By William Murray
The push to rebuild America’s shrunken industrial base is just beginning, but progress started during the Trump administration is reaching new heights under President Joe Biden, a sign that bipartisanship can still exist in American politics.
Of particular importance to the U.S. defense and renewable energy industries is the use of 17 “rare earth elements,” or RRE, that are vital to the 21st Century green economy. Electric car batteries need magnetized parts to hold their charges longer, and massive wind turbine generators need lightweight magnets to control their spinning blades and keep them from being torn apart in heavy winds. Only rare earth minerals with exotic names like neodymium, praseodymium and dysprosium can create these magnets.
Unfortunately, China currently accounts for two-thirds of the world’s rare earth mining, 85 percent of its refining, and 90 percent of production. Many experts believe the long-term success of the Biden administration’s trillion-plus dollar green infrastructure legislation largely depends on its ability to break the Chinese stranglehold on these supplies.
The U.S. has only one operating rare earth mine in California and no commercial-scale processing capacity, even though as recently as 1990, it was the world’s number-one producer of these minerals. The barriers to entry are now higher because China periodically floods the global market to flush out competitors, but there are more than a dozen potential mining sites across the U.S. – in states like New Mexico, Texas, Wyoming, Nebraska and Alaska – that have the potential to produce rare earths.
“I believe that the market – with the foreign concentration issues right now – is not resilient enough,” said Brian Gabriel, a senior industrial analyst with the Department of Defense, speaking on April 21 at a U.S. Association for Energy Economics policy conference in Washington D.C. “As we see with things like the current semiconductor shortage, growing markets can upset supply and demand.”
Decades of one-size-fits-all environment regulation and policy inattention are part of the reason for the increased dependency. Even with the United States holding vast mineral reserves worth trillions of dollars, America is now 100 percent dependent on imports for some 17 key minerals.
|Rare Earth Mineral||Commercial Uses|
|Lanthanum||(La)||Petroleum refining catalysts, camera and telescope lenses|
|Yttrium||(Y)||Lasers, superconductors, computer screens|
|Neodymium||(Nd)||Wind turbines, EV batteries, loud speakers, hard drives|
|Cerium||(Ce)||Battery alloys, catalytic converters in cars|
|Praseodymium||(Pr)||Aircraft engines, glass for welders’ visors|
|Gadolinium||(Gd)||TV screens, MRI machines, X-Ray machines|
|Dysprosium||(Dy)||Permanent magnets for compact discs and hard discs|
|Samarium||(Sm)||High-powered magnets, ethanol, radiation treatment|
|Holmium||(Ho)||Satellites, lasers, aircraft engines|
|Terbium||(Tb)||Fluorescent lamps, sonar systems|
|Europium||(Eu)||Control rods for nuclear reactors|
|Thulium||(Tm)||X-ray machines, superconductors|
|Luteium||(Lu)||LED Lights, chemical processing|
|Promethium||(Pr)||Nuclear batteries, portable x-ray machines|
This scenario leads Defense and Energy Department officials to sleepless nights when thinking about rising political tensions with China. In 2010, China banned shipments of REE to Japanese manufacturers over a trivial fishing dispute, sending prices up more than 700 percent and undermining important parts of Japan’s industrial sector for a short period.
If Beijing chooses to ban the export of rare earths to the U.S., it would cripple critical parts of our defense and energy sector supply chain for years. Rare earths like dysprosium and neodymium are used in F-35 fighter jets for targeting radars, and in electric motors that move the plane’s rudders and ailerons. Yttrium and terbium are integral to laser targeting used by Stryker armored fighting vehicles, Predator drones, and Tomahawk missiles.
But there are strong signs that the U.S. government is now fully engaged to solve the problem. President Biden in February signed an executive order to take a 100-day review of the most important changes needed to strengthen domestic supply chains. And in late December, former President Trump signed a $2 trillion pandemic spending package that included $800 million to better fund geological studies on federal land and improve the processing and recycling of rare earths.
There remain two consistent problems with rare earth mineral markets that are difficult to solve even with government support.
First, the markets are quite small and opaque compared to much larger markets like copper or zinc, making it harder to plan and build stockpiles. Second, it’s not just the mining, but the refining and production that can take a long time to develop, sometimes, “five to ten years in some countries,” Gabriel said.
To build any refining plant involving heavy metals in the U.S. can involve up to ten years of environmental review under the National Environmental Protection Act (NEPA), tying up millions of dollars in capital for years that investors would rather have earning income more quickly. This disincentive to build domestic refining capacity is a big reason the one U.S-based rare earth miner, at Mountain Pass in California, must still ship its raw material across the Pacific to China to be processed. Thankfully, the Trump administration in 2020 finalized NEPA reforms that – if Biden keeps the reforms in place – will shorten the time and scope of environmental studies, shorten the public comment process, and perhaps most importantly, limit the scope of judicial review for legal challenges.
It’s important to state that all this can and must be done while maintaining the current strong environmental emissions standards currently in place. Interestingly, while the Biden administration has reversed or overturned many of the Trump administration’s environmental initiatives, it has so far left the Trump-era NEPA reforms largely unchanged, so watch this space.
As an example of the market pressures that are coming; the world currently mines about 7,000 tons per year of neodymium, one of the key elements used in fabricating the electrical systems for wind turbines. Current clean-energy scenarios imagined by the World Bank (and others) will require a 1,000 percent–4,000 percent increase in neodymium supply in the coming two decades, according to the Manhattan Institute.
It may take up to a decade of constant work to build out the mining and production chain for the U.S. to feel more confident that these critical supplies will be available. Expect policymakers to experience more sleepless nights in the coming years if U.S.-Chinese tensions continue to escalate.
William Murray has written about energy markets and environmental policy for the past two decades for Bloomberg, RealClearPolitics, and others. More recently he was the senior speechwriter at the Environmental Protection Agency.