top of page
  • Writer's pictureThe Red Line

Episode 121. Rare Earth Elements: The Futile Fight Against China

Listen to this episode on: Apple Podcasts | Spotify | Youtube

 

As the world pivots towards a high-tech and green energy future, the dominance of rare earth elements has never been more crucial. Yet, while the West has been largely preoccupied with other geopolitical challenges, China has quietly taken control of this vital industry. This episode delves into the strategic manoeuvres that allowed China to secure a near-monopoly on rare earth production and the consequential vulnerabilities faced by Western economies. By focusing on technological advancements and resource acquisition, China has positioned itself as the gatekeeper of essential materials for modern technology and renewable energy. Has the West, with its divided attention, failed to anticipate this shift and what are the strategic missteps that led to this imbalance? We ask our panel of experts:


LISTEN TO THE PROGRAM HERE



 

EPISODE SUMMARY:


PART I: Monopolizing Minerals - (02:42)

with Fabian Villalobos

- Engineer and Prof of Policy Analysis at the RAND

- Specialist in Aerospace materials, Critical materials and Energy Storage

- Co-inventor and Co-author of several key patents


  1. Geological Limitations and Economic Viability: The rarity of economically viable deposits of rare earth elements (REEs) is due to geological constraints and low concentrations. Extracting and refining these elements is complex and costly, making large deposits rare and valuable.

  2. China's Dominance and Market Manipulation: Historically, China leveraged state-backed enterprises to dominate the REE market, driving out Western competitors through below-market pricing. This strategic move led to China's near-monopoly, with a significant control over extraction, refining, and manufacturing of REE components, impacting global supply chains and national security.

  3. National Security Concerns: REEs are crucial for high-end technologies, including military applications like the F-35 fighter jet, which requires substantial amounts of REEs. The reliance on Chinese REEs poses a significant risk to national security, prompting efforts by the U.S., Australia, and other countries to reduce dependence on Chinese supply chains.

  4. Regulatory and Environmental Challenges: Refining REEs is environmentally hazardous, producing radioactive waste and other pollutants. Western countries face stringent regulations and high costs for managing these byproducts, unlike China, where regulations are more relaxed, further skewing market dynamics.

  5. Need for Diversification and Technological Development: For the US to be able to counter China's monopoly, there is a need for significant investment in developing domestic extraction, refining, and manufacturing capabilities. This includes overcoming knowledge gaps and technological challenges, alongside navigating regulatory landscapes. Recent Chinese bans on exporting REE magnet technologies further complicate efforts to establish independent supply chains outside China.



PART II: Sovereignty Through Supply. - (27:49)

with Theresa Sabonis-Helf

- Chair of Science, Technology and International Affairs at Georgetown Uni

- Frm. Professor of National Security Strategy at the National War College

- Frequent advisor to the US Department of State and USAID


  1. Strategic Stockpiling and Government Intervention: Stockpiling of rare earth minerals (REEs) and guaranteed government purchases are crucial strategies to mitigate supply disruptions. This approach can stabilize the market temporarily but requires substantial government investment and may not ensure long-term industry sustainability.

  2. Environmental and Regulatory Challenges: The extraction and refining of REEs pose significant environmental risks, including radioactive waste. Democratic countries face stricter regulations and political pushback, making it difficult to establish refining facilities domestically. Authoritarian regimes can ignore environmental damage, giving them an advantage in REE production.

  3. Geopolitical Risks and National Security: Dependence on foreign REE supplies, particularly from unstable or adversarial countries, poses national security risks. The potential for geopolitical conflicts to disrupt supply chains necessitates the development of domestic or allied production capabilities to ensure access to critical materials for defense applications.

  4. Economic Viability and Market Dynamics: The REE industry requires long-term investments with high financial risks. Private companies face challenges such as volatile markets, high initial costs, and uncertain demand. The dominance of Chinese production, with its lower costs and state support, makes it difficult for Western companies to compete without significant subsidies or government intervention.

  5. Nationalization and Strategic Engagement: Nationalizing the REE industry or increasing government involvement in the market could address some strategic and security concerns. However, it also introduces challenges such as managing environmental impacts and ensuring fair compensation. There are various ways for governments to engage strategically in these markets without full nationalization, balancing economic, environmental, and security interests.



PART III: The Hollowing Hegemony - (47:28)

with Ariel Cohen

- Man. Dir. of the Energy Growth and Security Program at the International Tax and Investment Center

- Snr. Fellow at the Atlantic Council

- Frm Snr Research Fellow at the Heritage Foundation

  1. Diverse Military Applications: Rare earth elements (REEs) are critical in a wide array of military technologies, including aircraft engines, nuclear reactors, and advanced weaponry. Their unique properties make them indispensable for modern defense capabilities, highlighting the need for a secure and reliable supply chain.

  2. China's Strategic Leverage: China holds a dominant position across the entire rare earth supply chain, from mining to manufacturing. This dominance poses a national security threat, as China could leverage its control to disrupt supplies, as evidenced by past instances where China imposed restrictions on REE exports to exert geopolitical pressure.

  3. Stockpiling and Strategic Reserves: Establishing strategic reserves and stockpiles of REEs is a potential mitigation strategy. However, this approach risks driving up prices or provoking further supply restrictions from China, complicating efforts to ensure long-term security and stability of supply.

  4. Building Domestic and Allied Supply Chains: The U.S. and its allies need to develop a robust and independent REE supply chain to mitigate dependence on China. This includes significant investment in domestic mining, refining, and manufacturing capacities, as well as fostering REE production in allied countries like Canada, Australia, and European nations.

  5. Policy and Economic Measures: Government contracts and procurement policies can stimulate domestic REE industries by providing long-term demand guarantees. This strategy can help offset the economic disadvantages faced by private companies due to high initial costs and competition with subsidized Chinese production. A coordinated policy effort, including the appointment of a "Rare Earths Czar," is necessary to drive these initiatives and ensure the strategic security of REE supplies.


Rare Earth Elements: The Futile Fight Against China (Released June 17th)


 

THE RED LINE'S EPISODE 121 READING LIST:


I: The Rare Metals War

- By Guillaume Pitron


II: The War Below: Lithium, Copper and the Global Battle to Power our Lives

- By Ernest Scheyder


III: The Looting Machine

- By Tom Burgis


 

For episode transcripts, monthly geopolitics Q&A’s, member-only videos and to support the show, check out our Patreon here: https://www.patreon.com/theredlinepodcast


 

This episode is dedicated to our Patreon members: Washington13, Subtle Knife, Paul Petrick, Pancho, David Folting, Roshan, Issac Lewis, Rebecca Berlow, Andrew Moore, Matthew Palmer, Bryce, Mack Dolley, MetalDragonar, Eric Merth, Jens Nordberg, Dan Baumgartner and Mm


 

Episode Corrections:  In Part I of our episode, one of our guests suggested that there is no magnet production outside of China. The guest has since reached out to clarify that this statement was technically incorrect. While it is true that the vast majority of magnet production occurs in China, Japan does technically produce a small quantity of magnets as well. However, this production is not sufficient to significantly reduce global dependence on China. We apologise for the error.

 


The thumbnail created for this page contains images created using AI.

Comments


bottom of page