What if there were rare minerals so valuable to many of the United States' most advanced weapons systems that their disappearance from the marketplace could threaten America's national security interests—and those rare minerals were, in fact, almost solely in the hands of the country's fiercest global economic competitor who held a monopoly over them?
Well, this isn't a "what if" game, it's true.
Despite years of concern in the U.S. and around the world, China still controls a monopoly on Rare Earth Elements (REEs) that are critical to a number of advanced weapons systems, mobile devices and emerging green technologies. And the situation isn't likely to change any time soon.
"China holds a commanding monopoly over world REE supplies, controlling about 95 percent of mined production and refining," James Clapper, U.S. director of national intelligence, told the Senate Select Committee on Intelligence recently. "China's dominance and policies on pricing and exports are leading other countries to pursue mitigation strategies, but those strategies probably will have only limited impact within the next five years and will almost certainly not end Chinese REE dominance."
According to the 2013 Worldwide Threat Assessment of the national intelligence office, REEs are essential to civilian and military technologies and to the 21st century global economy, including green technologies (e.g., wind turbines and advanced battery systems) and advanced defense systems. Rare metals are also critical in most mobile devices, computer disk drives and televisions.
This, of course, is why China mines for the metals—which, actually, aren't so much rare as quite expensive to mine because they're found in such tiny amounts. What it doesn't explain is why the U.S., and virtually every other developed country, has been slow to recognize the threat that China's monopoly over REEs poses not only to national security but to emerging technologies that will also be critical in the 21st century global economy.
Has China taken advantage of the situation? Not quite yet, according to the unclassified threat assessment, but it may just be a matter of time before China profits from its monopoly.
"REE prices spiked after China enacted a 40 percent export quota cut in July 2010, peaking at record highs in mid-2011," Clapper told the Senate panel. "As of December 2012, REE prices had receded but still remained at least 80 percent, and as much as 600 percent…above pre-July 2010 levels."
Concern about China's monopoly over these rare minerals isn't new, but some of its recent actions have elevated those very real concerns. China deliberately ceased production of these rare metals last year in what was almost certainly an effort to drive up world prices on them. China also restricts exports of REEs‑effectively forcing large commercial electronics companies that need such rare metals in their devices to build inside China.
For these economic and obvious national security reasons, the U.S. and other global powers have begun to build their own mines to extract these rare minerals. Those mines in the U.S., Australia, Brazil, Canada, Vietnam and Malawi should be operational in less than five years, which should lessen concerns over China's monopoly a bit.
The problem is that the manufacturing facilities with the necessary expertise to refine these rare minerals still reside in just one country—you guessed it, China—and this isn't expected to change anytime soon.
While production at REE mines outside China are about to come online soon, "initial REE processing outside of China will remain limited because of technical difficulties, regulatory hurdles, and capital costs associated with the startup of new or dormant processing capabilities and facilities," Clapper said. What's more, "China will also continue to dominate production of the most scarce and expensive REEs, known as heavy REEs, which are critical to defense systems," he said.
New discoveries are likely to change the situation some. Researchers in Japan recently announced they had discovered large deposits of the types of rare earth materials that are used in any number of commercial and military weapons systems. The rare metals that Japan found off the country's Pacific coast appear to be both abundant and cheap to mine.
But Japan, which itself uses about half of these rare earth metals, plans to explore and study the deposits for up to two years before even attempting to mine them from the seabed in the Pacific. And Japan will still need to send the rare metals to China for refining because no one else has built the necessary manufacturing facilities yet.
Meanwhile, the White House and Congress, so at odds publicly on issues like budget reform, gun control, immigration reform and climate change, have at least managed to find some common ground on this particular issue. The U.S. Department of Energy, with Congress' blessing, plans to spend more than $100 million to create a new organization designed to look at new methods to produce REEs.
This new DOE-financed organization (the Critical Minerals Institute) will work with dozens of research partners in an effort to find creative ways and methods of inexpensively mining the rare metals. For instance, a mine in California (Mountain Pass) actually has one of the largest rare metal deposits in the world. Mining the rare metals cost-effectively has been the problem to date.
But it still begs the question, even if CMI and its research partners pull the rare metals out of the ground as cheaply as China, who will then refine them? The White House and Congress have largely been unable to establish common ground on such government-supported commercial partnerships in the past four years. Will the next four be any different? Time will tell.