Rare earths are a hot topic in Washington. Almost everyone
agrees that the United States needs a dedicated supply of rare
earths for high-tech national security and defense systems. But
not everyone is in agreement on how to make it happen.
Whether the U.S. Defense Department should take a bottom-up
approach of stockpiling raw materials by paying market rates in
places like China, or look more downstream and invest in a
domestic supply chain that can produce value-added products are
two points of contention.
Jeff Green, president of J.A. Green & Co. LLC,
Washington, and former counsel to the House Armed Services
Committee, warned of impending shortages of rare earth
materials, which are needed to support domestic manufacturing
of "green" technologies as well as military applications.
"There are clear projections that Chinese consumption is going
to exceed their supply," said Green, who noted that China
controls about 97 percent of global rare earths production.
China announced earlier this year it would cut rare earth
export quotas by nearly 72 percent in the second half of the
year. China's Ministry of Commerce said foreign shipments will
be capped at 7,976 tonnes vs. 28,417 tons in the same period
"This should serve as a huge red flag for U.S. government
officials studying this issue," Ed Richardson, president of the
U.S. Magnetic Materials Association (USMMA), said. "Immediate
action must be taken to free the United States from its
complete foreign dependence for these increasingly important
natural resources. If the United States is to become a leader
in clean-energy technology, it needs a reliable domestic rare
earths supply chain."
Rep. Mike Coffman (R., Colo.) earlier this year introduced
the Rare Earth Supply-Chain Technology and Resource
Transformation (Restart) Act (H.R.4866), which aims to
re-establish competitive domestic rare earths mineral
production, processing, refining, purification and metals
production industries to support the growth of green job
technology and manufacturing, as well as the nation's defense
The "whole-of-government" approach would involve the U.S.
Departments of Commerce, Defense, Energy and State, the Office
of the U.S. Trade Representative and the Office of Science and
Technology Policy within the Executive Branch.
Based on industry estimates, rebuilding the U.S. rare earths
supply chain could take up to 15 years and is dependent on
several factors, including securing capital investment in
processing infrastructure, developing new technologies and
acquiring patents currently held by international
Green, who also lobbies for the USMMA, said he supports this
"manufacturing first" strategy for developing a domestic rare
earths industry. "(China) said that they're not going limit
access to these raw materials provided that you come to China
for the manufacturing. It's a clear and blatant strategy to
draw the entire value chain into China. That's why we need to
create demand from the manufacturing side (in the United
States)," he said, adding that government policy should support
investment in the development of rare earth resources in the
United States as well as in friendly countries like
There are a number of non-Chinese projects, such as Lynas
Corp. Ltd.'s Mount Weld deposit in Western Australia, which is
due to come online next year, and Molycorp Minerals LLC's
Mountain Pass Mine in California, scheduled to start up in
A good model for the domestic rare earths industry could be
the titanium sector, Green said. "The U.S. titanium industry is
thriving, while the rare earths industry has been basically
non-existent. In the titanium market, there's a good story to
be told," he said.
The titanium market focuses primarily on the value-added end
of the manufacturing supply chain, according to Green. "From
sponge to ingot, that's where we have invested a lot of
resources, so the basic raw material isn't as much of a
concern. We turn raw material into things that the (Defense
Department) needs and not just put boxes of critical materials
in a warehouse," he said.
Noah Munro Lehrman, senior vice president of Hudson Metals
Corp. and chairman of the North American Committee of the Minor
Metals Trade Association, said that developing a domestic
industry is important, but he also contends that China will
have to play a role in the future. The specialty metals
provider serves the North American, Asian and European
The controversy over Chinese rare earth quotas is overblown,
Lehrman said, adding that supply will be available-if you're
willing to pay. "China is a major player in wind turbines and
solar energy, so it's only natural that demand (for rare
earths) is going to pull more and more toward China," he said.
"You're not going to get a policy solution because what are
really at play here are market forces and demographics. If you
want to get material over here, you're going to have to buy at
prices that are competitive with the market over there."
There have been similar concerns in the past over other
minor metals or ferroalloys that came out of China, Lehrman
said. "The thing is that metal still comes out; it's just going
to be at higher prices than it would be otherwise. We're not
the only game in town and we have to realize that." TOM