Why China's control of rare earths matters | FT
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
- ๐ China dominates the supply chain of rare earths, which are crucial for high-tech products.
- ๐ ๏ธ Rare earths, including lanthanum and terbium, are difficult to mine and process due to their geochemical dispersion.
- ๐ฅ These elements have high melting and boiling points and are essential in reactions with other elements for various applications.
- ๐ฑ Modern devices like electric vehicles and mobile phones are irreplaceably reliant on rare earths for their electronic, optical, and magnetic components.
- ๐ The defense industry also heavily depends on rare earths, making their supply a matter of national security.
- ๐ Historically, the Mountain Pass mine in California was a leading source, but China now produces about 80% of the world's rare earths.
- โ ๏ธ Deteriorating US-China relations raise concerns about potential supply disruptions from China.
- ๐ China's potential to cut off supply is highlighted by its recent threat to sanction Lockheed Martin, a major US arms manufacturer.
- ๐ In response, the US, Australia, and the EU are working to establish an alternative supply chain for rare earths.
- ๐ Lynas, an Australian company, is the only major non-Chinese supplier but is limited to processing light rare earths.
- ๐ญ The Pentagon is funding the design of heavy rare earth processing facilities in the US to reduce reliance on China.
- ๐ Western governments are seeking new rare earth deposits to enhance supply security.
- ๐ง Establishing a non-Chinese supply chain faces technical and environmental challenges, as well as market pressures from China's dominance.
- ๐ 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
๐ 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
๐กRare earths
๐กSupply chain
๐กGeochemical qualities
๐กMelting and boiling points
๐กElectronic, optical, and magnetic applications
๐กMountain Pass mine
๐กSanctions
๐กLynas
๐กHeavy rare earths processing
๐กTechnical and environmental challenges
๐กBeijing's Made in China 2025 strategy
๐กHigh-performance magnets
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.
Transcripts
Rare earths are essential for high-tech products, everything
from electric vehicles to mobile phones and even fighter jets.
However, China dominates the supply chain.
And as relations between the US and China deteriorate,
western countries fear they don't
have an alternative, which could have
serious implications for the future of manufacturing.
Rare earths are a group of 17 metallic elements
with obscure names such as lanthanum and terbium.
They're actually relatively plentiful in the earth's crust.
However, their geochemical qualities
mean they tend to be widely dispersed, making them
relatively difficult to mine and process profitably, hence
the name.
As a group, they tend to have high melting
and boiling points.
But it is when they react with other elements
that they become really useful.
In fact, they're indispensable for many electronic, optical,
and magnetic applications and currently irreplaceable
for modern devices such as electric vehicles
and mobile phones.
They're also vital for the defence industry.
Half a century ago, the Mountain Pass mine in California
was the world's leading source of rare earths.
But a successful push by Beijing to become the global leader
in the sector means it now produces about 80
per cent of the world's rare earths.
The sharp deterioration in relations between the US
and China is fueling concerns that Beijing
could cut off the supply.
In July, China threatened to impose sanctions
on Lockheed Martin, the biggest US arms manufacturer.
This has prompted the US, Australia, and the EU
to step up efforts to create an alternative supply chain.
Currently, there is just one major non-Chinese supplier
of rare earths, Lynas, an Australian-listed company.
But Lynas can only handle the so-called light rare earths
at its Malaysian processing facility,
leaving western companies totally
reliant on Chinese suppliers for heavy rare earths.
In July, the Pentagon provided funding to Lynas and US-based
MP Materials to design heavy rare earths processing
facilities that could be based in the US.
The US and Australian governments
have also signed an agreement to source new rare earth deposits
to boost security of supply.
The task of establishing a non-Chinese supply chain
will not be easy, however.
Even though rare earths are relatively abundant the process
of separating them poses technical and environmental
challenges.
China's dominance of the market enables
it to control prices and put pressure on challengers.
Beijing's Made in China 2025 strategy
is to create a vertically integrated supply chain
that dominates mining magnates in high-tech manufacturing,
such as electric vehicles.
But an increasing number of western experts
say this is exactly why the west needs
to begin producing its own supply of rare earths
and also the high high-performance magnets
required to power the digital age.
Otherwise, millions more high-tech jobs
could migrate to China.
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