Why China's control of rare earths matters | FT

Financial Times

21 Sept 202003:13

Summary

TLDRRare earths, crucial for high-tech manufacturing including electric vehicles and smartphones, are predominantly supplied by China, raising concerns as US-China relations worsen. Western nations, fearing a supply cutoff, are urgently seeking alternatives. Lynas, an Australian company, is the only major non-Chinese supplier but can only process light rare earths. The US and Australia are collaborating to establish a domestic heavy rare earth processing industry, crucial for maintaining high-tech manufacturing and defense capabilities, amidst China's market dominance and strategic ambitions.

Takeaways

🌐 China dominates the supply chain of rare earths, which are crucial for high-tech products.
🛠️ Rare earths, including lanthanum and terbium, are difficult to mine and process due to their geochemical dispersion.
🔥 These elements have high melting and boiling points and are essential in reactions with other elements for various applications.
📱 Modern devices like electric vehicles and mobile phones are irreplaceably reliant on rare earths for their electronic, optical, and magnetic components.
🔒 The defense industry also heavily depends on rare earths, making their supply a matter of national security.
📉 Historically, the Mountain Pass mine in California was a leading source, but China now produces about 80% of the world's rare earths.
⚠️ Deteriorating US-China relations raise concerns about potential supply disruptions from China.
🛑 China's potential to cut off supply is highlighted by its recent threat to sanction Lockheed Martin, a major US arms manufacturer.
🔄 In response, the US, Australia, and the EU are working to establish an alternative supply chain for rare earths.
📈 Lynas, an Australian company, is the only major non-Chinese supplier but is limited to processing light rare earths.
🏭 The Pentagon is funding the design of heavy rare earth processing facilities in the US to reduce reliance on China.
🔍 Western governments are seeking new rare earth deposits to enhance supply security.
🚧 Establishing a non-Chinese supply chain faces technical and environmental challenges, as well as market pressures from China's dominance.
📈 China's strategy aims for a vertically integrated supply chain in high-tech manufacturing, influencing the west to seek self-sufficiency in rare earths and related technologies.

Q & A

Why are rare earths crucial for high-tech products?
-Rare earths are essential for high-tech products because they are indispensable for many electronic, optical, and magnetic applications in modern devices such as electric vehicles, mobile phones, and even fighter jets.
What is the current situation of rare earth supply chain dominance?
-China currently dominates the rare earth supply chain, producing about 80% of the world's rare earths, which has raised concerns among western countries due to deteriorating relations.
What are the geochemical qualities of rare earths that make them difficult to mine and process?
-Rare earths tend to be widely dispersed in the earth's crust, making them relatively difficult to mine and process profitably, hence the name 'rare earths'.
Why are rare earths considered irreplaceable for certain applications?
-They become really useful when they react with other elements, making them irreplaceable for modern devices due to their unique properties such as high melting and boiling points.
What was the historical significance of the Mountain Pass mine in California?
-Half a century ago, the Mountain Pass mine in California was the world's leading source of rare earths before Beijing pushed to become the global leader in the sector.
What actions have the US, Australia, and the EU taken in response to supply chain concerns?
-The US, Australia, and the EU have stepped up efforts to create an alternative supply chain, including providing funding to companies like Lynas and MP Materials to design heavy rare earths processing facilities.
What is the current limitation of Lynas, the major non-Chinese supplier of rare earths?
-Lynas can only handle light rare earths at its Malaysian processing facility, leaving western companies reliant on Chinese suppliers for heavy rare earths.
What is the 'Made in China 2025' strategy, and how does it relate to rare earths?
-'Made in China 2025' is Beijing's strategy to create a vertically integrated supply chain that dominates mining magnates in high-tech manufacturing, including the production of high-performance magnets required for the digital age.
What are the challenges in establishing a non-Chinese supply chain for rare earths?
-The process of separating rare earths poses technical and environmental challenges, and China's market dominance allows it to control prices and put pressure on competitors.
Why is it important for the west to produce its own supply of rare earths and high-performance magnets?
-Producing their own supply is crucial for the west to avoid dependency on China and to prevent the migration of millions of high-tech jobs to China, ensuring technological sovereignty and economic growth.
What measures has the Pentagon taken to secure the supply of heavy rare earths?
-The Pentagon has provided funding to Lynas and MP Materials to design heavy rare earths processing facilities that could be based in the US, aiming to reduce reliance on Chinese supplies.

Outlines

00:00

🌏 Dominance and Dependence on Chinese Rare Earths

This paragraph discusses the critical role of rare earths in high-tech industries, including electric vehicles, mobile phones, and defense technologies. Despite their abundance in the earth's crust, the elements are challenging to mine and process profitably due to their dispersed nature and high melting points. China's control over 80% of the world's rare earth supply has raised concerns in the West, particularly with deteriorating US-China relations. The potential for supply disruptions is a significant risk for industries reliant on these elements. The US, Australia, and the EU are actively seeking to establish alternative supply chains, with initiatives such as funding to Lynas and MP Materials for heavy rare earth processing facilities and agreements to source new deposits.

Mindmap

Keywords

💡Rare earths

Rare earths are a group of 17 metallic elements with unique properties that are essential for high-tech manufacturing. They are relatively plentiful in the earth's crust but are dispersed in a way that makes mining and processing them for profit challenging. In the video, rare earths are highlighted as indispensable for modern devices such as electric vehicles and mobile phones, and vital for the defense industry, underlining their importance to the theme of technological advancement and geopolitical concerns.

💡Supply chain

The supply chain refers to the network of organizations, people, activities, information, and resources involved in manufacturing and delivering a product or service. In the context of the video, China's dominance over the rare earths supply chain is a central concern for Western countries, as it raises the risk of supply disruptions and underscores the need for alternative sources to ensure the continuity of high-tech manufacturing.

💡Geochemical qualities

Geochemical qualities relate to the chemical characteristics of elements in the earth's crust. For rare earths, these qualities mean they are widely dispersed, making them difficult to mine and process efficiently. This term is crucial in the video as it explains why rare earths are challenging to extract and why China has been able to dominate their production.

💡Melting and boiling points

The melting and boiling points of a substance refer to the temperatures at which it transitions from solid to liquid and from liquid to gas, respectively. Rare earths have high melting and boiling points, which are important for their industrial applications. The video mentions these properties to illustrate the unique characteristics of rare earths that make them valuable in high-tech applications.

💡Electronic, optical, and magnetic applications

These applications refer to the use of materials in electronic devices, optical equipment, and magnetic systems. Rare earths are highlighted in the video as being indispensable for such applications due to their unique reactive properties when combined with other elements, emphasizing their role in the advancement of technology.

💡Mountain Pass mine

The Mountain Pass mine in California was once the world's leading source of rare earths. The video uses this historical reference to contrast the past dominance of the US in rare earth production with the current situation where China produces about 80% of the world's supply, illustrating the shift in the global rare earths market.

💡Sanctions

Sanctions are measures imposed on a country, entity, or individual to coerce or punish by interfering with normal economic relations and trade. The video mentions China's threat to impose sanctions on Lockheed Martin, highlighting the geopolitical tensions that can affect the supply of rare earths and the urgency for Western countries to establish alternative supply chains.

💡Lynas

Lynas is an Australian-listed company and the only major non-Chinese supplier of rare earths. The company is mentioned in the video as it plays a critical role in the efforts to create an alternative supply chain, although it currently only handles light rare earths, leaving a dependency on China for heavy rare earths.

💡Heavy rare earths processing

Heavy rare earths processing refers to the refining and manufacturing of the heavier members of the rare earth elements. The video discusses the Pentagon's funding for Lynas and MP Materials to design facilities for heavy rare earths processing in the US, indicating a strategic move to reduce reliance on Chinese supplies.

💡Technical and environmental challenges

These challenges refer to the difficulties in the technical processes of separating rare earths and the environmental impact of mining and processing them. The video points out that establishing a non-Chinese supply chain is not easy due to these challenges, which include the need for advanced technology and adherence to environmental regulations.

💡Beijing's Made in China 2025 strategy

This strategy is a Chinese government initiative aimed at upgrading the manufacturing capabilities of Chinese industries, including high-tech sectors like electric vehicles. The video mentions this strategy to illustrate China's ambitions to dominate not just the mining of rare earths but also the high-tech manufacturing that relies on them, which is a key concern for Western countries.

💡High-performance magnets

High-performance magnets are powerful, specialized magnets used in various high-tech applications. The video emphasizes the need for the West to produce its own supply of these magnets, which are crucial for powering modern devices in the digital age, as a means to maintain technological independence and prevent the migration of high-tech jobs to China.

Highlights

Rare earths are essential for high-tech products like electric vehicles, mobile phones, and fighter jets.

China dominates the supply chain of rare earths.

Western countries fear lack of alternatives to China's rare earths supply could impact manufacturing.

Rare earths are 17 metallic elements with unique geochemical properties.

They are difficult to mine and process profitably due to their dispersed nature.

Rare earths have high melting and boiling points and become useful when reacting with other elements.

They are indispensable for electronic, optical, and magnetic applications in modern devices.

Rare earths are vital for the defense industry as well.

China produces about 80% of the world's rare earths, pushing out competitors.

US-China relations deterioration raises concerns about potential supply cut-offs.

China threatened sanctions on Lockheed Martin, the largest US arms manufacturer.

US, Australia, and EU are working to create an alternative rare earths supply chain.

Lynas is the only major non-Chinese supplier but only handles light rare earths.

Western companies are reliant on China for heavy rare earths.

Pentagon funds Lynas and MP Materials to design heavy rare earths processing facilities in the US.

US and Australia signed an agreement to source new rare earth deposits for supply security.

Establishing a non-Chinese supply chain faces technical and environmental challenges.

China's market dominance allows it to control prices and pressure competitors.

Beijing's strategy aims to create a vertically integrated supply chain in high-tech manufacturing.

Western experts argue the West needs to produce its own rare earths and high-performance magnets.

Failure to establish a domestic supply could lead to more high-tech jobs moving to China.