The US Defense Department is seeking new federal funds to bolster domestic production of rare earth minerals and reduce dependence on China, the Pentagon said Wednesday, amid mounting concern in Washington about Beijing’s role as a supplier.
The DOD’s request was outlined in a report that sent to the White House and briefed to Congress, said a Pentagon spokesman.
Rare earths are a group of 17 chemical elements used in both consumer products, from iPhones to electric car motors, and critical military applications including jet engines, satellites and lasers.
Rising tensions between the US and China have sparked concerns that Beijing could use its dominant position as a supplier of rare earths for leverage in the trade war between the world’s Top 2 economic powers.
Between Y’s 2004 and 2017, China accounted for 80% of US rare earth imports. Few alternative suppliers have been able to compete with China, because of it very low labor cost. China is home to 37% of global rare earths reserves.
“The department continues to work closely with the President, Congress and US industry to improve US competitiveness in the mineral market.”
The Pentagon report was tied to a federal program designed to bolster domestic production capabilities through targeted economic incentives.
While China has so far not explicitly said it would restrict rare earths sales to the United States, Chinese media has strongly implied this could happen.
In a commentary headlined “United States, don’t underestimate China’s ability to strike back,” the official People’s Daily noted the United States’ “uncomfortable” dependence on rare earths from China.
“Will rare earths become a counter weapon for China to hit back against the pressure the United States has put on for no reason at all? The answer is no mystery,” it said.
The Big Q: If we do not buy them from China, who will?
The US reported output of 15,000 tonnes of rare earths in Y 2018, up from no production the prior year. Rare earths reserves in the country are fairly high, and stand at 1.4-M tonnes.
Rare earths mining in the US currently happens only at the Mountain Pass mine in California. It was run by Molycorp before it went bankrupt, and then went up for sale — in the end, the mine was bought by MP Mine Operation, which is majority owned by JHL Capital Group and QVT Financial. Mountain Pass went back into production in Q-1 of Y 2018 after being put on care and maintenance in Q-4 in Y 2015.
Despite mining some reserves, the US is a major importer of rare earth materials, with demand for compounds and metals worth $160-M in Y 2018; that is up from $137-M the prior year. The country has classified rare earths as critical minerals, a distinction that has come to the fore in light of the trade dispute between the US and China.