With an estimated 44 million tons of rare earth reserves, China is by far the largest producer of rare earth elements (REE) in the world and dominates global rare earth supply chains. In fact, China produced 61% of global rare earths in 2021; compared to the USA’s 15.5%, there is a significant gap to close in the market. Although the USA, Australia, and Canada are looking for ways to onshore their processes, shifting dependence away from China is not easy.
Thanks to government funding, lower environmental standards in the past, and the ability to keep working wages low, mines throughout China in the 80s and 90s blossomed and REEs supply increased significantly – during that period western manufacturers looking for lower production costs were excited to move east . At the same time they basically exported their processing and manufacturing technologies from the west to the east, allowing China to seriously develop its own mineral resources and manufacturing capabilities. The development of the manufacturing infrastructure, coupled with a significant supply of critical minerals, has allowed China to hone her extraction process and become a dominating force in the REE supply chain, globally.
North American Dependency
Although North America has its own REE deposits, its extraction and processing capabilities are currently nowhere near China’s. For example, companies with REE projects in USA have not been able to complete the final process of economically producing oxides and there is no economic or sizeable production of rare earths metals, alloys, and magnets. The only mine producer in USA, MP Materials, exports its mineral concentrate material to China for processing.
And demand is only expected to continue increasing, with an estimated 315,000 ton of REEs needed by 2030. The demand is high because REEs are used in a multiplicity of applications, including technologies like flat-screen televisions, smartphones, electric vehicles, and wind turbines, to name a few. In addition, REEs are critical to the military as they are found in fighter jets, night vision goggles, firearms, sonars, missiles, and many more crucial technologies.
Because of this heavy dependence on Chinese REEs, the USA and other countries are highly concerned that they are strategically vulnerable and could be cut off from REE supply at any time, if trading relationship with China significantly deteriorate. It’s becoming more and more clear that avoiding these chokepoints in the supply chain is a matter of natural security.
Current Action Plans
So, what is North America doing to onshore production and move away from dependence on China? Well, certain operations, such as MP Materials’ Mountain Pass mine, intend to restore a full supply chain in the USA. This includes plans for establishing hydrometallurgy and separation facilities, along with a manufacturing facility that’s being built in Fort Worth, Texas, that’s expected to be completed in 2025 and will convert refined materials into metals and alloys. The Mountain Pass mine should produce enough REEs to fulfill all of the Pentagon’s requirements; however, the process of decoupling from Chinese supply chains is slow given the technological complexity and is a risky financial investment for developing companies if there is no government support.
Looking Forward
Although it is a phenomenal effort for western countries to move away from reliance on China and create domestic REEs supply chains, economic and regulatory support from the government is critical, and there are efforts to make funding available for advanced REE projects and downstream capacity. However, if Biden and Trudeau decide to put more investment upstream to support junior mining companies at all stages, we could see this significant gap between domestic/regional supply and demand being fulfilled by local producers instead of foreign sources. Unfortunately, with demand on the rise (electric vehicles alone will require 200,000 tons of rare earths over the next decade), there is need to begin planning, investing, and executing new mining and processing facilities sooner rather than later.
Despite efforts in North America, China will continue to dominate the REE market in the foreseeable future, thanks to its significant capacity and established infrastructure. However, this won’t likely be the case forever as the USA, Australia, and Canada look to expand their local operations, develop domestic supply chains, and reduce their political risk as they work to decouple their supply chains from China moving forward.
