Llewellyn King: America’s rare-earth vulnerability

Refined rare-earth oxides are heavy gritty powders usually brown or black, but can be lighter colors as shown here

WEST WARWICK, R.I.

A world commodities rebalancing is underway, and China is in a position of dominance. Take lithium, where China is a major processor and battery manufacturer; cobalt, where China has dominated the supply chains; and rare earths, where China has an almost total monopoly. Taken together, these three commodities are key to the future of alternative energy, electric vehicles, mobile phones, and even headphones.

Having stated that he was “fervently Sinophile,” British Prime Minister Boris Johnson in the House of Commons recently called lithium deposits in England’s rugged southwestern county of Cornwall “the Klondike” of lithium. Johnson is known for his grandiloquence, but he knows about the importance of lithium in the age of the lithium-ion battery, and a big lithium mine will open in Cornwall in 2026.

This kind of economic activity points to the re-evaluation and rebalancing of the world’s vital, non-agricultural commodities, reflecting the need for new raw materials for national survival as the demands of technology have changed.

The rare earth elements — there are 17 of them but only four are in demand — are the great multipliers of the modern electronic age. I have seen how this works with the equivalent of a refrigerator magnet. A traditional magnet has a slight pull toward the metal surface. Try it with a magnet that has been enhanced with one of the rare earths, neodymium, and you will find the attraction to the metal of the refrigerator so strong that the magnet will fly out of your hand — and it will take a muscular tug to remove it.

Enhanced magnetism is what makes wind turbines economically feasible. Wind turbines wouldn’t produce enough electricity to make them economical without that multiplier.

The problem is that 95 percent of the rare earths now mined and processed come from China.

This gives the Chinese the ability to choke off the West’s economies while the struggle to produce the vital elements elsewhere (and they are well distributed throughout the Earth’s crust) is mounted.

David Zaikin, a Ukrainian-born Canadian citizen working in London, knows as much about the world resource line-up and China’s influence as anyone. He is the CEO of Key Elements Group, and an alumnus and founder of the Mining Club at the London Business School.

“China is out there and is trying to win every race globally. The West must do everything it can to subvert its efforts and find alternative nations to work with,” Zaikin says.

“The good news is that there are friendly nations like Canada, Australia, and India that are naturally very rich in rare earths. They are well-positioned to bridge the gap in potential rare earths shortages, or in the event those are weaponized by the PRC,” he says, “The bad news is that it takes a long time to begin commercial production, and the right time to start was yesterday.”

The Mountain Pass mine, in the Mojave Desert in California, is in production after a hiatus. But that doesn’t mean much in terms of our Chinese dependence. The production from California is shipped to China for processing and then shipped back to the United States. The mine has also been financed by the Chinese.

The inhibition to mining for rare earths, as John Kutsch, executive director of the Thorium Energy Alliance, explains, is thorium, which isn’t a rare earth element, but which is found in conjunction with rare earths, especially in the United States.

Thorium is a fertile nuclear material and is classified as such by the Nuclear Regulatory Commission and the International Atomic Energy Agency, so miners have to account for it, and it has to be stored and disposed of as nuclear waste.

Until a national thorium bank is established, as supported by Kutsch and his group, we will be looking elsewhere.

Zaikin says, “As the West pursues green policies and becomes more independent of imported oil, it will reduce the influence that the GCC [Gulf Cooperation Council] and other oil-producing nations have on domestic and international policies.”

He adds, “However, by moving from oil into renewable energy, the West increasingly finds itself at the mercy of China. This is why it is crucial that the West includes nuclear power in its green vision of the future, in order to avoid the weaponization of energy by hostile powers.”

On Twitter: @llewellynking2
Llewellyn King is executive producer and host of White House Chronicle, on PBS. He’s based in Rhode Island and Washington, D.C.

White House Chronicle
Inside Sources

Editor’s note: The technique used to purify rare-earth minerals was developed at the beginning of the 20th Century by chemist Charles James (above) at the University of New Hampshire.

New England, especially New Hampshire, has rocks with rare earth elements

Llewellyn King: America's vulnerability to China's not-so-secret weapon -- rare earths

Rare earths are used in the manufacturing of wind turbines.

In October 1973, the world shuddered when the Arab members of the Organization of Petroleum Exporting Countries imposed an oil embargo on the United States and other nations that provided military aid to Israel in the Yom Kippur War. At the same time, they ramped up prices.

The United States realized it was dependent on imported oil — and much of that came from the Middle East, with Saudi Arabia the big swing producer. It shook the nation. How had a few foreign powers put a noose around the neck of the world’s largest economy?

Well, it could happen again and very soon. The commodity that could bring us to our knees isn’t oil, but rather a group of elements known as rare earths, falling between 21 and 71 on the periodic table. This time, just one country is holding the noose: China.

China controls the world’s production and distribution of rare earths. It produces more than 92 percent of them and holds the world in its hand when it comes to the future of almost anything in high technology.

Rare earths are great multipliers and the heaviest are the most valuable. They go into many of the things we take for granted, from the small engines in automobiles to the wind turbines that are revolutionizing the production of electricity. For example, rare earths increase a conventional magnet’s power by at least fivefold. They are the new oil.

Rare earths are also in cell phones and computers. Fighter jets and smart weapons, like cruise missiles, rely on them. In national defense, there is no substitute and no other supply source available.

Like so much else, the use of rare earths as an enhancer was a U.S. discovery: General Motors, in fact. In 1982, General Motors research scientist John Croat created the world’s strongest permanent magnet using rare earths. He formed a company, called Magnequench. In 1992, the company and Croat’s patents were sold to a Chinese company.

From that time on it became national policy for China to be not just the supplier of rare earths, but to control the whole supply chain. For example, it didn’t just want to supply the rare earths for wind turbines; it insisted that major suppliers, such as Siemens, move some of their manufacturing to China. Soon Chinese companies, fortified with international expertise, went into wind turbine manufacture themselves.

“Now China is the major manufacturer of wind turbines,” says Jim Kennedy, a St. Louis-based consultant who is devoted to raising the alarm over rare earths vulnerability. A new and important book, Sellout, by Victoria Bruce, details how the world handed control of its technological future to China and Kennedy’s struggle to alert the United States.

At present, the rare earths threat from China is serious but not critical. If President Trump — apparently encouraged by his trade adviser Peter Navarro, and his policy adviser Steve Bannon — is contemplating a trade war with China, rare earths are China’s most potent weapon.

A trade war moves the rare earths threat from existential to immediate.

In a strange regulatory twist the United States, and most of the world, won’t be able to open rare-earths mines without legislation and an international treaty modification. Rare earths are often found in conjunction with thorium, a mildly radioactive metal, which occurs in nature and doesn’t represent any kind of threat.

However, it’s a large regulatory problem. The Nuclear Regulatory Commission and the International Atomic Energy Agency have defined thorium as a nuclear “source material” that requires special disposition. Until these classifications, thorium was disposed of along with other mine tailings. Now it has to be separated and collected. Essentially until a new regime for thorium is found, including thorium-powered reactors, the mining of rare earths will be uneconomic in the United States and other nuclear non-proliferation treaty countries.

Congress needs to look into this urgently, ideally before Trump’s trade war gets going, according to several sources familiar with the crisis. A thorium reactor was developed in the 1960s at the Oak Ridge National Laboratory, in Tennessee. While it’s regarded by many nuclear scientists as a superior technology, only Canada and China are pursuing it at present.

Meanwhile, future disruptions from China won’t necessarily be in the markets. It could be in the obscure but vital commodities known as rare earths: China’s not quite secret weapon.

Llewellyn King (llewellynking1@gmail.com) is host and executive producer of White House Chronicle, on PBS, and a veteran publisher, columnist and international business executive. This first appeared in Inside Sources.