In an earlier post, I outlined the background leading to the current Chinese monopoly in the Rare Earth Element (REE) market and why the prevailing belief in the U.S. that private investment and opening of new domestic mines with will not solve the nation’s resource problem. In this article, I further expand on untenable beliefs that low REE defense use, individual metal, technology, or finished goods development can solve the problem, and establish why industry-academia R&D is critical to invert the situation.
There is a prevailing belief in the U.S. that defense use of REE components is less than 5% of total use and US value chain leadership and control is not of a concern. Regardless of the percentage of REE usage in defense production, REEs are both critical and strategic materials. It is surprising that DoD failed to classify REEs as critical and strategic materials as late as 2008. The REE supply vulnerability was made abundantly clear by the Members of Congress in a January 2011 letter to the Secretary of Defense: “Clearly, rare earth supply limitations present a serious vulnerability to our national security. Yet early indications are the DOD has dismissed the severity of the situation to date…… DOD could compare expected supply and demand of each rare earth element with overall consumption by the Department to identify critical vulnerabilities in our supply chain.” A 2019 US Department of Commerce report on the analysis of US Defense Industrial base supply dependency on Chinese REE, unequivocally stated: “the U.S. does not possess the capability to separate and process the REE concentrate and must send the concentrate to foreign facilities to perform this process. Similarly, the U.S. lacks the domestic capability to manufacture REE based high performance magnets from the separated and purified material”. Thus, it is evident that there is a realization within the Government establishments that REEs are critical and strategic regardless of the amount of Defense Industrial use. The belief that minimal REE consumption within the defense industry is tantamount to ceding REE supply chain to a hostile foreign country is irresponsible and unacceptable and should be aggressively countered. The US needs to bring this capability back via alternate value chain models discussed later.
Regarding the leadership of the REE value chain, the US must realign thought position and spearhead value chain ownership once again. As any commercial product and manufacturing organization knows, stable supply from multi-sources is key to a stable and profitable operation. On the other hand, monopolistic, interruptible, and state-driven subsidy-based supplies make for an impossible business, much more so for high-valued strategic and critical REE materials. China currently controls every level of the value chain: mining, mixed oxides, separated oxides, REE metal production. It also has a mining by-product based REE development infrastructure supported by small business subsidies, research and development, and supporting commercial and defense industries.
The prevailing belief that individual metal, technology or finished goods development can solve the sourcing problem is also untenable. This justification could be rational in a true free market. However, with REEs there is no “true” free market, due to Chinese subsidies, market manipulation, overseas default belt-road asset acquisitions, and a state driven source and manufacturing monopoly goal. Individual approaches will lead to Molycorp type consequences and will be fragmented as well, leading to “Divided we fall”, again.
The national goal should be to develop and enhance, modernize, and expand a sustainable strategic and critical REEs downstream materials, alloys, and finished goods production capacity and supply chain resilience. Very specifically, these should be:
- Educate US private industry on the criticality of a national REE supply and risks of single foreign source dependency.
- Incentivize for investment in domestic capabilities for industrial production for REEs.
- Actively drive federal and private industry investments and policies seeking innovations in material substitutions, recycling, and elimination.
- Develop technologies for improving mineral exploration, source mapping, data standards, accessibility, and analysis.
- Develop extensive industry-academia-national laboratories collaboration as a pillar of the strategy.
- Enhance the national defense stockpile program for quick and effective responses to unanticipated shortages or emergencies.
Industry-Academia R&D imperative: Currently, only a few institutions offer dedicated REE teaching programs and R&D activity is also minimal. An additional factor is the impending retirement of many university faculty and experienced working professionals. The US should actively invest in and encourage extensive development of research and teaching REE programs at its Universities. Joint support for innovation should be created in mining techniques and technology by collaborative government, academia, and industry partners to improve the industry and graduate, undergraduate, and community college education. University faculty and departments involved should be encouraged in cutting-edge research to enhance the quality of higher education and ensure meeting future human capital demand for mineral supply chain sector engineers and university faculty facing impending faculty retirements.
Technology capabilities should be spearheaded via advanced technology development at all levels of the supply chain. R&D on alternatives, REE use reduction, and elimination where possible. This can only be achieved through a sustained national policy engaging government agencies, laboratories, universities, mining, materials, and technology corporations.