Tech Companies Depend on China for Rare Earths. Can That Change? | WSJ

The Wall Street Journal

4 May 202108:24

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

00:00

🌏 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.

05:01

🏭 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

Neodymium, also known as Nd, is a rare earth element that is vital for the production of powerful magnets used in various modern technologies. It is particularly important in the manufacturing of electric vehicles, wind turbines, and high-performance audio speakers. The video script highlights the significance of neodymium in turning electricity into motion, which is crucial for many electronic devices. The term 'neodymium' is used to illustrate the dependency on rare earths for technological advancements and the challenges faced in securing a stable supply outside of China's dominance.

💡Rare Earths

Rare earths are a group of 17 metallic elements that have unique magnetic, optical, and electronic properties. They are essential in numerous applications, including electronics, renewable energy technologies, and defense. The script emphasizes the importance of rare earths in everyday electronics and the geopolitical concerns surrounding their supply, especially given China's significant market share. The term is used to discuss the broader context of rare earth elements and their impact on global technology and economy.

💡Monopoly

The term 'monopoly' in the context of the video refers to China's dominant position in the rare earth market, where it controls approximately 80 percent of the global supply. This monopoly raises concerns over supply security for countries like the US that rely heavily on rare earths for their technology and defense industries. The script discusses the efforts to break this monopoly by developing alternative supply chains.

💡Supply Chain

The 'supply chain' refers to the network of organizations, people, activities, information, and resources involved in moving a product or service from supplier to customer. In the video, the focus is on the neodymium supply chain and the efforts to establish a more diversified and secure supply chain for rare earths, independent of China's dominance. The term is crucial for understanding the global efforts to secure the raw materials needed for high-tech industries.

💡Deng Xiaoping

Deng Xiaoping was a key leader in China and is mentioned in the script for his strategic vision in the late 1980s to develop the rare earth sector as a strategic national industry. His foresight is credited with China's current dominance in the rare earth market, which has positioned the country as a major player in the global supply of these critical elements.

💡Environmental Regulations

Environmental regulations play a significant role in the production of rare earths, as the extraction and processing of these elements can be environmentally harmful. The script discusses how looser regulations in China have allowed its domestic rare earth companies to stay competitive. However, there is a growing emphasis on sustainability and the need for environmentally friendly practices in the production of rare earths, especially as new players enter the market.

💡Sustainability

Sustainability in the context of the video refers to the responsible and ethical extraction and use of rare earths, ensuring that environmental and social impacts are minimized. The script highlights the importance of sustainability in the new supply chain, as companies and governments seek to produce rare earths without 'trashing the environment along the way.' This term is central to the narrative of creating a more responsible and secure rare earth industry.

💡Government Support

Government support is highlighted as essential for the development of a competitive rare earth industry outside of China. The script mentions the need for subsidies, tax rebates, and other forms of assistance to help new players in the market establish a foothold. This support is crucial for the success of alternative supply chains and reducing dependency on China's monopoly.

💡Technological Advancements

Technological advancements are necessary for the efficient extraction, processing, and application of rare earths. The video script discusses the importance of innovation in the rare earth industry, from improving extraction techniques to developing new applications for these elements. The term is used to emphasize the ongoing need for research and development to maintain a competitive edge in the global market.

💡Global Competition

Global competition in the rare earth industry is driven by the need for these elements in various high-tech applications. The script outlines the efforts of the US, its allies, and other countries to build their own supply chains and reduce reliance on China. This competition is a key factor in the development of new technologies and strategies to secure rare earth resources.

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.