Tech Companies Depend on China for Rare Earths. Can That Change? | WSJ
Summary
TLDRThe video script discusses the critical role of neodymium, a rare earth mineral, in modern technology and the current reliance on China for its supply. It highlights the geopolitical implications of China's dominance in rare earths, which has led to concerns over potential supply disruptions. In response, the US and its allies are developing alternative supply chains to reduce dependence. The script also covers the history of China's rise in the rare earth industry, the challenges faced by Western producers, including environmental regulations and cost competitiveness, and the steps taken by companies like Lynas and Less Common Metals to establish a more sustainable and diverse supply chain.
Takeaways
- 🚗 Neodymium, a rare earth mineral, is crucial for technologies like Tesla's electric motors and iPhone speakers.
- 🌏 China dominates the global rare earth market, supplying about 80% of the U.S. imports, raising concerns over supply security.
- 🔄 The U.S. and its allies are working to build an alternative supply chain to reduce reliance on China.
- 🔧 The challenge lies in China's established dominance and the environmental impact of rare earth mining and processing.
- 🏭 Western companies like Lynas and Less Common Metals are expanding operations to produce and refine rare earths outside China.
- 💰 High costs are a hurdle for Western producers, with their products being 20-25% more expensive than Chinese counterparts.
- ♻️ Environmental regulations are stricter in Western countries, affecting the competitiveness of their rare earth industries.
- 🌱 Sustainability is key for the new supply chain, with an emphasis on producing rare earths without harming the environment.
- 💼 Government support is deemed essential for the development and competitiveness of the Western rare earth supply chain.
- 🔬 Tech companies like Apple are exploring the use of recycled rare earth elements to reduce their environmental footprint.
Q & A
What is the role of neodymium in technology?
-Neodymium is a rare earth element that is crucial in turning electricity into motion, used in various electronics such as Tesla wheels and iPhones.
Why are rare earths important for modern electronics?
-Rare earths are essential in many electronics we use daily due to their unique properties that enhance the performance of devices.
What is the current challenge with rare earth supply?
-The challenge lies in China's dominance over the rare earth market, which raises concerns about potential supply disruptions.
How has China become the dominant player in rare earths?
-China's dominance began with Deng Xiaoping's strategic vision, followed by government support through tax rebates and subsidies that helped the industry flourish.
What geopolitical tool has China used with rare earths?
-China has used its control over the rare earth industry as a geopolitical tool, exemplified during the trade war with the U.S. and the Huawei incident.
What is the significance of Mount Weld in the rare earth supply chain?
-Mount Weld in Western Australia is significant as it is one of the richest known deposits of rare earths and is part of an alternative supply chain outside of China.
What are the challenges in processing rare earths into usable materials?
-The challenge lies in separating the rare earth elements from the ground and turning them into usable materials, which requires significant processing.
Why is the Western supply chain for rare earths more expensive than China's?
-Western rare earth products are more expensive due to higher environmental standards and the costs associated with pollution control.
What is the environmental impact of rare earth mining and processing?
-Rare earth mining and processing can release radioactive residue, leading to pollution and community protests, necessitating stricter environmental regulations.
How are Western countries and companies responding to China's monopoly on rare earths?
-Western countries and companies are building their own supply chains, investing in research, and seeking government support to reduce reliance on China.
What steps are being taken to make the Western rare earth supply chain more sustainable?
-Sustainability is key, with companies focusing on reducing environmental impact, moving polluting processes to more suitable locations, and using recycled rare earth elements.
Outlines
🌏 China's Dominance in Rare Earths and Western Response
This paragraph discusses the critical role of neodymium, a rare earth mineral, in modern technology, particularly in electric vehicles and smartphones. It highlights China's significant control over the global rare earth market, with 80% of US imports coming from China. This dependence poses a risk, as it could be leveraged by Beijing for geopolitical advantage. The US and its allies are actively developing alternative supply chains to reduce reliance on China. The narrative also touches on China's strategic development of its rare earth industry since the 1980s, its use of rare earths as a geopolitical tool, and the challenges faced by Western companies in competing with China's lower environmental standards and state support.
🏭 The Challenges of Breaking China's Rare Earth Monopoly
The second paragraph delves into the difficulties Western companies face in establishing a competitive rare earth supply chain independent of China. It introduces Ian Higgins, whose company is one of the few outside Asia capable of refining rare earths into metal pieces. Higgins acknowledges the higher costs of Western-produced neodymium, primarily due to stricter environmental regulations compared to China. The paragraph also discusses the environmental impact of rare earth processing, with examples such as the radioactive residue produced by a Malaysian plant. It outlines the need for government support and investment to make the Western supply chain viable, as seen in recent initiatives by the US and EU. The paragraph concludes with a call for collaboration among Western countries to rebuild the rare earth supply chain and the role of companies like Apple in transitioning to recycled rare earth elements.
Mindmap
Keywords
💡Neodymium
💡Rare Earths
💡Monopoly
💡Supply Chain
💡Deng Xiaoping
💡Environmental Regulations
💡Sustainability
💡Government Support
💡Technological Advancements
💡Global Competition
Highlights
Neodymium, a rare earth metal, is essential for technologies like Tesla's electric motors and iPhone speakers.
China dominates the rare earth market, supplying 80% of U.S. imports, raising concerns over potential supply disruptions.
The U.S. and its allies are developing alternative supply chains to reduce reliance on China's rare earth monopoly.
China's strategic development of the rare earth sector began in the late 1980s under Deng Xiaoping's leadership.
Beijing's policies, including tax rebates and subsidies, have fostered the growth of China's rare earth industry.
China used its rare earth dominance as a geopolitical tool during the trade war with the U.S.
Mount Weld in Western Australia is a significant site for rare earth mining outside of China.
Linus, the largest rare earth miner outside China, is expanding to meet growing global demand.
Processing rare earths into usable metals involves complex steps and significant environmental challenges.
Less Common Metals in the UK is capable of turning rare earth rocks into metal pieces for various applications.
Western producers face higher costs due to stricter environmental regulations compared to China.
Linus plans to use part of its expansion funds to reduce pollution from its neodymium refining process.
Sustainability is key for the Western supply chain, with a focus on environmentally friendly practices.
The West needs significant investment to catch up with China's three decades of rare earth industry development.
Government support, similar to China's, is essential for the development of the Western rare earth supply chain.
The Biden administration is reviewing the supply chain to protect U.S. interests in rare earths.
The European Union has initiated a significant investment program for rare earth and green energy projects.
Tech companies like Apple are transitioning to recycled rare earth elements to address sourcing concerns.
Collaboration between Europe, the UK, North America, and Australia is crucial for rebooting the rare earth supply chain.
Transcripts
for the wheels of a tesla to spin or
sound to come out of your iphone
they all require a tiny piece of metal
called neodymium
it helps turn electricity into motion
and it's one of 17
important minerals called rare earths
which are in many of the electronics we
use every day
but now your tech could be under threat
the fundamental challenge
is the complete and total dominance of
china in the past few years
80 percent of u.s rare earth imports
have come from china
and that's an issue because of concerns
that beijing could cut off access to the
us
there's going to be a need for many more
errors and on a much more secure
basis than the presently politically
charged chinese monopoly
so the us and its allies are building
their own supply chain
we're going to be producing at least 50
percent more than we do today
we follow the new players in the
neodymium supply chain as they seek to
break china's monopoly
[Music]
to understand how china got so big let's
rewind about 30 years
it all started with deng xiaoping
china's leader back then
is reported to have said that saudi
arabia has oil
but china has rare earths jeffrey wilson
is the research director at the think
tank perth u.s asia center
which is partly funded by the australian
government he's been watching china's
rare earth policies for the past decade
the chinese government started
developing the rare earth sector as a
strategic national industry in the late
1980s
and that was built on a recognition that
rares would be really critical to a
number of the technology sectors that
were emerging
[Music]
with that foresight beijing rolled out
tax rebates and subsidies that helped
the industry flourish
by the end of the millennium the country
became all dominant
and could influence global prices for
instance
in 2010 it cut export quotas that caused
the price of some rare earths to surge
tenfold
and china's control over the industry
was a geopolitical tool during the trade
war with the u.s
china has been taking advantage of the
united states for many many years
when the trump administration threatened
to cut off supplies of chips and
processors to telecom giant huawei
beijing said it was a threat to its
national sovereignty and warned that it
could stop the export of rare earth
materials to the u.s
the chinese government didn't pull the
trigger but as tensions escalated
some companies decided to take action
here we have one of the richest
known deposits in the world this is the
first stop in an alternative neodymium
supply chain
mount weld in western australia where
amanda lacaze's mining company digs rare
earths out of the ground
it was once a volcano and there are rare
earths
found throughout that and this shows the
tiny little bit that we have actually
mined at this stage
lacaze runs linus the largest rare earth
producing miner outside of china
she says these minerals are actually not
that hard to find
but the difficulty is turning them into
something usable
the rarers actually come out of the
ground and they're all married together
and then we put it through our
concentrator so that by the time it
leaves here
but about 35 percent of the material is
rare earth
lakas has been trying to extract more
from these rocks because recently
she says companies have told her they
want to buy more so to keep pace with
growing demand
linus is expanding this is the new plant
we're going to build
linus raised about 330 million dollars
last august to upgrade processing
facilities
around the same time the company won a
u.s department of defense contract to
build a new plant
in texas it would process rare earths
needed to produce military weapons and
electronics
once these expansions are finished
industry analysts expect lioness to
produce a quarter of the world's
concentrated rare earth
but neodymium still has a long way to
travel after australia
and before it ends up in your phone
these rocks typically have five more
steps to go
where they have to be processed and
turned into metals like at this facility
in the uk
so this is a sample of neodymium metal
that's melted
together with iron and boron and some
other additives to make the alloy
ian higgins is the managing director of
less common metals near liverpool
industry experts say the company is one
of the few outside of asia that can turn
the rocks into metal pieces
then some of these go directly to tech
companies automakers or end up in
formula one cars
higgins didn't immediately begin selling
neodymium metals to big companies
when he started his new operation in
2017 he turned to industry leaders for
advice
so the kind of business model we're
putting together would involve
essentially copying the chinese
he purchased machines from china and
before the pandemic
was visiting chinese plants up to three
times a year
today he's honed the technique and even
automated some of the process
but his medals still aren't cheaper than
china's
higgins says the price of western
neodymium products are around 20 to 25
percent more expensive
and one big reason is a challenge that
all rare earth producers face
pollution linus refines its neodymium at
a processing plant in malaysia
which releases a type of radioactive
residue
[Music]
after protests from the local community
lina said it plans to use part of the
330 million dollars in expansion funds
to move back some of the polluting work
to australia
wilson says environmental regulations in
china are looser
and this has helped domestic rare earth
companies stay competitive
for example china produces heavy rare
earths using a technique called in-situ
leeching where asset is poured directly
into the ground this is a mining
technique that is
practically unusable due to its
environmental costs in most western
countries
over the years beijing has said it's
taking measures to protect the
environment
and encouraging rare earth enterprises
to use efficient and green technologies
this colors represents
different grade of rare earths
for the western supply chain lakas says
sustainability will be key
the whole ecosystem in which we're
involved
is ending up with products which are
sold on the basis that they're good for
the environment
well that is absolutely no good if we
trash the environment along the way
and it's still a long way for this new
supply chain especially as it tries to
catch up with china's three decades
worth of investments
for instance in order for the west to
produce 2 000 tons of magnets a year
which is enough for 1 million cars
higgins says one option would be to open
a new mine
and that would cost up to 1 billion
dollars so he suggests taking a page
from beijing's book
they enjoy extensive amounts of state
support subsidies tax rebates
the help of government is absolutely
essential to allow this coordination to
take place
government support is starting to come
in last year the trump administration's
pandemic aid package included 800
million dollars to fund rare earth
research
[Applause]
the biden administration also said it's
reviewing the supply chain to protect
u.s
interests allies are also on the move
last year the european union kickstarted
a 12 billion dollar
investment program for rare earth and
green energy projects
higgins and lacaze aren't alone in their
supply chain efforts
we have this incredible mission which is
to restore
the rare earth supply chain back to the
western hemisphere other companies are
opening or expanding minds at processing
facilities in various places like the us
australia and tanzania meanwhile some
tech companies
have expressed concerns over how rare
earths are sourced
apple said it's transitioning to
recycled rare earth elements
which are already in several of its
products
for now the new players are ready to
make change europe the uk
in north america and australia we need
to collaborate
we're looking forward to really reboot
the rare earth supply chain
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