China could shut down our military in a minute if we don't fix the looming rare earths supply crisis

In 2010, China precipated a low-intensity conflict with Japan and the West by stopping the export of rare earth elements. Alarm bells rang across the White House, the Pentagon, and corporate America.  When China relented after about a week, U.S. military planners knew our country had dodged a bullet.  They started asking: how likely is another rare earth squeeze play by China?

As the then-CEO of the only producing rare earth mine in the U.S. in 2010, I rate the odds of another rare earth crisis in the next five years as 9.5 out of 10.  As was the case then, neither the U.S. nor our allies are adequately prepared for the economic and military catastrophe that will result.  The rare earth projects that were on the drawing board in the U.S. at that time still have not advanced past the permitting and study stages, which means they are still years away from production.

Many modern technologies, and most major weapons systems, require rare earths to function. Without them, we quickly lose the ability to manufacture electric vehicles, advanced wind turbines, energy-saving appliances, Abrams tanks, F-35s, smartphones – the list goes on and on.

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The crux of the impending crisis? We don't make the rare earth materials needed by these technologies, so we must get them from China.  All major Chinese rare earth companies produce and export under the close supervision of their government. That gives Beijing a button it can press at will to quickly hobble Western economies and degrade our defense systems.

Unless and until the U.S. government moves aggressively to help fund and advance American critical minerals mining, Western militaries will drive, fly, and sail by the grace of Chinese rare earths.

China is also not shy about reminding us of this leverage.  For example, in the midst of heated trade tensions during the Trump years, Chinese President Xi Jinping decided to make a highly publicized tour of the JL MAG Rare-Earth factory in Ganzhou, China, where high-performance rare earth magnets are produced.  The photo op from that tour, released by Xinhau, China's official state news agency, was unambiguous in its message:  we still hold the keys, America, to much of your technology and economy.  Don't cross us.

U.S. military planners focus on dealing with a rare earth cut-off due to direct confrontation with China. I see a more likely reason: good old-fashioned market competition.

China leads the world in producing and processing rare earths. China is also the world's largest consumer of rare earths – by far. But its mineral resources are finite.  

Today, China uses its rare earths to manufacture and export electric vehicles, wind turbines, energy-saving appliances and motors, weapons systems, and nearly every electronic device in everyday use. China already is the world's largest producer of electric vehicles. It wants to dominate that and other durable goods markets.

THE FIGHT FOR RARE EARTH MINERALS

It should come as no surprise, then, that China would rather export Chinese-made EVs powered by Chinese-made rare earth magnets as opposed to exporting rare earth magnets to the West so we can make competing EVs. By keeping more of its rare earths in-country, China also creates and sustains robust supply chains and a manufacturing ecosystem that employs millions of its workers.

We need to prepare more aggressively for the day when Chinese rare earths are no longer readily available.  The Biden administration, and the Trump administration before it, have taken concrete steps to encourage greater U.S. rare earth and other critical mineral mining and processing. Yet in the dozen years since the 2010 export halt, the West has overall made scant progress.

For example, Australia is mining rare earths and processing them in Malaysia, although it still sells a significant portion of its output to Chinese customers.  A large rare earth mine in California is digging up rare earths, thanks in part to support from the Defense Department and is working toward launching value-added rare earth processing.  Yet today it still mines and sells its rare earth feedstock to – you guessed it – China.

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There is no getting around the fact that bringing mines online in the U.S. takes a long time. The company I now lead, NioCorp Developments, has worked for more than a decade to bring our large critical minerals resource to commercial launch once sufficient project financing is obtained to allow the project to proceed. We have secured all federal, state and local permits necessary to proceed, thanks to an innovative environmental project design. The project enjoys strong local support.

But we are still three years away from production once we are fully financed. Many other critical minerals projects in the U.S. face even longer timelines. Some will never get operational.

While the U.S. struggles to make more of our own critical minerals, China continues to send not-so-subtle reminders that it can send a hypersonic mineral 'missile' with the press of a button. Unless and until the U.S. government moves aggressively to help fund and advance American critical minerals by mining, Western militaries will drive, fly, and sail by the grace of Chinese rare earths.

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It is time to recognize the mission-critical nature of domestic mining and processing of rare earth and other critical minerals. It is time to stop studying the problem – which governments are fond of doing – and walk the talk of critical minerals.

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Congress and the Biden administration should move more aggressively to help fund critical minerals projects that are shovel-ready. "Shovel-ready" means projects that have (1) completed all exploratory drilling, engineering, and financial analysis sufficient for commercial financing, (2) met all government environmental permitting requirements required for construction, (3) demonstrated that they can sell their products into the market, and (4) earned strong local support. 

The window of opportunity to meet the looming supply crisis for rare earths and other critical minerals is narrow and shrinking.  It will take a clear-eyed and focused effort to avert it. History shows the importance of doing so.

Mark A.Smith is the former CEO of Molycorp, Inc., which pioneered rare earth production in the U.S. before being knocked offline by the Chinese in 2015. He currently is the CEO and Executive Chairman of NioCorp Developments Ltd., which is developing the Elk Creek Critical Minerals Project in southeast Nebraska, which is designed to produce niobium, scandium and titanium.