China’s Control Over Rare Minerals Troubles Pentagon

U.S. officials are getting worried.China has cornered the market on rare earth metals vital to defense and for three years in a row has cutback on exports on which the Pentagon depends. Officials say it’s time the U.S.takes action to assure a long-term supply.

In the lastdecade, China has moved aggressively, acquiring mines around the world that nowaccount for more than 90% of global production of the most desired rare earthmetals, such as terbium, dysprosium, molybdenum, thorium, erbiumand yttrium. Because of their special qualities, several are used in defense applications,especially in missile assemblies, radars, satellites and power supplies.

The U.S. no longer keeps many rare earthson hand, although atthe height of the Cold War, the U.S. national defense stockpile included severalhundred materials and mineral ores. The stockpile, worth billions, included alot of lead, nickel and copper but also many precious metals largely found inAsia, Australia and parts of South America. In recent years, however, thePentagon sold off the stockpile in order to accumulate parts and assemblies forships, planes and military weapon systems.

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This was not a problem while suppliesof rare earths were easily obtainable.But in each of the last three years, China has kept more rare earths forinternal use and cut exports accordingly. Experts think that trend willcontinue. Chances are that the Chinese government also is stockpiling the oresinstead of allowing them to be traded in the global market.

Some U.S. military officials and leadingmembers of the House and Senate Armed Services committees want to start restockingat least some of the rare earth materials over the next several years. Rare earths are not used inhuge amounts, but many are expensive; dysprosium costs about $50 per pound andis used in communication systems. Terbium costs about $150 per pound and isused in avionic systems and radars.

The prospectof many years of limited supplies of about a dozen rare earth minerals islikely to spur the U.S. to negotiate with mining companies in countries such asAustralia and Argentina about increasing exploration for rare earths andrestricting further acquisition by China of rare earth mines.

The North Americanmarket for rare earths is about $1 billion per year, but there may be moredemand in the future, especially with a growing market for electric vehicles.Rare earths are used in batteries for electric cars. Japan, also dependent onChina for rare earths, likely a major producer of electric cars, also may beginbuilding a strategic reserve in the next few years.

Tight globalsupplies from China will lead to more prospecting, although there are only afew countries in which geologists expect rare earths to be found in large enoughquantities to make mining operations worth the investment. Among them are SouthAfrica, Greenland, Mongolia, Paraguay and New Guinea.

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