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Risky reliance: US dependence on China for rare earth minerals

The date of: 2018-11-14
viewed: 1

Source:Idaho State Journal

In light of the aggression made by a Chinese warship toward a U.S. Navy vessel last month, one might question the wisdom of the U.S.’s dependency on China for 71 percent of its rare earth minerals (REMs). According to a recent summary report by the U.S. Geological Survey, the U.S. produces only 24 percent of the REMs it needs to produce many of its manufacturing necessities. Rare earth minerals are used in the production of fertilizers for agriculture, high-tech and green energy products, oil refining processes, and the production of military equipment.

The USGS conducts monthly, quarterly and yearly analyses on more than 90 nonfuel mineral commodities from more than 180 countries. The USGS tracks domestic supply and production of these commodities. Using prior-year data, the USGS calculates the U.S.’s net import reliance on mineral commodities and publishes its findings in its annual USGS Mineral Commodity Summaries.

According to the 2017 USGS Mineral Commodity Summaries, the United States was 100 percent dependent on foreign sources for 20 of the 90 rare earth minerals the USGS tracks, including niobium and manganese. In 1954, the U.S. was fully reliant on foreign sources for only 8 mineral commodities. That is a 250 percent increase in dependence on foreign imports in 60 years.

Currently, China is the largest exporter of rare earth minerals, producing 93 percent of the world’s REMs. As global demand for green technologies has increased, China has taken advantage of its dominant market position by limiting its REM exports, causing prices to rise to record-high levels.

In 2007, China cut off REM shipments to a U.S. petroleum refinery for several months, causing panic that the stoppage could create a nationwide gasoline shortage.

China has continued using its market power as a political weapon, blocking REM exports to Japan in 2010, halting their production of hybrid cars and wind turbines, a significant source of income for Japan’s economy. It also affected Japan’s ability to produce guided missiles, posing a national security threat for Japan. China’s trade restriction on yellow phosphorus in 2010 caused the U.S., the EU, and Mexico to file trade violation complaints against China with the World Trade Organization. Because some of the minerals that the U.S. depends on are not produced in large quantities, if this trend continues, even small disruptions in the flow of supply can have a major impact on the economy.

Certain rare earth minerals are critical for the production of U.S. high-tech, energy, and defense products. Manufacturers of these products utilize minerals such as gallium, silicon, nickel, chromium, cobalt, and titanium. The U.S. is dependent on imports for 94 percent of its gallium and 81 percent of its cobalt and titanium. REMs such as potash, bromine, and nitrogen are used to produce higher agricultural yields, essential to a healthy food supply. With the possibility of increased trade barriers being imposed by China, over-reliance on imports for rare earth minerals could harm the U.S. economy and its national security.

When conducting business risk analysis, business analysts try to predict and prepare for unexpected changes in the external business environment as much as possible, considering the impacts of possible technological changes, natural disasters, political conflict, and international trade barriers. The U.S. government’s current commodities trade policies may put the stability of the country at risk, especially during times of war. While working for a global commodities company, Israel Chemicals, Ltd. (ICL), a major employer in Israel, I observed the effects of war on the company’s international trade. The 2014 conflict with the Gaza Strip caused a 3-month blockade on ICL’s exports and a significant loss to the company.

According to a recent Freakonometrics publication, since 1776, the United States has been at war 222 years out of 239. That is 93 percent of the time that our country has been at war, with only 20 years at peace since its founding. In today’s volatile political climate, no one country should ever become too dependent on imports for its essential survival needs. The U.S. has enough of its own natural resources that such a high dependency is neither wise nor necessary.

According to U.S. Geological Survey reports, an estimated 13 percent of the world’s rare earth mineral resources are primarily in the Western United States on lands that are protected by the Bureau of Land Management. According to one USGS estimate, the untouched REM deposits in North America have the capacity to produce more than twice the amount of REMs that U.S. industries use today. It could also allow the U.S. a greater future self-sufficiency over a long-range period as REM import prices continue to increase. Idaho, alone, has significant phosphate deposits in Southeast Idaho while the Couer d’Alene area conceals substantial zinc, lead, and industrial garnet deposits. Oil and gas reserves have also been surveyed in Southern Idaho that could be tapped.

Thoughtfully having considered arguments in favor of the U.S. retaining its natural resources in the instance that other global resources become exhausted, I still wonder: in the face of strong political tension, is it prudent to be as high as 71 percent reliant on REM imports at any time? A move toward greater self-reliance could prove to be the nation’s savior during an unexpected international conflict.

Congress can help the U.S. to become more self-reliant by altering its domestic mining policies to make permits easier for entrepreneurs to obtain so that prospectors will have more incentive to open mines. Currently, with all the reviews required by state and federal agencies, it takes an estimated 5-10 years to attain a mining permit. Congress could also approve legislation that encourages investment in our country’s vast mineral resources.

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