Although I became acutely aware of the potential of the REE export restrictions threat in 2007 through research for a U.S. government entity, the increasing demand for rare earths in advanced electronics applications and an increasingly competitive supplier base were forecasted more than a decade ago. The now nearly forgotten Cox Report ( HOUSE REPORT 105-851, SELECT COMMITTEE ON U.S. NATIONAL SECURITY AND DEFENSE/COMMERCIAL CONCERNS WITH THE PEOPLE’S REPUBLIC OF CHINA, January 1999) of 1999) noted China’s increasing need for rare earths for the technologies being fostered under its High-Tech Research and Development Program 863.
By 2002, the USGS noted: “In 1999 and 2000, nearly all (more than 90%) of the separated REE [rare earth elements] used in the United States was imported either directly from China or from countries that imported their plant feed materials from China. The surprisingly rapid progression from self-sufficiency prior to about 1990 to nearly complete dependence on imports from a single country today involves a number of causative factors.”
In retrospect then with the early warnings of foreign control of rare earths, now estimated at 97% owned by China, and the realization that America’s electronics production—and thus its ability to produce hybrid electric cars and alternative energy systems—could come to a halt should China decide to curtail all access to these materials, it is clear that the U.S. should have been proactive by developing industrial policy aimed at protecting its industrial base. But as this example shows that, in spite of long term advanced warning, the U.S. is not very good at developing industrial policy whereas China is.
Recognizing the successes attributable to its three decades of robust industrial policy and S&T investment, China developed trade policies aimed at ensuring and controlling the supply of the natural resources necessary for rapid and sustained industrial growth. This has resulted in China gaining virtual control over the rare earth materials critical to advanced electronics.
In response to China’s October 2011 announcement re cutting export quotas for rare earth elements Martin Hickman of the U.K. paper, The Independent noted “the announcement caused dismay among Western governments, which have belatedly begun to appreciate that China’s stranglehold on elements such as lanthanum, used for batteries in hybrid cars, and neodymium, for permanent magnets in wind turbines, give it immense economic and political power.” This was the first and only admission that the west was needlessly caught with its pants down when all the warning signs were there that this would eventually happen…starting more than two decades ago with well-documented Chinese industrial policy. It has been my experience as China watcher that China, through its five-year plans and a host of other political vehicles, telegraphs its intentions to the world far in advance of their ability to achieve them. What we westerners fail to realize, given our own habit of announcing then failing to achieve, is that China will indeed deliver on its published intentions as the country has done with its REE policy.
Shortly after I covered this issue with the DoD, DoC and 24 other government and industry representatives ago this past March, the Congress once again took up the rare earths issue in hearings. Yet, it appears that several versions of an attempt to pass the Rare Earths and Critical Materials Revitalization Act of 2010 have failed.
Sadly, in the May 2, 2011 New York Times article Supplies Squeezed, Rare Earth Prices Surge http://www.nytimes.com/2011/05/03/business/03rare.html there is every indication that things will get worse before they get better.
One of the alternatives I see very little discussion of is R&D activity towards developing alternatives to REEs. Until the China chokehold on rare earths can be broken through new mines outside China, cost effective recycling and alternative materials development, we are in a box.
At the moment price is not the issue, access and availability are. In the meantime, China continues to make REE processing technology transfer part of its national policy by making it a condition of foreign owned processors to operate in China.
For an earlier version of this piece see http://www.insidertalk.net/