In an earlier post, I outlined the background leading to China’s monopoly over the rare earth element (REE) market, and why the prevailing belief in the U.S. that private investment and the opening of new domestic mines will solve the nation’s resource problem is not realistic.
In this article, I further expand on untenable beliefs that low REE defense use, technology, or finished-goods development can solve the problem, and establish why industry-academia research and development is critical to inverting the situation.
There’s a prevailing belief in the U.S. that defense use of REE components is less than 5% of total use, and that therefore U.S. supply-chain leadership and control isn’t a concern. Regardless of the percentage of REE usage in defense production, REEs are both critical and strategic materials. It’s surprising that the Department of Defense failed to classify them as critical and strategic materials as late as 2008.
The REE supply vulnerability was made abundantly clear by members of Congress in a January, 2001 letter to the Secretary of Defense: “Clearly, rare earth supply limitations present a serious vulnerability to our national security,” the letter stated. “Yet early indications are the DOD has dismissed the severity of the situation to date…. DOD could compare expected supply and demand of each rare earth element with overall consumption by the Department to identify critical vulnerabilities in our supply chain.”
A 2019 U.S. Department of Commerce report on the U.S. defense industrial base’s dependence on Chinese REE unequivocally stated: “The U.S. does not possess the capability to separate and process the REE concentrate, and must send the concentrate to foreign facilities to perform this process. Similarly, the U.S. lacks the domestic capability to manufacture REE-based high performance magnets from the separated and purified material.”
Thus, it is evident that there is a realization within the government establishment that REEs are critical and strategic regardless of the amount of defense industrial use. The belief that minimal REE consumption within the defense industry is tantamount to ceding the REE supply chain to a hostile foreign country is irresponsible and unacceptable, and should be aggressively countered. The U.S. needs to bring this capability back via alternative supply-chain models.
To assert leadership of the REE supply chain, the U.S. must realign its thinking and reemphasize ownership. As any commercial product and manufacturing organization knows, stable supply from multiple sources is key to a profitable operation. On the other hand, monopolistic, interruptible, and state-driven subsidy-based supplies make for an impossible business, much more so for high-valued strategic and critical REE materials. China currently controls every level of the value chain: mining, mixed oxides, separated oxides, and REE metal production. It also has a mining byproduct-based REE development infrastructure supported by small business subsidies, research and development, and supporting commercial and defense industries.
The prevailing belief that individual metal, technology or finished-goods development can solve the sourcing problem is also untenable. This justification could be rational in a true free market. However, with REEs there is no “true” free market, due to Chinese subsidies, market manipulation, overseas default acquisitions of assets through the Belt and Road Initiative, and a state-driven sourcing and manufacturing monopoly goal. Individual approaches will lead to Molycorp-type consequences, and be fragmented as well.
The national goal should be to develop, enhance, modernize, and expand critical REE downstream materials, alloys, and finished-goods production capacity, with a focus on supply-chain resilience. Measures should include:
Collaborative R&D by industry and academia is imperative. Currently, only a few institutions offer dedicated REE teaching programs, and R&D activity is minimal. An additional factor is the impending retirement of many university faculty and experienced working professionals. The U.S. should actively invest in and encourage extensive development of research and the teaching of REE programs at its universities. Joint support for innovation should be created in mining techniques and technology by government, academia, and industry partners, to improve education at the graduate, undergraduate, and community college levels. University faculty and departments should be encouraged to pursue cutting-edge research to enhance the quality of higher education, and ensure that future needs for human capital, including mineral supply-chain sector engineers and faculty, are met.
Technology capabilities should be spearheaded via advanced technology development at all levels of the supply chain. R&D should be conducted on material alternatives, use reduction and elimination where possible. This can only be achieved through a sustained national policy engaging government agencies, laboratories, universities, mining, materials, and technology corporations.
(Note: This is the second of a multi-part series of articles.)
Shubho Chatterjee is a digital transformation, strategy, technology and operations executive.
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