China Plays the Rare Earth Card, Again

The trade spat between the U.S. and China took an ugly turn threatening high-tech materials for motors, generators, and batteries. Recently, Chinese President Xi Jinping visited a Chinese rare earth element (REE) factory. We should see his visit as an implicit threat that he would consider cutting off supplies of REE materials needed by huge swaths of the U.S. economy. REEs play an existential role in oil refineries, wind turbines, jet engines, electronics, and military equipment. China could hobble those industries by limiting the export of REEs, and there is little the U.S. can do to remedy the problem.

We have seen China’s Kabuki style threat before. About decade ago, China threatened to cutoff REE exports to Japan, because Japan was opposing its effort to build artificial islands in the South China sea.

Rare earths elements (REE) come from scarce mineral deposits, generally in mixtures with other rare earths. For example, you may target your mine for Ytterbium, but if you find it, you are likely to get Cerium as well. Most of the REE supply is mined in China, but REEs are found in sea floor manganese nodules, and some REE is mined in the U.S. and Australian operators. Researchers at the University of Kentucky are hunting rare earths in coal slag. That source is also being pursued in Russia.

The REEs are yttrium and the 15 lanthanide elements (lanthanum, cerium, praseodymium, neodymium, promethium, samarium, europium, gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium, and lutetium). Scandium is found in most rare earth element deposits and is therefore usually classified as a rare earth element.

Two REE mining companies that seem unshackled to China are Lynas and Neomaterials. It may be worth the U.S. considering a partnership to augment what little is produced by others in the US. Such an unusual step may be in the national interest for access to REEs that are essential to the manufacture of electronics and military components.

Lynas (Australian) is receiving take-over bids after its inability to mine REEs economically. Unfortunately, it also has a licensing issue that could crimp its usefulness. Since October 2018, Lynas is going through a renewal of a Malaysian license slated to expire in September 2019. Given the current implicit threat from China, Malaysia may also be pressured to delay or deny Lynas’ license renewal.

Molycorp was an American supplier that bankrupted in 2015 and was acquired by Neomaterials. Neomaterials may be a good candidate for the U.S. to approach with an offer of partnership. It is slightly profitable, because of makes a range of products, not just raw ore.

Mining molybdenum nodules may seem far-fetched, but they contain a very large part of the world’s REE reserves, If the nodules are clustered they might be efficiently scooped up despite being in the deep-sea.

Recycling should not be neglected. Batteries, motors, and electric generation components should be broken down to concentrate the REEs for subsequent refining. Such a process is already done to recover gold, platinum, and sometimes copper. Depending on the concentration of REEs in the recycled materials, it could be the best process to produce US-REEs.

Three aggressive strategies are available: first, buy competent REE miners; second, invest in technologies to handle deep sea mining and recovery from coal ash; and third, recycle REE-containing equipment. When coupled with Congress’ action on bills such as S. 1317, the American Mineral Security Act, aggressive strategies may generate some of the supply that China may withhold. However, the Mineral Security Act needs to be accompanied by enough investment to attract world class miners into the REE supply strategies suggested above.

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