In the deeply entrenched arena of hybrid geo-politics, Rare Earth Elements (REEs) have emerged as prominent drivers of global security. REEs are a group of 17 elements, including scandium, yttrium and the lanthanides, which are relatively abundant in the earth’s crust, however, their extraction is an economically and environmentally strenuous process that hinders many states from actively engaging in REE trade.
They may not be household names, but these elements are essential for the production of modern technologies, including semiconductors, permanent magnets, batteries and defence systems. Heavy REEs like dysprosium and neodymium are also crucial for the production of high-performance magnets which have dual-use utility across the technological and defence domains.
“China’s hegemony over the rare earth market has become a tinderbox of contention in international politics and fiscal planning.”
China has dominated the REE market since the 1980’s through local mining and refining of light REEs, saturating the market with low-cost rare earths, vertically integrating the industry with other major REE companies, and, through exploitative trade partnerships with states like Myanmar –who exports heavy REEs in their raw form to China for refining and global distribution-. In a globally interdependent world, China’s hegemony over the rare earth market has become a tinderbox of contention in international politics and fiscal planning.
As states strive to procure sustainable supply chains for strategically important materials, discussions have centred around China’s monopoly over REEs trade, especially following the export restrictions and regulations that it has imposed globally. The relatively inexpensive supply of REEs has allowed China to exploit major trading partners leading to harmful dependency. Although there have been calls for diversification of rare earth trade, the process is inherently time consuming and progress seems like a distant mirage against a glaring trade titan like China.
The United States’ heavy reliance on Chinese REEs is troubling, especially in the wake of an overt Sino-American trade war. President Donald Trump’s imposition of heavy tariffs on Chinese goods has pushed China to regulate and restrict its export of seven major REEs, including Neodymium, Samarium, Dysprosium, and, Yttrium to key American defence companies.
Lockheed Martin, Raytheon, and Boeing use Chinese refined permanent magnets in the production of drone motors and missile actuators which are essential in precision guided systems. Thermally stable magnets are crucial for sea and air missions in extreme temperatures. Phosphors and lasers derived from REEs are pivotal in the production of night vision goggles, lider, and advanced radar systems.
“Lockheed Martin, Raytheon, and Boeing depend on Chinese refined magnets for missile and drone production.”
The financial cost of this dependence is monumental for a country like USA which invests heavily in its force modernization. China’s stringent regulations on the export of rare earth elements has the potential to delay projects and shrink budget allocations to integral defence projects. The irregularity of supply from China jeopardizes the consistency needed to complete complex projects like integrated missile defence networks, naval vessels, nuclear-powered submarines and fighter jets.
This unhealthy reliance on Chinese REEs has made US state security vulnerable and the regulations on rare earth exports have served as a wake-up call to diversify REE sources. As a result, America has accelerated its domestic investments in an attempt to curb China’s monopoly in the rare earth arena. Mountain Pass Mines in California has been awarded $400 million to build a vertically integrated rare earth refining and magnet production facility. The Quad alliance between USA, Australia, UK, Japan and India has incorporated clauses regarding joint rare earth production and processing strategies.
In practice, REE development suffers from supply chain challenges, market fragmentation and environmental constraints that hinder the diversification agenda of REE production. Firstly, establishing alternate sources of REEs does not hinge just on mining, they rely on technical expertise, separation techniques, and intricate extraction infrastructure, which China has perfected over decades of experience. The United States’ entry into the REE refining, production, and supply business could be a time-intensive process that may take an exorbitant amount of time to produce the quantity of rare earths needed to fund the USA’s defence expenditure.
Secondly, the high costs of capital, long development cycle, and regulatory burdens may hinder investments in new REE projects in the USA. Market volatility may also impact diversification. When market prices of Chinese REEs plunge due to overproduction, non-Chinese producers shall automatically become economically unviable, reinforcing reliance on Chinese REEs.
“Environmental hazards and high capital costs make U.S. REE diversification a fickle idea rather than a solid reality.”
Thirdly, strict environmental laws in the United States may hinder the expansion of the rare earth industry. REE mining and refining process uses toxic chemicals and produces radioactive waste like uranium and wastewater water which can destroy ecosystems. In comparison, China’s lax environmental regulations allow steady REE production and supply without delays or disruptions.
In the contemporary defence arena, missiles and warships depend upon REEs that provide them with agility, versatility, and advanced manoeuvrability. The United States’ dependence upon Chinese rare earths amidst a trade crisis begs the need for diversification. Investing in indigenous REE production and forming alliances to reduce reliance on Chinese rare earths is a progressive step.
“China’s regressive export regulations could gravely disrupt U.S. defence production and innovation.”
Unfortunately, REE expansion is a tricky process tangled in supply chain issues, high capital costs, environmental hazards, and market volatility, which make diversification a fickle idea rather than a solid reality. China’s regressive export regulations, coupled with its autonomy over the REE industry, have the potential to gravely disrupt US defence production and innovation.
Disclaimer: The opinions expressed in this article are solely those of the author. They do not represent the views, beliefs, or policies of the Stratheia.
