Rare Earth Elements & Trade War

Rare Earth Elements (REEs)are 17 elements that are difficult to obtain in most parts of the World. A rare earth element forms part of set of 17 chemical elements in the periodic table, specifically Scandium, yttrium and the 15 other elements of the lanthanide series of metals including neodymium, dysprosium and holmium. Rare earth elements are all metals. They have similar properties and can be found together in geologic deposits. They are also referred to as “rare oxides”, because they are typically sold as oxide compounds. Despite their name they are not rare, they’re called that because they abound in nature, in comparison to other elements or compounds like the pyrite or gold. Rare earths are prized for their use in consumer electronics and renewable energy such as wind turbines and electric cars. They are so important because without them, almost all our lives will come to a standstill as they are used in plethora of things- mobile phones, cars, airplanes, missiles, radars etc. Electric vehicles cannot function without neodymium and lithium which is mostly found in Bolivia. Without neodymium, an iPhone cannot vibrate, air pods would not work and neither would wind turbines. This is because for all of them to work, they need to be powered by Rare Earth permanent Magnets (REPM) which are the most powerful permanent magnet to make robots, hard drives. REEs are also used in Aerospatiale and military industries to make resistant glass and fuel additives and Lasers, superconductors. In addition to technology, they are also used in medical research as well as certain medical treatment for lung, prostrate and bone cancer. As the use of high-tech products has increased over the years, so has the demand for rare earth elements/metals. This generates geopolitical competition because they are essential for technology they’ve become very valuable.
Though these elements are not “rare’, as their name indicates the process of extracting them and subsequent treatment is very complex and costly. Even though they are relatively abundant in the Earth’s crust, the problem, however is that they are rarely found in sufficient quantities in a single location which makes their mining unviable. That means it’s difficult to find a substantial quantity of the elements together and ready to extract. As a result, aggressive methods are used to obtain them, such as extraction through organic solvents, magnetic separation or at high temperatures. Methods are very inefficient and environmentally aggressive methods where often more than 50% of the elements is lost in the separation processes. On the other hand the extraction has a high environmental cost. Rare earths often have a radioactive elements- thorium. They’re not high concentration but we don’t know how it can affect the environment and people in the vicinity. Due to huge environmental costs associated with the mining and processing of REEs, many developed countries are sometimes reluctant to do it by themselves. The US had closed its Mountain Pass mine in California in 1998- where the majority of the World’s REE supply was actually produces- after it was reported that radioactive water had seeped into nearby areas. The mine did open later but only after it adopted a more environmental friendly technology. Similarly, the Malaysian government recently asked Lynas, an Australian rare-earth mining Company to ship its radioactive waste back to Australia if it wanted to renew its operating license. The biggest deposit of rare earths is located in Bayan Obo, a mining town in northern China. It’s responsible for approximately half of the metals production since 2005.China has over times acquired global domination of rare earths. At one point, China produce 90% of the rare earths, the world needs. Today, however has come down to 60%. The remaining is produced by other countries including the Quad (US, India, Japan and Australia). As of 2018, China had 44 million tons or 36.7% of the World’s rare earths deposits, Brazil has 22%, Vietnam 18%, Russia 10% and India has 5.8%. The rest of the World, including the US and Japan have 10.9% of rare earths. India has more rare earths deposits than Australia and US combined. Though extraction of rare earths is environmentally destructive, increasingly countries around the World have gone away from refining metals like these.
China has lax environmental laws and has endless expanses of deserts and areas where nobody lives. So, deliberately China has made laws such that it could pollute as no one else could and other countries who mine these minerals could send it to China to process. China leveraged its lax environmental laws by way of an indirect ecological subsidy in the rare metal industry. However, the turning point came in 2010 when the World realized that China had crippling monopoly where it could punish any country by controlling the supply of the earth metals. The trade war between China with US and other countries is hardly abating, but even in the melee of new headlines a particular export from China has attracted considerable attention—rare earth elements (REEs). In May 2019, Chinese President Xi Jinping visited a rare earth mining facility. Observers argued that Xi’s idea was to signal to the US administration that China could use REEs as a strategic tool in the trade war. In 2010, China stopped its supply of rare earths to Japan after a Chinese fishing boat was arrested near the disputed Senkaku Islands. To fulfil Japan’s needs, two Japanese Companies” Sojitz and JOGMEC”, invested 250 million USD in an Australian mining corporation called Lynas. Now one-third of Japan’s needs are fulfilled by these companies, reducing dependence on China.However China imposed restrictions on exports of rare metals that same year, pushing the price of these metals up nine times. This is how much China controls these materials. While Japan manage to cut down its dependence on Chinese rare earths to 60% from 91.3%, the US relies on China for 80% of its rare earths needs. One has to see their natural wealth as a strategic asset or the lack of it as strategic liability. India has not been able to use its natural wealth as a strategic asset, which needs to be corrected. Despite more ore than the US, India only mined 3000 tons of rare earths in 2020 while the western nation mined 38,000 tons. The Indian Ocean Region, including India’s coastline is rich in mineral sands. Meanwhile, Australia mined 17,000 tons and China mined 1,40,000 tons. The same year the US had 16% of production of the World’s rare earths, Australia has 7% while India at 1%.
According to various estimates, China presently accounts for approximately 80% of the mining, refining and processing of REEs. Given the centrality of these elements in high-end technologies used for consumer devices and defense production, concerns have been raised that US’s reliance on China for these elements may put it in a vulnerable position. For instance, when asked if Chinese monopoly on REEs threaten US national security, former White House Official Dan McGroarty told CBS News “Unchecked, yes”. Moreover the Chinese government has implicitly threatened to use REE export as a strategic tool in the ongoing US-China trade war. However many experts have also argued that the concerns over any possible Chinese restriction on REE exports are far-fetched. China is aware that it has in its possession a powerful weapon in the trade war against the US since the North American country is heavily dependent on Chinese export of rare earth elements. XiJinping’s visit to a production plant in late May 2019, unleashed all sorts of speculation and stirred up international markets of REE .According to data from the US government, China is home to around 36.7% of the World’s known rare earth reserve and was responsible for 70.6% of the total global production of these metals. If Beijing says, they are stopping exports; it will be very complicated to obtain the necessary production of the elements now, so indispensable for western societies.
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