many countries, particularly in the West, have stringent environmental regulations that make establishing and operating REE processing facilities both challenging and costly. This regulatory environment contributes to the reluctance to develop domestic processing capabilities, thereby increasing reliance on countries with more lenient environmental standards, such as China.​

While Zeihan acknowledges China’s dominance in REE processing, he underestimates the strategic risks associated with this monopoly. China’s control over approximately 80-85% of the global REE supply chain enables it to influence global markets and potentially restrict access to these critical materials, which are essential for various high-tech and defense applications. This dependency poses significant national security concerns for countries like the United States, which relies heavily on Chinese REE imports.  Zeihan, a generalist, demonstrates his limitations on the subject, downplaying the whole process as not that difficult.

On to economic and geopolitical factors involved.  Zeihan suggests that dormant REE processing capacities in countries like Australia, Malaysia, France, and the United States could be activated to mitigate reliance on China. However, he overlooks the economic and geopolitical challenges in reviving these industries, including the need for substantial investment, specialized expertise development, and secure supply chains. Additionally, geopolitical tensions and trade policies can impact the feasibility of such initiatives.​  The widely touted consultant’s depth here is cursory, to say the least.

Finally, regarding the timeframes for the U.S. to develop alternatives, Zeihan implies that establishing alternative REE processing capabilities could be achieved relatively quickly, within six months to a year. This assessment is way over-optimistic, as developing a fully functional and environmentally compliant REE supply chain involves complex processes, including securing financing, obtaining regulatory approvals, constructing facilities, and training personnel, all of which can extend the timeline significantly.​  Rare Earth Exchanges has emphasized that industrial policy will need to be implemented. Yet DOGE and all of the executive orders to date have yet to budge on this topic.

In summary, while the generalist Zeihan correctly identifies that rare earth elements are not inherently scarce and that China has strategically positioned itself as a dominant player in the REE market, he completely underestimates the environmental, regulatory, economic, and geopolitical challenges associated with developing alternative REE supply chains. Addressing these challenges requires coordinated efforts, substantial investment, and time to establish a resilient and secure global REE supply infrastructure.​