Rare earths alert: How the US forfeited its lead, and a framework to win it back

Apr 02, 2010 | 04:46 AM | Michael Komesaroff

Growing tensions between the United States and China have highlighted the West's increasing dependence on China for rare earth metals.

The group of 16 metallic elements are used in the manufacture of a wide range of consumer and industrial products, but also are indispensable for many defense applications as well as new green technologies, particularly electric vehicles.

China accounts for more than 90 percent of the world's output of rare earths, and the fact that the West in general and the U.S. in particular are beholden to China for such strategically important metals creates some remarkable ironies.

First, it is ironic that the West's green technologies depend on ore supplied from high-polluting Chinese mines where workers are exposed to toxic pollutants such that the incidence of cancer is very much higher than elsewhere in China. Second, the West is developing electric vehicles as a means of reducing its dependence on foreign oil, but the chosen route makes it even more dependent on China, a country some consider hostile. The third and possibly biggest irony is that U.S. defense is dependent on components that can only be produced in China with Chinese raw materials, but with technologies developed in the U.S. and funded by the Pentagon.

These ironies have not been lost on China's neighbors, Japan and South Korea, where their governments have announced strategies for ensuring uninterrupted supplies of rare earths. Their concerns have been raised by China's policy of using export quotas to systematically reduce the volume of rare earth shipments. China's decision to limit its rare earth exports is consistent with its long-standing policy of consolidating its industries around fewer but larger players that are financially more viable and environmentally more sustainable than the many small players that characterize much of its industry. This is especially so in rare earths.....