Wednesday, May 23, 2018

Strategic Minerals

Whether you believe we are on an inexorable path to war with China (we are) or merely observing them as they rise benevolently to friendly and helpful world neighbor status, one thing is certain: we are engaged in a peer level competition, at the moment, and in such a competition you don’t want to find yourself dependent on anything that your competitor has a monopoly on.

We learned this the hard way when we were dependent on Middle East oil and those oil producing countries were able to dictate prices, manipulate our economy, and create financial and societal disruptions that led to gasoline shortages and long lines for what gas there was.  We have since become largely energy independent to our significant betterment.

China, it turns out, has a monopoly on rare earths and minerals that we need for weapons manufacture.  The Trump administration initiated a study and report on the defense industry from a strategic viewpoint.  The results were previewed in a Breaking Defense article. (1)

“The review promises to be the most thorough look at the entirety of the manufacturing and production of defense materials ever attempted, involving several government agencies, surveys of large and small players in the supply chain, and a study of foreign materials used in the production of American weaponry.” (1)

The results are disturbing.

“China will likely loom large in the report, given the country’s dominance of the rare earth minerals market so critical to the U.S. defense industry, the pumping of billions in Chinese investments into U.S. tech startup firms, …

Last month, Ellen Lord, the Pentagon’s Undersecretary for Acquisition and Sustainment, said that once her team started taking a hard look at the reliance the American defense industry has placed on China for critical minerals, the results were “quite alarming…we have an amazing amount of dependency on China.“

“The United States defense industry relies on Chinese producers for 100 percent of its rare earth materials …” (1)

For example, Gallium and Germanium, used in the production of radars, infrared devices, and fiber optics, are sole sourced from China, according to the article. (1)

How bad is the situation?

“The entire global market now flows through China, and “China can always underprice competitors,” he told me, as “they view this as part of their global industrial and defense policy. This is part of their industrial and defense strategy. No matter how many rare earth mines you open up, China can undercut them on price.” (1)

“Rare earth metals are so critical and in so many defense components for guided missiles, smart bombs, targeting lasers, sonar, radar, night vision and high temperature resistant metals for military jet engines, that if China cut us off, the U.S. could not replace or build most of our advanced weapon systems.” (2)

“These materials are also found in smart phones, small electric motors, sensors and catalysts in automobiles, computers, commercial aircraft and most green technology. If China embargoed these materials the U.S. would be forced to shut down all or most of our nation’s technology manufacturing assembly lines.” (2)

Was this always the case?  No.

“Rare earth materials are the byproduct of almost all normal mining activities, and while they can be mined and produced in the United States — which until the 1980s was meeting all of its domestic needs — a series of rules, and Chinese moves to undercut the market, dried up most domestic production.” (1)

The reality is that we are already at war with China – or, at least, they are at war with us.  China views war as the totality of a nation’s actions, unlike the US, and holding a monopoly on defense-critical rare earth minerals is just another weapon in China’s war chest.  It doesn’t take much imagination to see that the threat of being cut off from our sole supplier of critical defense manufacturing resources makes it very difficult for us to take actions in other areas such as trade, tariffs, patents, cyber espionage, etc.  In other words, China’s monopoly makes it difficult for us to act in our own best interests.

This monopoly needs to be broken and decisively so.  We had production capacity once and we can re-establish it again.  The Trump administration has taken the first, vital step of recognizing the problem.  Whether you like Trump or not, his investigation into this area is of vital national strategic importance.  He has done what several previous administrations have failed/refused to do.

The Obama administration, for example, failed badly, as noted in the article.

“The focus of the Obama administration when it came to rare materials was “reduce, reuse, recycle,” he added, “what was missing was production.” (1)

Make no mistake, China will use our dependence against us.  It is a matter of national security to break China’s monopoly over us.  We must begin taking the same view as China regarding the totality of war and start fighting back on every front.  Trump is quite correct on this issue.  It’s not even debatable.  It’s a matter of national security not politics.



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(1)Breaking Defense website, “DoD, White House Likely To Fight Chinese Monopoly on Rare Earth Minerals”, Paul McLeary, 18-May-2018,

(2)The Hill website, “China's secret trade war option: A rare earth embargo”, Victoria Bruce, 2-Apr-2018,

30 comments:

  1. Well good thing for you Australia is the second largest producer after China

    https://investingnews.com/daily/resource-investing/critical-metals-investing/rare-earth-investing/rare-earth-producing-countries/

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    1. China 105 mt vs Aussie 20 mt per your link. Is that enough for the US and its allies in a war? Definitely would crowd out consumer goods.

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    2. Well if you're in a war you probably would't be worried about not having the latest iphone :D

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    3. Americans have not seen ration coupons since World War 2. I would not discount the amount of political discontent from such a move. China will probably count on outlasting us in a test of wills.

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    4. "China will probably count on outlasting us in a test of wills."

      Your point is noteworthy although it should be noted that multiple countries have made this exact miscalculation regarding the US in the past. Japan believed it could outlast us until the public grew tired of the cost and casualties. Saddam Hussein made the same miscalculation. Interestingly, the Confederate States of America made the same miscalculation regarding the North.

      On the other hand, Vietnam did, indeed outlast our will.

      Good comment.

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    5. "Americans have not seen ration coupons since World War 2"

      What, haha tell that to the 43 million Americans on food stamps

      Or this

      http://www.businessinsider.com/american-families-cant-afford-new-car-2016-7

      half of the states is already poor ( sadly )

      Delete
  2. If I recall correctly, most of these rare earth metals are Chinese natural resources, the ore is mined and refined in China.

    There is not much we can do about that apart from building up a stock pile and moving to alternate resources. Note that may include mining asteroids.

    GAB

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    1. "moving to alternate resources."

      On the mark, as usual. We need to stop developing systems that require raw materials we don't control. There are always technical alternatives. They may not be the best choice but they beat any choice that won't be available when needed.

      There are also strategic alternatives. In this case, China can't be the only place on Earth that has the rare earth minerals we need. Let's identify the locations (including the US!) and secure mining rights.

      We provided all our own needs internally, once upon a time, so let's make reestablishing that capability a national security priority. Let's revoke any regulations that drove our own suppliers out of business and reestablish our own supplies.

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    2. We already have backup options for every REM in the US. We can easily supply them ourselves if required. You are confusing the difference between an economical supply and a military reserve supply. We have a military reserve supply that can be tapped when required and last us decades without issue. It simply isn't economical to have it running right now when china will just dump on the market.

      It is pretty simple to start back up the mining at the various shutdown mines. In addition, pretty much every major mine in the US also has REMs in the spoils that aren't economical to separate atm.

      Market economics tend to disappear when fighting a war.

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    3. "We have a military reserve supply that can be tapped when required and last us decades without issue."

      Tell me about this and give me a reference. I've never heard anything about this.

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    4. We have abundant known in ground reserves of REMs. They simply aren't worth mining when we can get them cheaper other places atm.

      Its like Appalachian Coal, we know where it is, we know how much is there, but it simply isn't worth it to mine it atm when we can get more coal than we need other places for less than 1/10th the cost (aka while coal mining in Appalachia is dying except for the rare mine that provides super high quantities of carbon black).

      AKA, it is foolish to look at current supply and panic. We can get all our REM requirements without China IF REQUIRED, but it isn't economic to do it atm when china is basically giving theirs away.

      Delete
  3. US had a mine, been open and closed over the years, not like we can't reopen it BUT the problem is also pricing and ecological.

    If US mining operation opens and China dumps RE minerals, then they lose money, you really would need then to have US govt to step in and buy way above market prices to maintain operations....and that is anathema to GOP, USG supporting private industry with controlled prices?!?! Not happening! The other one is environmental, it's getting harder and harder to open mines in USA, again, I guess you could bypass laws in time of war but before that? Not happening with out a fight in courts for years....

    https://ensia.com/features/rare-earth-recycling/

    AS far as I know, Molycorp went into Chapter 11 and has reemerged as NEO Performance Materials, I don't think the US RE mine is open now...not sure.

    http://www.mining.com/molycorp-thrown-lifeline/

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  4. It looks like a Chinese mining company bought the US mine in 2017 and looking at reopening it....

    https://en.wikipedia.org/wiki/Mountain_Pass_rare_earth_mine

    Best option that I have seen proposed would be to nationalize the mine and maybe others....

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  5. Theres just one problem, its all hysteria.
    https://capx.co/rare-earth-elements-scarcity-and-human-ingenuity/

    It has literally already happened.
    China already embargoed REMs to Japan, and Japan just kept on ticking, using fewer REMs, or not using them at all.

    Rare earth metals arent particularly rare, they are everywhere, every commercial mine pulls them out of the ground, its just not economical to sort them from the spoil left over and sell them whilst China does it.
    But once China stops, everyone else can quickly start again.

    Reopening Mountain Pass Mine taking 15 years, not a chance, even if the EPA goes balls out to stop it, with an enabling act and deep enough pockets, it would be open in months.
    Active mines could begin producing sooner than that.


    Oil is a slightly different case, but even that, 5 years of blockade and mass bombing didn't deplete German or Japanese Oil Stockpiles.

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    1. "Theres just one problem, its all hysteria."

      It's a matter of national security that must be addressed so that we have the capability in hand BEFORE we need it in a war. If that's your definition of hysteria, that's fine. To me, it's a long overdue recognition of some of our strategic weaknesses that need to be addressed.

      The challenge is to make it legal and profitable enough for someone to want to do it. We need regulatory reform and, likely, subsidies. Those are Congressional responsibilities and those are what will take years to accomplish unless it can be done by Executive Orders.

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    2. About the only way that will happen would be for the US to nationalize the mine and provide subsidies for its output on the order of what china has done.

      The reality is that we can reopen and produce REMs within a month if required. It simply isn't economical to do it at large when china is basically dumping on the open market.

      Delete
    3. "US to nationalize the mine and provide subsidies"

      For a material that is of national strategic importance, that seems eminently reasonable if more conventional approaches won't work.

      I know nothing about mining but it seems unlikely that we can set up separation and purification facilities that quickly.

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    4. For something like REMs where all the processes are known, you can have a separation setup within a week if you really really want to.

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    5. ats is correct - Rare-earth minerals are badly named - in respect to most REMs it's a misnomer.
      REMs are mostly extremely common.
      Some are among the most common elements in the Earth's crust.

      They are common, and as ats points out are produced all the time as spoil from regular mining operations.
      In fact, they are so abundant that mining companies often don't bother extracting them from spoil.
      China has significant reserves of known REMs (about 30% of known reserves). They represent more than 80% of production not because of their reserves though - it's because they undercut the market in the 90s, and so the other sources of production just stopped operating their mines.

      But there are massive reserves all over the place, and most areas haven't been searched.

      Canada, Australia, Vietnam, Greenland, Brazil, Tanzania, South Africa and the US all have significant known deposits of REMs. In the US, mines are beginning to reopen (and started to resume production under Obama).

      In Australia, production is ramping up massively. Australia is already the second largest exporter of REMs, and has massive, untapped reserves only just beginning to be exploited. They are about to open the first major mine to export heavy REMs (e.g. dysprosium) at Halls Creek.

      Essentially the Chinese undercut the global market of REMs through the 90s and early 2000s.
      It put most exporters out of business.

      Since 2010, things have started turning around though.
      China began playing political games with Japan and it was a wake up call.
      They lost a WTO case in 2014. After that they actually lifted all quotas on REMs.
      This, coupled with the fact that Chinese production and supply fell behind demand, made the REM market more economical again.

      Australia massively ramped up production in anticipation.
      Canada, the US, Vietnam and Greenland aren't far behind.

      If it became a matter of national emergency, the US could easily supply it's own requirements.
      In addition they have access to many other markets - including among their closest allies.

      This whole thing is a bit of a beat up.

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  6. The miners need to hire International Dairy Foods Association. Milk price supports program is a decent model for REMs.

    Elsie

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    1. Elsie - I get it.

      I didn't know there was a milk subsidy program.

      Delete
  7. TL;DR : I think it is both a supply AND a demand problem.

    I watched a lot of video of the youtube channel forgotten weapons lately, and that war time constraints(ww1, ww2).
    Putting aside the steel provision (which has been talked about before), rare material is also a thing. We are very gold platted now. But when we think of material, do we think "what is supply of rare material is limited". Do we have plan B? Will we have less reliable radar? less fast electronic? bigger one (needing different design, more bulky?) Will we need to build less efficient radar to use more available material?

    If I share none of light pacifism of "defence and freedom" military blog, I do like his talk of plan of industrialization for total war being needing to be ready. (even if plans never works as intended, planning for it is useful). Do we have plan B for limited use of rare material (exponential increase of military need versus limited increase of production, even if all producers were friendly).

    A historical example if germany dependance on rare mineral for some anti tank ammunition in ww2. They had some very limited supply from Sweden, but not much. It hurted them a lot in the early phase of the war. Their anti tank gun against French and Russian were often inferior (and yet it is when they got their victory, irony of history). They should either have found internal provision, or designed their anti tank weapons strategy different from the beginning. There were alternatives.

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    1. Found the link about Germany ww2 problems : https://defense-and-freedom.blogspot.co.uk/2010/04/little-bit-german-artillery-and-anti.html

      I quote : "Critics of the German anti-tank effort in WW2 usually point at this failure; the failure to replace the 3.7 cm gun early with a 5 or 7.5 cm AT gun. (This failure is actually explainable by the pursuit of squeeze-bore technology guns. This technology was unusable in wartime because of its consumption of rare tungsten.)" with links to references.

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    2. "Will we need to build less efficient radar to use more available material? "

      In a sense, you're asking, is it better to build Sherman tanks or exquisite German tanks? In combat, basic, rugged, lethal, and reliable are the attributes of successful weapon systems. Sadly, too few of ours have those attributes.

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    3. I enjoy as much as you the importance of cheap, good enough, tough product. I was more pointing that on top of the usual problem of gold plating; we might not even be able to use/produce our gold platted product when a peer war come because we depends on rare minerals for productions/ammo.

      So yes, producting 3 sherman for 1 german tank is better. What is better if is you are at least able to use it (aka tungsten lacking for anti tank ammo). Which is even worse (the system might even be cheap, tough, deadly on all other aspect).

      Not sure I made myself clear.

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  8. The majority of rare earth metals (REM) are also present in combination thorium. The purification of the REMs also produces purified/concentrated thorium. Thorium is considered a nuclear material (could be converted to U233 and made into a bomb(nation state level of difficulty)) and is highly regulated. Dealing with anything nuclear drives the cost of domestic REMs because of the record keeping and inspections needed to deal with the thorium produced. Reduce the economic burden of thorium and REMs would be more economical to mine in the USA. Government purchase of Thorium from REM mines would be the easiest. A token purchase price would jump start domestic production, since the REM mine would not have to treat the tailings as radioactive waste. The purchased thorium could be used in government reactors (naval reactors) as a burnable poison/fertile.

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    1. Absolutely fascinating. I had no idea. Thanks for sharing that.

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  9. If memory correct one of the reasons the Converteam's Advanced Induction Motors (AIM) chosen rather than the DRS 36.5 MW Permanent Magnet Motors (PMM) for Zumwalt was PMMs required foreign (China) sourced REMs.

    The new Columbia SSBN will use an electric propulsion motor of undisclosed origin, it failed under test, guessing it was the DRS PMM, PMMs have the advantage of more compact dimensions so advantageous in limited volume submarines, source of REM?

    China have in the past restricted export of REMs, source of 97% of supply at the time, in violation of WTO rules, China lost case and now exports currently unrestricted.

    February 2018 Toyota stated it has developed new magnet for its car electric motors, to reduce use of critical rare earth element by up to 50%, no doubt in response to the Chinese threat.

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  10. Afew links about REMs and Thorium.

    https://investingnews.com/daily/resource-investing/critical-metals-investing/rare-earth-investing/thorium-rare-earth-liability-or-asset/

    https://investorintel.com/sectors/technology-metals/technology-metals-intel/800-pound-gorilla-room-rare-earth-sustainability-north-america-thorium/

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  11. It's a lot worse than you think (or, at least, than you write).

    Most of the refining capacity for rare earths is also in China.

    Printed circuit board production--mostly in China.

    Electronics assembly--mostly in China.

    Textiles--mostly in China.

    Lithium-ion battery assembly--mostly in China.

    LCD production--Japan and Korea.

    Lithium ion cell production--Japan and Korea.

    Machine tool production--Japan, Germany, and Italy.

    Robots--Japan, Germany, and Korea.

    You can go on and on like this. We're lucky to even have a car industry in this country. Thank God for Lee Iacocca and Barack Obama.

    The USA has been trading industrial marketshare for "security" interests since the late 1940s (when it bizarrely pressured European countries to drop tariffs against JAPAN) with disastrous results. The Kennedy Round of GATT negotiations is when the Rubicon was crossed (the Kennedy Administration abandoned the Point of Peril Doctrine), and the first practical demonstration was when Nixon sacrificed the American radio and television industries to assure Japanese logistical support during the Vietnam War.

    Now ask yourself--what should have been more important to America? What kind of government the South Vietnamese had, or having a thriving electronics industry in the Midwest?

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