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Risky Reliance: The US's Dependence on China for Rare Earth Minerals

The date of: 2018-12-25
viewed: 0

Source:American Thinker

A Chinese warship's aggression against a U.S. Navy vessel last month makes questionable the wisdom of American dependency on China for 71% of America's rare earth minerals (REM).  According to a recent U.S. Geological Survey (USGS) summary report, the U.S. produces only 24% of the REMs needed to produce many American manufacturing necessities.  Rare earth minerals are necessary for agriculture fertilizers, high-tech and green energy products, oil-refining processes, and military equipment.

The USGS conducts monthly, quarterly, and yearly analysis on more than 90 nonfuel mineral commodities from more than 180 countries, tracking 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 the findings in annual USGS Mineral Commodity Summaries.

According to the 2017 USGS Mineral Commodity Summaries, the United States depended 100 percent on foreign sources for 20 of the 90 rare earth minerals the USGS tracks, including niobium and manganese.  In 1954, the U.S. fully relied on foreign sources for only 8 mineral commodities.  Thus, dependence on foreign imports has grown 250 percent in 60 years.

Currently, China produces 93 percent of the world's REMs and is the largest global REM-exporter.  As global demand for green technologies has increased, China has leveraged its dominant market position by limiting REM exports and creating record-high prices.  In 2007, China stopped REM shipments to a U.S. petroleum refinery for several months, creating panic over a nationwide gasoline shortage.

China has continued wielding market power as a political weapon, as a Chinese embargo of REM exports to Japan in 2010 halted Japanese production of hybrid cars and wind turbines, a significant Japanese income source.  This embargo also affected Japan's ability to produce guided missiles and thus threatened Japanese national security.  China's trade restriction on yellow phosphorus in 2010 caused the U.S., the E.U., and Mexico to file trade violation complaints against China with the World Trade Organization.  Because the U.S. depends on some minerals with small production quantities, if this trend continues, even small supply disruptions can have major economic impacts.

Certain REMs are critical for U.S. high-tech, energy, and defense products.  These manufactures utilize minerals sucah as gallium, silicon, nickel, chromium, cobalt, and titanium.  The U.S. depends on imports for 94% of its gallium and 81% of its cobalt and titanium.  REMs such as potash, bromine, and nitrogen help produce higher agricultural yields, essential to a healthy food supply.  As China could increase trade barriers, over-reliance on REM imports endangers the American economy and national security.

According to USGS reports, an estimated 13 percent of the world's REM resources are primarily in the western U.S. on protected Bureau of Land Management lands.  According to one USGS estimate, untouched REM deposits in North America could produce more than twice the amount of REMs used in U.S. industries today.  Domestic production could also allow the U.S. greater future self-sufficiency over a long-range period as REM import prices continue to increase.

Although some arguments favor conserving American natural resources in case global resources deplete, a 71-percent reliance on REM imports at any time nonetheless remains questionable in light of strong political tension.  Greater self-reliance measures could be the nation's salvation during unexpected international conflicts.

Congress could aid American self-reliance by altering domestic mining policies.  Entrepreneurs need easier access to permits so that prospectors will have more incentive to open mines, as current state and federal agency reviews demand an estimated five to ten years for a mining permit.  Congress could also approve legislation that encourages investment in America's vast mineral resources.

Business risk analysis is intended to predict and prepare for unexpected external business environment changes.  This includes possible technological changes, natural disasters, political conflict, and international trade barriers.  The U.S. government's current commodities trade policies risk America's stability, especially during times of war.  While working for a global commodities company and major employer in Israel, Israel Chemicals, Ltd. (ICL), I observed war's effects on the company's international trade.  The 2014 Gaza Strip conflict caused a costly three-month blockade on ICL's exports.

According to a recent Freakonometrics publication, the U.S. has been at war 222 years out of 239 since America's 1776 founding, or 93 percent of America's existence, with only 20 years of peace.  In today's volatile political climate, no country should ever depend on imports for essential survival needs.  The U.S. has enough domestic resources that such high dependency is neither wise nor necessary. 

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