In 2010, China gave the world shivers as it imposed embargo about exports of some rare earth metals to Japan. In the television, frightened Japanese leaders begged that they were short of the essential raw materials.
The embargo caused by a territorial conflict was solved within seven weeks. It altered the world chain of supply of these metals. At the end of the embargo, China forcefully put its mineral wealth under its control. The highest authorities in Beijing eliminated corruption, shattered smugglers and monopolized the industry in the hands of the state.
It was a warning to the world and more so to Japan and the US, two largest customers of rare earth metals consumed in production of cars, smart phones and missiles among other applications. Both governments have prepared elaborate measures on how they can redress the situation easily. Japan has to a great extent fulfilled the intentions and now it has access to the minerals in Australia.
The United States is not. The country still depends almost upon China in processing rare earth metal after 15 years. This has exposed the American automakers, the aerospace and defense industries to vunerabilities.
Enraged with the tariffs imposed by President Trump, China has stalled all exports of some of the rare earths, besides the far more useful magnets that can be made out of the earth.
These are simple but mighty magnets, consisting of no larger than a ring that a person could put on his/her finger, but are 15 times more powerful than the average iron magnet, and it is a cheap, unknown (though simple) component of the electric motors. They are present in electric and gasoline-runner cars and robots, drones, offshore wind power plants, missiles, fighter planes and in numerous others.
The inability of the Americans to come up with a solution to eliminate their reliance on Chinese supplies has occurred across party lines cutting across Democratic and Republican regimes.
The threat of being dependent on China with regard to rare earth metals and in particular rare earth magnets has not been treated seriously by U.S policymakers over 15 years, according to Milo McBride, an expert on critical minerals at the Carnegie Endowment for International Peace, Washington.
According to him, rare earths are the most strategic minerals of all the minerals that have been considered in encouraging over the past several administrations.
The case of 2010 Beijing embargo of Japan was compromised by the organized crime syndicates in China, which controlled most of the industry in south-central China in liaison with the local authorities. The gangsters were exporting out as much as half of the annual Chinese output of rare earth.
Years after the lift of the embargo, Beijing struck back. The government troopers, also under the orders of national safety stormed the valley adjacent to Longnan in Jiangxi Province where most of heavy rare earth minerals were discovered. They took over the privately operating mines and imprisoned thousands of individuals all over the south China. This move changed the regulators of the industry and moved it down the chain to Beijing.
The mines had subsequently been nationalized and brought under the umbrella of one state owned enterprise, China Rare Earth Group. Last week, after a visit to the valley without informing the local authority, the thugs that previously guarded the southern china rare earth mines were nowhere found.
China has just come up with their own magnet industry, rather than sending the material to magnet plants in Japan. Beijing has provided funds to construct high tech magnet factories in Ganzhou, which is a city, close to the area of Longnan.
The world manufactures 90 percent of the magnets in China. The construction was also in progress last week at two of the biggest factories of magnets in Ganzhou.
In a 2020 speech, Xi Jinping explained that national security of China dictated the importance that the West continue to rely on the Chinese supply chains.
Less than half a year after a visit to Ganzhou which visited the most advanced magnet factory, he said, we need to develop our strengths and cement our international lead in the industries we had advantage. He advocated the need to deepen the reliance of global and industrial supply chains on China to create powerful capacity to resist and dissuade intentional disruption by foreigners.
Japan also made far-reaching measures following the 2010 embargo. Its producers started keeping sufficient rare earths in their warehouses to supply them to their requirements by up to two years. They began to seek abroad as well.
Sumitomo Group which is a conglomerate group with the support of the Japanese government was able to assist in forming the Lynas, an Australian based mining company. Lynas extracts and processes 60 percent of light rare earths that are used to produce rare earth magnets with a small proportion of heavy rare earths. And the company is set to begin processing of heavy rare earths to provide Japanese manufacturers this summer in Malaysia but on small amounts.
The largest magnet manufacturers in Japan which are Proterial, Shin-Etsu Chemical Company and TDK Corporation have shifted a part of their production in china so that they will have access to rare earths without any problems and also, in Vietnam where the cost of labor is cheaper. However, they have not been totally out of Japan in terms of production either.
Starting in the 1980s at a subsidiary of General Motors in northern Indiana, the U.S. rare earth magnet industry began. However, the industrial plants closed and relocated overseas to China and Singapore.
Following the embargo of 2010, a Japanese manufacturer, Hitachi Metals (later renamed Proterial in 2023) sensing the misgivings of the administration of US President Barack Obama, constructed a facility to produce rare earth magnets in North Carolina between 2011 and 2013.
Hitachi Metals factory, where dozens of employees worked, was costly compared to big complexes under constructions in Ganzhou. The American firms were not happy to accept to pay a higher price to purchase magnets made in the United States and bought those made in China. The factory was closed down in 2020, and the equipment was put under storage by Hitachi
The Mountain Pass mine in Calif. is the only currently operating rare earth mine in the United States. Its owner, MP Materials, says it is beginning to ramp up commercial production at the end of the year of rare earth magnets at a plant in Texas. However, when fully operating, the facility will only be able to generate in a single year what China does in a day.
The factories of China are pumping out thousands of tons of rare earth magnets a year that are used by the manufacturers of both the electric cars and the offshore wind turbines in the country, 2 industries which the president, Mr. Trump, has attacked.
Similarly to the magnet production, the history of the rare earth mining in the United States became uneven. Mountain Pass mine has been the main source of the rare earths in the world since 1965 until 1995 when China decided to flood the international market with all kinds of cheaply manufactured goods.
In 2002 another factor was the increasing number of environmental standards imposed by the California government which led to the mine being closed. In 2010, a $1.5 billion upgrade was started but mining could not restart until 2017 and then the mine had to ship its ore to China to be processed in low-cost refineries there. Finally the mine has started to refine a big portion of its production.
Rare earth mine will be difficult to initiate in the United States due to zoning and environmental requirements. In the United States, it takes 29 years to open a rare earth mine, Mark Smith, the chairman and chief executive of NioCorp Developments stated, which has acquired the construction permits to implement a mine in Nebraska.
According to Mr. Smith, getting a mine to work can be a lifetime activity.
In comparison, Chinese mines can be started within a short time and they do not require the same type of scrutinous regulatory license.
Behind all the issues is the fact that the world market in the minerals is small as compared to the other types of mining, such as copper.
Not many American companies have been keen to invest heavily in rare earths in order to have the risk exposing them to the fact that their customers tend to use cheaper items that are produced by the industry backed by the government in China.
David Sandalow, who led critical minerals policy the last time, suggested in part that U.S. companies have been slow to jump in.