This company is America's best chance to loosen China's grip on rare earths

By Pamela Boykoff and Clare Sebastian

Mountain Pass, California -- Less than an hour from the glitzy casinos and high-rise hotels of Las Vegas, the miners at Mountain Pass are reviving an industry that nearly disappeared from American soil. 

This is the only mine in the country devoted to rare earths, elements essential to modern electronics. Rare earths are contained in everything from iPhones to wind turbines to Teslas.
"If there's going to be an American rare earths industry, it's gonna be led by us. We're it," said James Litinksy, the co-chairman of MP Materials, which owns the mine in Mountain Pass, California.
Shuttered after the previous owner went bankrupt in 2015, MP Materials has spent two years rebuilding the Mountain Pass operation. 

Two hundred people now work at the mine site, carrying out blasts, trucking the minerals out of the mine and milling them into a powdered concentrate that is packed into dozens of white bags on site.
MP Materials say they supply about 10% of the world's rare earths, a set of 17 minerals with magnetic and conductive properties that help power most electronic devices.
The rest of the rare earths industry is dominated by China, where labor costs are cheaper and environmental standards more lax.
The market for rare earths is expected to grow substantially over the next decade as the world becomes more and more dependent on high-tech products. 

With Washington and Beijing locked in a trade dispute, some in the US government and private industry want to see the United States develop an alternative supply of these essential elements -- first to increase mining of the minerals -- and eventually develop refining and production.
This Chinese dominance of such an important commodity has raised alarm bells in the Trump administration, particularly the defense department, which requires rare earths materials to build things like fighter jets, missile defense systems and satellites. 

Chinese state media stoked such concerns in May, when it hinted the country could restrict access to rare earths as a weapon in the trade war. 

Chinese dictator Xi Jinping even paid a personal visit to one of the country's high-tech rare earths processors.
"The Chinese have wanted to cultivate that dependence and use it as a lever, and so I don't think it's any surprise that they are considering using it more dramatically," said Eugene Gholz, associate professor of political science at the University of Notre Dame and former Pentagon senior adviser.
The Defense Department says its working with President Donald Trump, Congress and industry to try and mitigate US reliance on China for rare earth minerals.

The pit at the MP Materials' Mountain Pass mine in California. It's the only operating mine in the United States that provides rare earths, ingredients that are key for producing high-tech products like cell phones and electric vehicles.

It's easy to see how Mountain Pass could be central to this effort. 

Experts say the site contains one of the world's highest quality deposits of this type of material, with a high proportion of naturally occurring rare earths and little of the radioactive elements that can make this type of mining dangerous or environmentally damaging. 

The mine started operations in the 1950s by producing europium, which was used to make red colors in early televisions.
The trouble is that Mountain Pass currently has no ability to separate the rare earths into the type of products required for technological supply chains. 

All of its final product is exported back to China for processing.

Building capacity
Experts say this step is the true impediment to diversifying the supply chain. 

"Mining and concentration is actually one of the easier steps," said Roderick Eggert, an economics professor at Colorado School of Mines. 

"The real challenge is actually downstream in separations."
A US defense official told CNN Business that the Pentagon expects to soon receive additional authorities and resources from the Trump White House to begin developing non-China rare earth refinery options, with a focus on building up capacity within allied countries.
James Litinsky believes Mountain Pass is up for the challenge. 

He says the site will have its own separations facility operating by next year, allowing them to make rare earth oxides they can sell directly to global companies. 

They are taking advantage of $1.7 billion the previous owner spent to upgrade the site and make it environmentally friendly before abandoning it in the bankruptcy, including building a massive separations facility that currently sits unused. 

A minority non-voting stake in MP Materials is owned by a Chinese company that is listed on the stock exchange in Shanghai.
Someday, Litinsky hopes his company may be able to carry out the entire supply chain, from mining all the way into production of miniaturized magnets, motors and other rare earth products that go directly into consumer goods. 

Right now, nearly all of that final step is done in China or Japan.
He said the trade war between Washington and Beijing provided an additional impetus for the company to achieve its goal of creating "a real Western allied super major" -- an alternative supply chain to the current one monopolized by China.

A worker checks on operations at the processing facility at the Mountain Pass rare earths mine in California.

"There were a lot of people who doubted we could make this work and so we felt an extra burden and a duty," he said. 

"But I've said there has definitely been a heightened sense of awareness of what we are up to since the trade war started."
Litinsky won't discuss his specific contacts with the government but said some officials have visited the Mountain Pass site. 

Trade war or no trade war, he believes he's building a business that's economically viable and can compete in an open market. 

He hopes officials and corporations see the company's strategic importance and recognize the advantage Chinese producers have because of state subsidies and looser environmental regulations.
"We don't want a handout," Litinsky said. 

"We don't need that help. We just need a level playing field to compete."
The demand for rare earths is expected to grow alongside the market for high-tech products. 

Research firm Adams Intelligence estimates that between 2018 and 2030 the value of demand will quadruple, turning rare earths into at nearly $16 billion market.
Both Gholz and Eggert believe this growing demand and rising prices, combined with market pressure for a more diverse, sustainable supply chain, may bring the Chinese control of rare earths to an end, even without government intervention.
That shift seems to be what Mountain Pass is betting on.
"As a matter of national security we need to lead in these industries of tomorrow and I think that that's probably where the military is most focused," he said. 

"They actually ultimately make up a much smaller percentage of the market than electric vehicles, wind turbines all these significant industries of tomorrow that will lead to millions of jobs. That will be the arena with which this situation plays out. "

China’s Rare Earths, Locked And Loaded

By Steve Hanke 

President Trump has picked a fight with China on trade. 

This has run the gamut of badgering to the imposition of tariffs on Chinese exports to the United States. 

And, if that is not enough, the President threatens to lay on more tariffs if China fails to comply with a host of U.S. demands. 

China will not stand idly by and be beaten with a stick, but will they pull the trigger?
One weapon that China has in its arsenal is rare earths. 

As the Global Times, a state-owned Chinese newspaper, put it: rare earths are “an ace in China’s hand.” 

Rare earths cover 17 important elements on the periodic table. 

And, they are elements in which China occupies a dominant position. 

Furthermore, the Chinese leadership is well aware of the strategic importance of rare earths. 

As far back as 1992, Deng Xiaoping stressed that “the Middle East has oil; China has rare earths.”
And that is not all. 

China knows that rare earths can be used to counterpunch. 

Last month, China’s Natural Development and Reform Commission, a body that oversees Chinese policy shifts, pointedly brought up rare earths in a question-and-answer bulletin on the threat of a rare earths export ban. 

The notice read: “Will rare earths become China’s counter-weapon against the US’s unwarranted suppression? What I can tell you is that if anyone wants to use products made from rare earth to curb the development of China, then the people of the revolutionary soviet base and the whole Chinese people will not be happy.”
So, the threat of a Chinese export ban on rare earths is not idle. 

Indeed, China has used export bans before. 

In 2010, China cut its exports of rare earths after a Chinese trawler collided with two Japanese Coast Guard ships in the East China Sea. 

Subsequently, the World Trade Organization ruled against these Chinese restrictions.
To punctuate the importance and potential potency of the rare earths weapon, Xi Jinping recently visited a rare earths mining site. 

He also visited a plant that produces precision magnets which rely on rare earths.
Just what are rare earths used for and why are they important? 

Rare earths are found in a wide range of consumer products from iPhones to DVD players and rechargeable batteries. 

They are also critical for many “green” products, like LED lights. 

Prominent products also contain specialized magnets that require rare earths, and China produces 90% of those magnets. 

Motors in electric cars and the generators in wind turbines all use loads of precision magnets. Magnets that use rare earths are also employed in missile guidance systems. 

Other military equipment, like night vision devices and jet engines use rare earths.
As the following two tables indicate, the reserves of rare earths are scattered around, with China holding down the top spot with slightly over 39% of the world’s reserves. 

When it comes to mining and the physical removal of rare earths, China’s lead becomes dominant. Indeed, over 70% of rare earths are mined in China. 

Further downstream is processing. 

At that stage, China is even more dominant, with 87% of the world’s rare earths being processed in China.



How did China gain such a dominance across the board in rare earths? 

As someone who landed his first faculty position and cut his eye teeth on mineral economics in the late 1960s at the Colorado School of Mines (the top-ranked University in the World in Mineral Engineering), I suspected that China must have invested heavily in the 3Ms: Mining and Mineral Engineering, Metallurgical Engineering, and Materials Science and Engineering.
So, let’s take a look. 

The chart below shows that, when it comes to the world’s top-flight universities, China is nowhere to be found in the Top-20.

But, when we move into the 3Ms, things change dramatically. 

China dominates in Mining and Mineral Engineering, with nearly half of the world’s Top-20 programs in those fields.

When we move to Metallurgical Engineering, China holds down 35% of the Top-20 programs in the world.

In Materials Science and Engineering, China slips, but still holds down 5% of the world’s first-class programs.

Just how has China reached the commanding heights in the 3Ms educational fields? 

The answer to this question is hard to nail down with precision. 

We have Deng Xiaoping’s quip about rare earths in 1992. 

So, we know that the Chinese leadership was aware of the importance of the 3Ms. 

But, it wasn’t until 2001 that I was able to turn up specific evidence of the Chinese government pouring money into education and development of the 3Ms.
In 2001, China launched its 10th Five-Year Plan for National Economic and Social Development. 

It was signed by none other than Zhu Rongji. 

According to the plan, China aims to make good use of its abundant mineral resources and enhance traditional industries (such as energy, metallurgy, chemical, machinery, automobile, building materials, construction, textile and light industries) with high, new, and advanced technologies. 

The measures include improving product variety and quality as well as speeding up development of universal, key, and accessory technologies. 

These objectives are to be supported by university investments in the relevant fields.
So, Mining and Mineral Engineering, Metallurgical Engineering, and Materials Science and Engineering are supported by the Five-Year Plan. 

The Communist Party has spoken, and in the sphere of the 3Ms, the Party has delivered.
When it comes to rare earths, China is loaded for bear—locked and loaded. 

But, will China fire? 

It is not as likely as it might seem at first sight. 

After all, the last time Beijing attempted to restrict supply, it didn’t work out too well. 

Indeed, the World Trade Organization slapped China down. 

And, given today’s trade wars, China does not want to cross swords with the WTO. China needs the WTO to protect it from Trump’s tariff onslaught. 

Also, if a Chinese export ban was imposed, prices of rare earths would soar, and investment would pour into the development of non-Chinese mines and processing facilities. 

These investments would create new sources of rare earths supply. 

On the demand side, work arounds and rare earths substitutes are available, and they would be used if prices of rare earths become higher and more variable. 

So, China might not pull the trigger on rare earths, but rather just stay locked and loaded.

China Is Bluffing in the Trade War

Chinese say they can effectively retaliate against Trump’s tariffs. They’re wrong.

BY SALVATORE BABONES

A Chinese worker looks on as a cargo ship is loaded at a port in Qingdao, China, on July 13, 2017.

U.S. President Donald Trump’s trade war with China is about to get real. 

Until this point, not much has happened, because the 25 percent tariffs on Chinese goods that the Trump administration announced in May did not apply to goods already in transit. 

That created a four- to six-week window of opportunity for U.S. and Chinese negotiators to come to an agreement and avoid the implementation of the duties.
That window is now closing, and with no deal in sight, speculation has turned to how China might respond. 

With Chinese official media vowing no compromise in negotiations with the United States, the country seems to be settling in for a protracted siege.
Considering that China ran a trade surplus of $420 billion with the United States last year, it is obvious that it can’t come close to matching the United States in terms of tit-for-tat tariffs. 

But it does have other arrows in its quiver. 

Expert commentary and internet speculation have focused on three: an embargo on imports of soybeans from the United States, an embargo on exports of rare earth metals to the United States, and the diversification of China’s currency reserves away from the dollar.
Fortunately for the United States—and for the health of the global trading system—each of these would be an empty threat.
In 2018, as rhetoric about the trade war took off in earnest, China slapped a punitive tariff of 25 percent on American soybeans. 

Soybeans are the United States’ biggest farm export, and they are important crops in the Midwestern states that swung to elect Trump in 2016. 

The 25 percent duty has been widely cited as the root cause of low prices that have led to a wave of farm foreclosures across the U.S. heartland.
The United States’ largest competitor in the global soybean market is Brazil, so one might expect Brazilian farmers to be jumping with joy as they see more demand for their produce. 

But Brazilian soybean prices have fallen almost 20 percent since April 2018, almost exactly matching the slightly over 20 percent fall in U.S. soybean prices for that period.
The reason is simple: Soybeans are fungible. 

When China buys Brazilian soybeans instead of American ones, Europeans have to turn to soybeans from the United States to replace their usual Brazilian supplies. 

There is one, single, undifferentiated global market for soybeans. 

Squeeze it in one place, and it just pops out in another.
Indeed, the decline in soybean prices is global, and it has nothing to do with the U.S.-China trade war. It’s all about the Chinese swine fever. 

The majority of the world’s soybeans feed pigs and other animals, not people, and China’s pork producers have been hit with a nationwide fever epidemic.
As a result, Chinese purchases of U.S. soybeans have now stopped completely. 

That may look like a total soybean embargo. 

But the reality is that China just doesn’t need as many soybeans, because it doesn’t have as many pigs to feed. 

As the swine fever continues to rage, look for U.S. exports of pork products to boom.
China is by far the world’s largest producer of rare earth metals: elements such as neodymium, europium, terbium, and dysprosium that are crucial to the production of some advanced materials and electronics. 

Despite their name, rare earths really aren’t so rare, and, in fact, the United States was the world’s major producer until cheap Chinese sources undercut the market in the 1980s.
The United States still has plenty of rare earth metals, but the environmental costs of extracting them from the underlying ores are too high to make production economic. 

Refining the minerals is only cheap in China because of the country’s lax environmental standards. 

If China does place a global embargo on the export of rare earths, prices will go up to reflect the metals’ true economic costs, which would actually be a good thing (from an environmental perspective).
Anything less than a total global embargo, however, would be useless, since, even more so than soybeans, rare earths are entirely fungible. 

China found that out in 2010, when it slapped an embargo on rare earth exports to Japan. 

Analyses a few years later found that the export ban had virtually no ill effect. 

If China sells them to anyone, U.S. companies can just buy them secondhand or switch to alternative inputs to their industrial processes.
China holds an estimated $1.1 trillion of U.S. government bonds, out of a total foreign currency reserve of around $3 trillion. 

That sounds like a lot of money, but in comparison to the size of its economy and levels of international trade, China’s reserves are roughly in line with those of other developing countries. 

It’s also not a particularly large proportion of the roughly $22 trillion total U.S. government debt to the world outstanding.
Alarmists warn that a Chinese dollar dump could send U.S. interest rates soaring and the U.S. economy crashing down. 

Just about everyone else understands that the huge market for U.S. Treasury securities, with an average daily trading volume of $500 billion in the spot market—and many times that in swaps, options, and futures—could easily absorb China’s entire reserves.
Ironically, the biggest victim of any Chinese liquidation of U.S. dollar holdings could be the European Union. 

Any reduction in China’s dollar reserves holdings would have to be matched by a corresponding rise in its holdings of other currencies, and the euro is the most likely alternative. 

But eurozone government bond trading is much thinner and more fragmented than the U.S. Treasurys market. 

A massive Chinese shift into euros could see that currency skyrocketing, placing a massive drag on Europe’s big industrial exporters.
The truth is that China has very little leverage in a trade war with the United States. 

Given Beijing’s bluster, it can be easy to forget that China is still a relatively poor country with a GDP per capita less than one-sixth the U.S. level. 

Compared to the America’s, China’s economy is relatively inefficient and undifferentiated, and its markets are poorly developed.
The simple fact is that China needs the United States more than the United States needs China. 

In itself, that’s no reason to start a trade war. 

But if the trade war really does heat up, there’s little doubt who will win.

How China Could Shut Down America’s Defenses

Advanced U.S. weapons are almost entirely reliant on rare-earth materials only made in China
BY KEITH JOHNSON, LARA SELIGMAN
The Virginia-class fast-attack submarine USS Hawaii prepared to moor at the historic submarine piers at Joint Base Pearl Harbor-Hickam on June 6. Each Virginia-class submarine uses nearly five tons of rare-earth materials. 

President Donald Trump has often argued that China has much more to lose than the United States in a trade war, but critics say his administration has failed to address a major U.S. vulnerability: Beijing maintains powerful leverage over the warmaking capability of its main strategic rival through its control of critical materials.
Every advanced weapon in the U.S. arsenal—from Tomahawk missiles to the F-35 fighter jet to Aegis-equipped destroyers and cruisers and everything in between—is absolutely reliant on components made using rare-earth elements, including critical items such as permanent magnets and specialized alloys that are almost exclusively made in China. 

More worrisome is that the long-term U.S. supply of smart bombs and guided munitions that would have to be replenished in a hurry in the event of U.S. conflict in Syria, Iran, or elsewhere are essentially reliant on China’s acquiescence in their continued production.
Chinese threats to cut off U.S. supplies of rare earths, first floated by Beijing in late May, haven’t abated. 

Over the weekend, Chinese state media suggested that high-end, finished products using rare earths that the U.S. defense industry requires could be included in China’s technology-export restrictions, themselves a response to U.S. pressure on the telecoms giant Huawei. 

“China is capable of impacting the US supply chain through certain technical controls,” said an editorial in China’s Global Times that pointedly referred to processed rare earths.
“China has effectively altered the way we manage war, and potentially the outcome,” said James Kennedy, the founder of ThREE Consulting, a rare-earths consultancy focused on security implications.
For all the hints of a new cold war with China, Kennedy said, U.S. warfighting capabilities are in the hands of the one country that has come to be seen by U.S. national security officials as a peer competitor and a strategic rival.
“Rare earths are actually a hegemonic trigger. If the United States gets into a conflict, China is supplying the majority of the upscale weapons,” he said. 

“China can determine the outcome of the conflict, and that could result in a hegemonic shift.”
If rare-earth elements have become the key ingredient in all sorts of advanced civilian technology such as cell phones, electric cars, and renewable energy equipment, they’re doubly important for defense. 

Each Virginia-class attack submarine needs 9,200 pounds of rare-earth materials, while each F-35 needs 920 pounds, according to a 2013 Congressional Research Service report.
The defense industry, unlike most other sectors, doesn’t need low-end rare-earth materials that—contrary to their name—are actually commonly found in many places around the world. 

Rather, what the defense industry most needs are highly processed rare-earth products, especially permanent magnets, that are essentially made only in Japan and China. 

And while Japan, itself stung by a Chinese rare-earth embargo in 2010 and 2011, has made some progress emancipating itself from reliance on Chinese suppliers, its rare-earth value chain is still deeply enmeshed with China, leaving it with little ability to ramp up production volumes to bail out U.S. consumers while still meeting its own domestic needs.
The highest-end products are high-powered magnets, which are what make the guidance systems on smart bombs and cruise missiles work and what runs Aegis missile-tracking and secure communications.
But there are a host of other rare-earth products that the defense industry relies on, Kennedy said. Those include temperature-resistant coatings and alloys for jet engines and stealth coatings for fuselages, all advanced targeting systems, advanced radar and sonar, and even night-vision goggles.
The Pentagon has been grappling with the importance—and vulnerability—of rare earths in the defense industrial base for years. 

Successive administrations have sought to either revitalize the once-booming U.S. rare-earths industry, stockpile critical materials, or line up alternative suppliers—but with little success so far.
China often subsidizes its rare-earth firms and sells at or below cost, which makes it very difficult for private firms to make a go in the business. 

Alternative supplies of rare-earth ore abound, but China has a dominant position in the processed rare-earth products that the defense industry needs. 

The Department of Defense has no clear definition of just what critical materials are needed, and defense stockpiles of critical materials often are not in usable form.
“DOD has no comprehensive, department-wide approach to determine which rare earths are critical to national security, and how to deal with potential supply disruptions to ensure continued, reliable access,” concluded the Government Accountability Office in 2016.
The Pentagon most clearly outlined its concerns in a 2018 review ordered by the White House, which accused China of deliberately leveraging its monopoly on these minerals to squeeze the U.S. defense industrial base. 

The report specifically warned that China is the sole source or primary supplier for a number of critical materials used in munitions and missiles. 

For example, the United States used to make neodymium ion boron permanent magnets, the gizmo that helps guide guided missiles to their targets; today, they are almost all made in China, and none are manufactured in the United States.
In many cases there is no alternative for this material, and in others the time and cost to test and qualify alternatives would be “prohibitive,” the report found.
“China represents a significant and growing risk to the supply of materials and technologies deemed strategic and critical to U.S. national security,” the report concluded. 

And it underscored the potential national security vulnerabilities as Washington’s trade war with Beijing heated up.
“China’s trade dominance and its willingness to use trade as a weapon of soft power increases the risks America’s manufacturing and defense industrial base faces in relying on a strategic competitor for critical goods, services, and commodities,” the report said.
Former defense officials stress that despite years of attention to the potential vulnerability, it’s not clear that the United States yet has a solution.
“Rare-earth elements are critical for defense applications, and there are no easy alternatives for their functionalities, so we absolutely need them,” said Andrew Hunter, the director of the Defense-Industrial Initiatives Group at the Center for Strategic and International Studies and a former senior Pentagon official. 

“It would be a major blow to the defense industrial base if we were cut off from rare earths.”
Having weathered one Chinese embargo on rare-earth exports nearly a decade ago, which led to price spikes but only temporary disruptions, many Pentagon officials put their faith in market solutions, Hunter said. 

“I sense that still holds, but I’m not sanguine that it will remain that way without more government intervention,” he said.
Still, it is far from clear that Beijing will make good on implicit threats to cut off U.S. access to certain critical minerals. 

Hu Xijin, the editor of the Global Times tabloid, which is owned by the Chinese Communist Party, said in late May that the government was considering the idea but cautioned that it may not act right away. 

Such a curtailment would be seen in Beijing and Washington as an extremely provocative step—especially after China has spent the last decade trying to rebuild its reputation as a reliable supplier of critical rare earths.
“I think Chinese government won’t do this immediately,” Hu wrote on Twitter, “but it’s seriously evaluating the need to do so.”
China has had a laser focus on rare earths and their importance to advanced technologies since the Deng Xiaoping years—the former Chinese leader reportedly likened the leverage it gave Beijing to the Middle East’s control of oil supplies.
And that industrial dominance has come to complement China’s breakneck race to match the U.S. military’s technological dominance, put on explosive display during the Gulf War, when smart bombs revolutionized modern warfare. 

That development convinced Chinese leaders they would have to catch up technologically to pose a credible threat to U.S. military might, and Beijing has spent the last 30 years doing just that, noted former U.S. Deputy Defense Secretary Robert Work and his former Pentagon colleague Greg Grant in a new study for the Center for a New American Security on China’s own “military-technical offset.”
It didn’t used to be this way. 

From the 1960s into the 1980s, the United States dominated both the mining and processing of rare earths. 

But that started to change, partly because of challenging economics in what is still a niche industry, and partly because China’s lax environmental standards give it an advantage in the dirty business of extracting the stuff, which is often mixed with radioactive material.
One important blow to the U.S. industry was a 1980 regulatory change regarding the handling of thorium, a radioactive element, that drove conventional miners of iron, zinc, and other raw materials—once the source of most rare-earth production—to dispose of rare-earth ores rather than use them. 

Combined with China’s state subsidies, lax standards, and desire to corner the market, it amounted to a wholesale shift in who controlled what would become one of the key building blocks of the modern economy—and modern militaries.
The shift of rare-earth dominance to China happened to coincide with a revolution in military affairs, where high-tech weapons using ever more difficult-to-acquire materials became the go-to arrows in the U.S. quiver. 

Tomahawk missiles, for example, are about the most ubiquitous and most used weapon in the U.S. arsenal, but they can’t read terrain and find their targets without the critical materials now controlled by China.
Next-generation weapons will likely be even more reliant on highly processed rare-earth materials, Kennedy said, including hypersonic missiles, directed-energy weapons, and even quantum computing.
The Pentagon does maintain a stockpile of lots of different critical materials and rare earths—but mostly in raw or intermediate form, not in the highly processed finished form that defense platforms actually require. 

Rare-earth oxides, for example, still must be further processed or refined into metals, alloys, and eventually the permanent magnets that run guidance systems for missiles or navigation systems for American Abrams battle tanks. 

The United States has very little rare-earth processing ability, and it would take years to rebuild it.
“The critical materials stockpile is a joke,” Kennedy said.
The Trump administration and many lawmakers are redoubling efforts to restart domestic rare-earth mining, and the Department of Commerce this month released a report calling for the United States to address its reliance on imported critical minerals.
The Defense Department recently asked Congress for federal funds to bolster domestic production of these minerals. 

The Mountain Pass mine in California is currently the only operating U.S. rare-earths facility. Notably, China’s Shenghe Resources Holding Co. is a minority investor, and MP Materials, the owner of Mountain Pass, ships the roughly 50,000 tons of concentrate it extracts from California each year to China to be processed, according to Reuters.
At least three U.S.-based companies are planning to open rare-earth processing plants, including one at Mountain Pass mine set to open next year that will reportedly produce about 5,000 tons of rare earths a year, Reuters reported.
But more mines and intermediate processing facilities likely won’t blunt China’s control of the whole production chain—from mine to magnet. 

Even highly touted announcements, such as Lynas Corp.’s decision to build a rare-earth separation plant in Texas, don’t solve the Pentagon’s problem, because the oxides must still be shipped overseas to be turned into alloys or permanent magnets.
One possible solution that has been rattling around Washington for years, which Kennedy advocates, is to allow technology firms to create a cooperative. 

That would be a way to provide soup-to-nuts rare-earth services: mining the stuff, separating it, processing it, and finally turning it into advanced metals, magnets, and more, without risking the serial bankruptcies that have plagued the sector for decades.
Some House Republicans have been urging the administration to take such a step, and the White House could issue an executive order essentially dictating the same measures.
But for now, the United States is still left without an answer to its rare-earth dilemma.

Trade War

China ready to hit back at U.S. with rare earths

Reuters

BEIJING -- China is ready to use rare earths to strike back in a trade war with the United States, Chinese newspapers warned on Wednesday in strongly worded commentaries on a move that would escalate tensions between the world’s two largest economies.
Xi Jinping’s visit to a rare earths plant last week had sparked speculation that China would use its dominant position as an exporter of rare earths to the United States as leverage in the trade war.
Rare earths are a group of 17 chemical elements used in everything from high-tech consumer electronics to military equipment. 

The prospect that their value could soar as a result of the trade war caused sharp increases in the share prices of producers, including the company visited by Xi.
While China has so far not explicitly said it would restrict rare earths sales to the United States, Chinese media has strongly implied this will happen.
In a commentary headlined “United States, don’t underestimate China’s ability to strike back”, the official People’s Daily noted the United States’ total dependence on rare earths from China.
“Will rare earths become a counter weapon for China to hit back against the pressure the United States has put on for no reason at all? The answer is no mystery,” it said.
“Undoubtedly, the U.S. wants to use the products made by China’s exported rare earths to counter and suppress China’s development. The Chinese will never accept this!” the ruling Communist Party newspaper added.
“We advise the U.S. not to underestimate the Chinese ability to safeguard its development rights and interests. Don’t say we didn’t warn you!”
The expression “don’t say we didn’t warn you” is only used by official Chinese media to warn rivals over major areas of disagreement, for example during a border dispute with India in 2017 and in 1978 before China invaded Vietnam.
In its own editorial on Wednesday, sister paper the Global Times said an export ban on rare earths “is a powerful weapon if used in the China-U.S. trade war.”
“Nevertheless, China will mainly use it for defense,” it added, noting that while China might incur losses from a ban on exports, the United States would suffer more.
The paper’s editor had said on Twitter late on Tuesday that Beijing was “seriously considering” restricting rare earth exports to the United States.
China has used rare earth sales to exert pressure in past diplomatic disputes.
In 2010, Beijing cut rare earth export quotas after a Chinese trawler collided with two Japan Coast Guard ships near Japanese Senkaku islands in the East China Sea.
In 2012, Japan, the United States and European Union complained to the World Trade Organization (WTO) over the restrictions. 

Two years later, China was rebuked by the WTO for citing environmental reasons to justify the quotas. 

It ultimately scrapped its export quota system after losing the case.
If Beijing moves forward with new restrictions on rare earth exports to the United States, it will likely follow Washington’s example and use national security as a justification.
China has repeatedly criticized Washington for what it says are abuses of national security exceptions at the WTO, including this week when, according to media reports, it accused the United States of breaking rules by blacklisting Huawei Technologies Co Ltd, the world’s largest telecom network gear maker.
But China for years has used national security considerations to block major U.S. technology companies, including Google and Facebook, from operating in its market.
Such restrictions have in recent years fueled calls from within some parts of the U.S. business community for Washington to pursue more reciprocal policies with Beijing.
Shares in the company Xi visited last week, JL MAG Rare-Earth Co Ltd, surged another 10% to a record high on Wednesday, having gained 134.1% in May alone. 

China Rare Earth Holdings Ltd soared more than 40%, while Australia’s Lynas Corp, the only major rare earths producer outside of China, climbed as much as 14.6%.
China accounted for 80% of rare earth imports between 2014 and 2017 by the United States, which has excluded them from recent tariffs along with some other critical Chinese minerals.
Beijing, however, has raised tariffs on imports of U.S. rare earth metal ores from 10% to 25% from June 1, making it less economical to process the material in China.
Some trade analysts expect an acceleration in bringing fresh rare earth mining capacity on line in California and Australia if China uses its dominant position in the market for diplomatic advantage.

National Insecurity

US reliance on China for critical metals is being ignored
By John Moody

The United States has made no progress to decrease its dependence on China for metals and materials that are critical to our national security and defense, according to a narrowly-circulated report from the Department of Defense.
The document, dated January 2017 and titled, “Strategic and Critical Materials Operations Report to Congress,” confirms the widespread fear among industry experts that the U.S. remains dangerously incapable of mining and producing so-called rare earths. 

Those 17 metals and elements are needed for, among other things, the Pentagon’s new F-35 fighter jet, laser-guided missiles and catapults that launch fighter jets from aircraft carriers.
Those same materials, which the United States imports almost exclusively from China, are also used for consumer goods such as smartphones, GPS systems, automobile electronics and computer and television screens.
With President Trump vowing to deal more aggressively with China on trade matters, possible Chinese export restrictions on critical metals like rare earths have again been raised.
Our perilous dependence on Chinese-produced rare earths is likely to be a topic of discussion when the U.S. Senate Committee on Energy and Natural Resources meets Tuesday. 

Among the witnesses expected to testify is an associate director of the U.S. Geological Survey, the government agency that released a report showing that the U.S. is 100 percent reliant on foreign producers of rare earths. 

The last American rare earth production facility, Molycorp, closed in 2015.
Also expected to testify are representatives of mining and energy companies that hope Trump will encourage domestic production of rare earths and other critical metals, which exist in abundance under American soil.
Those producers have been frustrated by eight years of inaction by the Obama administration, which largely ignored America’s rare earth dependence because of environmental concerns and because those materials could be imported from China more cheaply than they could be produced domestically.
In 2012, the Obama administration brought a complaint against China to the World Trade Organization, charging it was restricting exports of rare earths, as well as tungsten and molybdenum. When, in 2015, the WTO ruled in favor of the United States, China removed its quotas. 

It also exposed American reliance on Beijing exports of rare earths and rang alarm bells in the defense establishment.
“The WTO allows appeals when issues of national security enter into consideration,” said Anthony Marchese, chairman of Texas Mineral Resources Corp., a company that has pending rare earth projects in the United States. 

“The Obama administration was effectively hamstrung since any mention of national security concerns would have strengthened China’s position.”
The danger of America’s dependence is hard to overstate. 

“What would you say if you blanked out the words rare earth and said, ‘How would you feel about being totally dependent on a product from a potential adversary whose use is ubiquitous in your defense industry and everyday products like smartphone?” says Marchese.
So far, no one has the rarest notion of how to answer that question.