As Trump talks about a trade war with China, concerns grow about rare earth supplies Mining

Taipei, Taiwan – As US President-elect Donald Trump prepares for a second trade war with China once he takes office on January 20, rare earth minerals essential for the production of electronics, vehicles and weapons are one resource that is expected to fall into the fray. .

While rare earth elements are abundant on Earth – despite what their name suggests – China controls about 70% of their production and 90% of processing, according to estimates by the US Geological Survey and the International Energy Agency.

The 17 elements, which include scandium, promethium and yttrium, are used to make everything from smartphones, semiconductors and electric vehicle batteries, to F-35 fighter jets, drones, wind turbines, radar systems and nuclear reactors.

The vulnerability of rare earth supply chains has been a growing concern for governments around the world in an era of heightened geopolitical tensions.

Last month, China banned exports of gallium, germanium and antimony to the United States after President Joe Biden’s administration announced its latest restrictions on the sale of chips and advanced machinery to the country.

The move was widely seen as symbolic because the United States had other sources of gallium and germanium.

But it nonetheless represents an escalation in Beijing’s use of rare earths as a tool for geopolitical gain after declaring state ownership of rare earths in October and banning the export of technologies used to extract and separate the materials late last year.

It also referred to the Chinese government’s decision in 2010 to briefly ban the export of these minerals to Japan amid a maritime border dispute between the two sides.

And with Trump pledging to impose a host of new trade restrictions on China — ranging from a 10% tariff on Chinese goods over Beijing’s failure to limit fentanyl exports, to a 60% tariff on unfair trade practices — Beijing could impose more restrictions on rare earths. To answer that. Kind.

Even if the Chinese government does not respond with an export ban, Trump’s tariffs would likely make obtaining the minerals much more expensive.

“Looking 12 to 18 months ahead, the global geopolitical landscape is full of unpredictable factors that could materially impact in an instant the outlook for supply chains and the economies they serve,” said Ryan Castillo, a rare earths expert at a Canadian-based research and consulting firm. Adamas Intelligence told Al Jazeera.

Castillo said Washington is particularly concerned about rare earth elements such as neodymium, praseodymium, dysprosium and terbium, which are used to make powerful neodymium magnets — also known as NdFeB magnets.

Rare earths and finished products such as rare earth magnets, which are many times stronger than standard magnets, are considered a “weak spot for American manufacturers and the defense industry” because the United States and its allies have not yet developed an alternative source other than China. Although mineral production projects are underway elsewhere, including three U.S. states and Estonia, Castillo said.

Washington has made creating a “sustainable supply chain from mine to magnet” a top priority.

Last March, Danielle Miller, acting deputy assistant secretary of defense for industrial base resilience, said efforts to build a pipeline capable of supporting all U.S. defense requirements by 2027 were “on track.”

Despite abundant reserves of rare earth elements in many countries, from Angola and Australia to Brazil, Canada and South Africa, expanding the supply chain beyond China is a difficult task.

China has been able to maintain its dominance of the industry thanks to economies of scale, government support and a buildup of huge inventories that have allowed it to undercut rivals with “irrationally low prices,” said Neha Mukherjee, a senior analyst for critical metals. In standard mineral intelligence.

Rare earths are byproducts of mining other minerals such as iron ore, and are not produced in predictable quantities. As a result, the quantities and prices of different rare earth elements can vary widely among the 17 minerals.

Mukherjee said China is focusing on keeping rare earth prices stable to support the domestic electric vehicle industry, even if it comes at the expense of the mining sector.

China’s unbeatable near-monopoly prices have historically made operating rare earth mines and processing facilities an unattractive proposition for many investors.

“They don’t encourage anyone to become a competitor. Developing a mine doesn’t make economic sense when you can buy the semi-processed material at a competitive price,” Mike Walden, senior director of TechCet, a consultancy specializing in electronics supply chains, told Al Jazeera. “.

The timeline is also long, taking 10 to 20 years from exploration to construction, Walden added.

The watershed moment for US efforts to secure rare earth supplies was the reopening of the Mountain Pass Mine in California’s Mojave Desert – first discovered in the 1870s – by MP Materials in 2018.

The company has since opened a magnet factory in Texas.

Other rare earth-related facilities outside China include a mine in Yellowknife, Canada, a magnet recycling plant in Texas, and a rare earth magnet plant in South Carolina, with more projects in development across North America.

Since 2022, the US Department of Defense and the US Department of Energy have awarded more than $440 million to rare earth companies, with additional tax breaks provided by the Inflation Reduction Act.

Such projects could help the United States weather the storm if China halts its exports of rare earth elements, although the country could still struggle to achieve full self-reliance, Walden said.

“The key point here is that there are operational facilities in North America. Is it necessarily enough to support all North American demands? The answer to that is no. Is it enough to support North American strategic demand? It seems that the answer to that is yes,” he said, referring to areas with Priorities for Washington are defense and energy.

Even as mines outside China open or reopen, rare earth minerals are still being sent there for processing in many cases, analysts said.

China controls 99% of the processing of heavy rare earth elements, a subset of rare earth elements that are less abundant but nonetheless essential for the production of electric vehicles, wind turbines, and fiber optic cables.

North America is not the only region trying to catch up. In January, Brazil’s first rare earth mine in Serra Verde opened for commercial production after 15 years of development.

Europe has rare earth processing facilities in France, Estonia and Germany, but has not yet opened any mines despite having huge rare earth deposits in Sweden, Finland, Norway and Spain.

Australia also has large mining and processing facilities in operation, and the government is spending hundreds of millions of dollars to develop more.

Such initiatives are still not enough to reduce dependence on China, said Mukherjee of Benchmark Mineral Intelligence.

“There is a desperate need for a circular economy. There is a desperate need for recycling facilities. There is a desperate need to develop production and processing facilities in the United States, and a lot of funding should be redirected in this way,” she said.

Some of the hesitation – especially in Europe – was due to the environmental costs associated with extracting and processing rare earth elements, including the separation and removal of radioactive materials such as uranium and thorium.

Mining and processing produce large quantities of waste rock and can unleash residual concentrations of rare earths, radionuclides, heavy metals and acids into the ambient air, soil and groundwater, according to a 2021 Canadian study.

Australia’s Lynas Rare Earths, the largest rare earth processing company outside China, faced major protests in Malaysia in 2019 over toxic waste produced by rare earth processing facilities there.

Analysts say some of these concerns could be overcome through new technology and automation to meet higher environmental standards demanded by many governments, but this will take time and money.

Ironically, the industry could get more support if Beijing blocks its exports, said Castelloux of Adamas Intelligence.

“The last time China limited rare earth exports, it led to years of demand destruction as many end users looked to reduce their consumption or switch to alternatives in the following years,” he said.

“Restrictions on magnet exports, even if short-term, will likely lead to increased government investments in alternative supply chains at home and abroad.”

With days remaining before Trump returns to the White House, there is a great deal of uncertainty about how he will handle the rare earth industry.

During his first presidency, he issued an executive order declaring rare earths a national emergency because the United States relied on a “foreign adversary” to obtain them.

Trump is widely expected to roll back environmental regulations that create barriers to opening and operating mines, but he has also expressed opposition to key financing initiatives such as the Inflation Reduction Act and the bipartisan Infrastructure Act.

Some analysts have expressed concern that Trump might invoke the International Emergency Economic Powers Act to impose tariffs on imports of minerals such as rare earths, or direct the Secretary of Commerce to open a Section 232 investigation into the national security implications of such imports, as he did with Trump. Aluminum in 2018, despite its critical importance to the economy.

In the meantime, the industry is bracing for a bumpy road ahead, Walden said, and is stockpiling resources accordingly.

“There have been preparations. Everyone expects, not de-escalation, but actually further escalation. So, it’s mutual: revenge, next step, revenge, next step.”