National Review
China is once again rattling its saber with rare earth minerals
The Financial Times released a key story on Feb. 16 outlining how China is plotting to disrupt the US defense industry. Not for the first time, it appears that China is considering using its control over rare earth elements critical to the production of many weapons, including the F-35 jet, to get the US in trouble. an F-35 contains 417 kilograms of valuable rare earth minerals that China is virtually suffocating over. What exactly are rare earths? They cover 17 important elements in the periodic table, including many elements that are not household names, such as Dysprosium, Praseodymium and Ytterbium. And that’s not all. China has an inordinate dominance in what I call the three ladies: 1) Mining and Mineral Engineering, 2) Metallurgical Engineering, and 3) Materials Science and Engineering. When it comes to rare earths and the Three Ms, China is fully aware of how strategically important their position is. As the Global Times, a Chinese state newspaper, put it, Rare earths are “an asset in Beijing’s hand.” As early as 1992, Deng Xiaoping emphasized that “the Middle East has oil; China has rare earths. Importantly, China knows that rare earths can be armed. In May 2019, China’s Commission for Natural Development and Reform, a body that oversees Chinese policy changes, highlighted rare earths in a question-and-answer bulletin on prospects of an export ban on rare earths. The report read, “Will rare earths become China’s counter-weapon against the unfounded oppression of the US? What I can tell you is that if anyone wants to use rare earth products to curb China’s development, the people of the Soviet revolutionary base and the entire Chinese people will not be happy. ”And now we learn from the FT that the Ministry of Industry and Information Technology is refining China’s strategy for the use of rare earths. These strategies are more than just an empty threat. China has indeed enforced export bans before. In 2010, China stopped exporting rare earths after a Chinese trawler collided with two Japanese coast guard vessels in the East China Sea. Although the World Trade Organization then ruled on these Chinese restrictions, they still pose a potentially viable threat to the future. To underscore the importance and potential strength of the rare earth weapon, President Xi Jinping is in the habit of visiting rare earth mining sites and factories that produce the precision magnets that rely on rare earths. But rare earths are not only vital to many weapon systems. Far from it. They are also used in a wide variety of consumer products from iPhones to DVD players to rechargeable batteries. They are also crucial to many “green” products, such as LED lamps. Many important products, such as motors in electric cars and the generators in wind turbines, contain specialized magnets that require rare earths, and China produces 90 percent of those magnets. Rare earth reserves are scattered around the world in countries such as Australia, the United States and Myanmar, with China taking the lead with about 40 percent of the world’s reserves. When it comes to mining rare earths, China’s lead is becoming dominant. In fact, more than 70 percent of China’s rare earths are mined. Further downstream is the processing. At that stage, China is even more dominant, processing nearly 90 percent of the world’s rare earths. In rare earths, how has China achieved such dominance across the board? As someone who got his first position on the faculty and got his eye on mineral economics at the Colorado School of Mines in the late 1960s, I’ve long suspected that China must have invested heavily in the Three Ms. So let’s see . The graph below shows that, when it comes to the best universities in the world, China is nowhere to be found in the top 20. But when we go to the Three M’s, things change dramatically. China dominates in mining and mineral engineering, with nearly half of the world’s top 20 programs in those areas. As we move to Metallurgical Engineering, China will control 45 percent of the top 20 programs in the world. In Materials Science and Engineering, China is slipping, but still holds 25 percent of the world’s top-notch programs. How did China attain such a position in the field of education with regard to the Three Ms? The answer to this question is difficult to determine precisely. We have Deng Xiaoping’s joke about rare earths in 1992. So we know that the Chinese leaders were at least aware of the importance of the Three Ms at the time. But it wasn’t until 2001 that I was able to provide specific evidence of the Chinese government pouring money into the education and development of the Three Ms. This is in stark contrast to the United States, where the entire Bureau of Mines and its important mineral economy division was disbanded in 1996. In 2001, China launched its tenth five-year plan for national economic and social development. It was signed by none other than Zhu Rongji, the Prime Minister of China at the time. Under the plan, China wanted to make good use of its abundant mineral resources and improve traditional industries (such as energy, metallurgy, chemistry, machinery, automotive, building materials, construction, textile and light industries) with high-quality, new and advanced technologies. The measures include improving product variety and quality and accelerating the development of universal, key and accessory technologies. These objectives had to be supported by university investment in the relevant fields. Mining and mineral engineering, metallurgical engineering and materials science and engineering were thus supported by the five-year plan. The Communist Party issued instructions, and in the field of the Three Ms the results were impressive. Indeed, over the past twenty years, China has put its money on the map by increasing research and development spending more than tenfold. And those expenses weren’t just for rare earths. They addressed a variety of critical materials that are essential in the global transition to a “green” economy. For example, in the field of batteries alone, China dominates the production of the necessary raw materials (ie lithium, natural graphite and synthetic graphite). China also dominates in the chemical processing required for inputs for battery production. In addition, China dominates in battery anodes and cathode production as well as battery cells. And that’s not all. Chinese companies produce 72 percent of the world’s solar panels and 45 percent of wind turbines. When it comes to rare earths, China is clearly locked and charged and ready to put maximum pressure on the Biden government. Realizing this fact, President Biden yesterday signed an executive order mandating multiple federal agencies to conduct 100-day reviews of supply chains for semiconductors, pharmaceuticals, electric vehicle batteries, and critical minerals used in electronics. Still, this is nothing new: Biden’s predecessor, Donald J. Trump, signed a similar executive decree on September 30, 2020. To subscribe to our daily business, finance and economics commentary, The Capital Note, follow the link here. If you’d like to subscribe to The Capital Letter, a recap of the week on Capital Matters – and some additional commentary – follow the link here. Both are free.