China has a bottleneck in supplying the world with critical minerals – and experts are warning that the situation is a major risk to US national security unless the government steps up its efforts to compete.
Control over rare earth metals – which are needed to build everything from the semiconductors that power iPhones to wind turbines, electric vehicle batteries and military weaponry such as tanks and missiles – have become a key point of friction and worsening trade relations between the US and China.
Heavy regulations and decades of underinvestment have left the US dangerously dependent on China – which mines up to 70% of the world’s critical minerals, controls roughly 90% of processing capacity and regularly uses unfair trade tactics to boosted its advantage, sources told The Posto.
“The fact that we are dependent on China for defense equipment is just a completely incomprehensible and unsustainable situation,” said Pini Althaus, CEO of the New York-based firm USA Rare Earth.
If diplomatic relations deteriorate or an actual conflict erupts between the two countries, U.S. lawmakers and experts fear China, led by President Xi Jinping, could cut off supplies entirely — with disastrous consequences for the U.S. auto industry, tech firms and the Pentagon. .
“Honestly, they can turn off the faucet,” Althaus added.
China’s decades-long efforts to subvert the market are heavily subsidized by Beijing, which uses its control over supply to manipulate prices and imposes increasingly tight export controls to cement its dominance. China has also grabbed mineral rights across Africa and other resource-rich areas as part of its Belt and Road initiative – on very favorable terms.
When the U.S. or other rivals make progress in mining or processing a particular material, such as gallium or lithium, China often responds by flooding the market — which drives prices down and kills the incentive to invest in projects, according to Rep. . Rob Wittman. R-Va.), who chairs the House Select Committee on China Critical Minerals Policy Task Force.
“They dump massive amounts of these materials on the market and they do it below the cost of production — so these companies can’t even compete,” Wittman added.
China has already begun to weaponize its control – in part by implementing export bans on mining and processing technology. Last month, China banned exports of three critical minerals to the US – gallium, germanium and antimony – and earlier imposed restrictions on graphite shipments.
The idea of a total embargo is not so far-fetched. In 2010, China briefly halted shipments of rare earth elements to Japan while the two countries were embroiled in a territorial dispute.
According to US Geological Survey data, China has about 44 million tons of rare earth reserves – or 34% of the worldwide total. By comparison, the US has about 2.3 million tons in reserves.
Despite the disparity, the U.S. “has absolutely significant deposits” of key minerals, according to Wittman, who points to sites in Minnesota, Nevada and California, as well as large untapped seabed resources that could be claimed.
The US began moving away from rare earth mining in the 1980s as environmental concerns prompted increasingly stringent permitting and licensing rules. As businesses looked offshore for their supply needs, mining profits dwindled and domestic production dwindled.
So far, the permitting process is “still very cumbersome,” according to Barbara Arnold, a professor of mining engineering at Penn State University.
Standards are much more rigorous in the US than other countries such as Canada and Australia. The process of fielding a new project is costly and difficult, which has discouraged firms from exploring for new mining sites.
“From the time you actually find a deposit of something to the time you’re producing it, it can be 20 years. “It can take 10 years just to get the permits,” Arnold said. “These are all absolutely necessary, but there needs to be a mechanism to get those permits faster.”
By comparison, China places few environmental restrictions on its mining projects — and has built a domestic supply chain “contaminated with forced labor and environmentally degrading mining and refining practices,” according to a recent report by the select committee.
“China would be the opposite extreme, meaning there is almost no permissive austerity,” Althaus said.
To strengthen its supply chain outside of China, the US should aim to increase partnerships with Canada and Australia, according to Althaus. Resource-heavy countries in Central Asia and Africa, which have traditionally fallen under China’s influence, are another option.
On the domestic front, the US government’s support for early-stage mining exploration and local processing capabilities would go a long way, he added.
Canada, for example, offers “stream shares” that make investments in so-called small-scale mining outfits tax-deductible. Smaller firms do location scouting and assess the feasibility of a particular site, then approach larger firms to finance operations.
Last month, Wittman and his colleagues introduced a trio of bills aimed at boosting the critical U.S. mineral supply chain and limiting dependence on China.
The bills would authorize more funding for US cooperation with friendly countries in critical mineral supply chains; imposing export controls on domestic battery and magnet materials; and create a “Resource Resilience Reserve” that would help protect American manufacturers from China’s price manipulation.
“We are not going to fight them in any other way than to have an alternative to what China is doing. And I think we can do it, and I think we can do it quickly,” Wittman said.
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