Rare-earth metals dependence. The world in the arms of China

    28 Jul 2021

    The concentration of production of many minerals has increased markedly over the past few decades. This trend reflects changes in global demand for materials, comparative advantages in production (for example, aluminum production using low-cost electricity in the United Arab Emirates), or government policy to ensure domestic security (supply of strategic materials such as beryllium to the United States). One of the most notable global shifts has been the increase in mineral production in China, whose share in world mining and processing has grown significantly since 1990. Accordingly, there is an increasing dependence on imports of mineral resources (including aluminum, bismuth, purified cobalt, gallium, lead, magnesite, metallic magnesium, mercury, rare earth elements (REE), silicon, titanium, vanadium, zinc) for many industrialized countries, including for the United States.

    Let’s check the story about the Chinese monopoly in this sphere by Zerkalo Nedeli authors from Ukraine.

    China concentrates 90% of the world’s reserves of rare-earth metals and the same share of the world’s number of enterprises for their extraction and processing.

    Another key player in this field is Lynas Corporation, one of the largest REE processors outside of China. An Australian mining company that operates a separation plant in Malaysia recently received $30.4 million in funding from the Pentagon for the construction of a plant for processing light rare earth elements in Texas, as well as another contract in partnership with Blue Line Corp., also based in Texas, for the construction of a plant for the separation of heavy REE. A spokeswoman for Lynas Corporation in an e-mail to CNBC called the new production facilities “an important basis for resuming further metal production and the introduction of magnet production in the United States.” She noted that diversification outside the Chinese magnetic supply chain is essential for creating competitive markets and meeting the needs of growing demand for 21st-century technology.

    While companies such as Lynas and MP Materials seek to increase domestic supply chains, the extraction of rare earth elements is a complex process due to a combination of environmental, technical, and political factors. After extracting from the mines, REEs are sent to separation sites, separated from other minerals. REE is then divided into oxides, metals, and, finally, magnets used in everything from rockets to wind turbines, medical devices, power tools, mobile phones, and engines for hybrid and electric vehicles.

    According to Jane Nakano, senior researcher at the Center for Strategic International Studies’ Energy Security and Climate Change Program, many regions, including the European Union, have enough of these resources. Still, they lack the experience of other countries, such as China, in processing and manufacturing magnets. Moreover, the rare earth element industry has been criticized by environmental activists because many REEs are radioactive and can be released into groundwater during extraction. Mining and processing can also disrupt the ecosystem and release hazardous by-products.

    Rare-earth metals are actually more than their name implies, but their extraction, processing, and purification are complex for many technical and environmental reasons. These 17 elements, which are divided into subsets of rare light earth and heavy rare earth elements depending on their atomic mass, are found in natural deposits worldwide. Heavy rare earth elements are often harder to find. They include metals such as dysprosium and terbium, which play a crucial role in the production of technological goods, in particular, electric vehicles. Neodymium and praseodymium are among the most popular lightweight REEs, which are essential in the production of engines, turbines, and medical devices. Demand for them has risen sharply in recent years with technology development and will continue to grow amid the ongoing race to create a large market for electric vehicles. The administration of US President Joseph Biden and the Department of Energy has made rare earth elements among the security priorities of the domestic supply chain, emphasizing their connection to the implementation of ambitious climate and technological policies.

    “Undoubtedly, the market for lithium and other rare earth elements is becoming a cornerstone of technological growth,” said John Bride’s climate spokesman John Kerry at the CNBC Evolve summit on energy innovation. But attempts in the recent past to compete with China in the REE market and restore American industry have failed. “It’s technically possible to try to restructure the entire supply chain because we once had that opportunity,” said Jane Nakano. “It’s not that we have no experience, it’s not that we are we have no idea what the internal supply chain might look like. The fact is that existing business models, environmental and political factors can make it difficult to implement these efforts, especially in the short term.”

    The United States has already tried to revive itself as a dominant player in the REE supply chain, which is one of the critical materials used in the manufacturing of electric vehicles, batteries, renewable energy systems, and a range of technologies. Under the Joe Biden administration, these efforts are receiving increasing attention. They are reinforced not only by a tough stance on geopolitical rivalry and threats to national security emanating from China but also by large-scale investments in climate change technology.

    In December 2020, the Investigation of the US Foreign Reliance on Critical Minerals (US Geological Survey Technical Input Document in Response to Executive Order No. 13953 issued September 30, 2020) was prepared by the US Geological Survey. USGS). According to the US Department of Commerce, the report identifies and classifies the primary sources of US mineral imports under existing security of supply agreements and a list of non-market economies. In addition, the USGS quantified the concentration of import sources and identified factors that could reduce the dramatic dependence on imports. Minerals are critical to the US economy, affecting GDP at several levels, including mining, processing, and manufacturing. The estimated cost of non-fuel minerals mined in the United States in 2020 was $ 82.3 billion, of which about $ 4.0 billion was exported. The value of processed products in the domestic market was $ 28 billion, with the share of scrap iron and steel accounted for $ 9 billion. From American raw materials and materials processed domestically, mineral materials worth $ 710 billion were produced. These mineral resources, as well as imported processed mineral resources, which increased by 83% in 2020, in turn, were consumed by processing and marketing enterprises, which in 2020 allowed to generate 3.03 trillion dollars.

    At the same time, the US’s dependence on foreign sources of raw materials and processed mineral materials does not allow it to relax and creates a demand for rethinking the issue of economic and national security. In 2020, imports covered more than 50% of the consumption of 46 non-fuel mineral raw materials (over $ 40 billion), with 17 of them imported at 100% (14 of them were classified as critical materials). Of the 35 minerals identified as essential in 2018 (Federal Register 83 FR 23295), 14 were among those whose dependence on imports exceeded 50% of consumption.

    For example, a typical Toyota Prius uses 25 kilograms of rare-earth elements compared to one kilogram in a standard car with an internal combustion engine.

    Most powerful automakers in Europe, Asia, and North America have already announced the abandonment of the production of vehicles with internal combustion engines (ICE), both truck and car, over the next 10-15 years. The most ambitious plans are in Norway, which from 2025 is going to sell exclusively electric cars. The rechargeable battery is a critical component of an electric car, and sustainable production of electric vehicles is impossible without the presence of its own technological chain of production, from raw materials to the final product. This is the path that the world’s leading automakers BMW, Volkswagen, and Tesla, are going to follow, but how they will be able to implement their ambitious plans has not yet been determined. Other countries plan to completely displace cars with internal combustion engines in the market in 2030-2040. According to the International Energy Agency, by 2040, the number of electric vehicles in the world should exceed 40 million, which provoked changes in business processes in mining companies in order to ensure the supply of materials for lithium-ion batteries. This factor is one of the explanations for the expected rise in prices, among others, for lithium, nickel, cobalt, graphite, and hence the final cost of production, which each consumer will feel.

    Thus, to meet the demand for REE without global supply chains, the United States, according to Jane Nakano, will have to achieve a massive level of concentration of production and build a chain of production, processing, and production, which can take a decade. So today, the best alternative is to enlist the support of allies in the face of the European Union to reduce dependence on China as the dominant player. And, of course, to raise environmental and other standards to limit China’s price dominance in the production of technological products.

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