As Trump talks up commerce conflict with China, fears rise for uncommon earths provide | Mining | USAEMALL.com

Taipei, Taiwan – As United States President-elect Donald Trump gears up for a second trade war with China once he takes office on January 20, the rare earth minerals essential to the production of electronics, vehicles and weapons are one resource expected to be caught up in the fray.

While rare earths are plentiful across the earth’s surface – despite what their name suggests – China controls about 70 percent of their production and 90 percent of processing, according to estimates by the US Geological Survey and the International Energy Agency.

The 17 elements, which include scandium, promethium and yttrium, are used to make everything from smartphones, semiconductors, and EV batteries, to F-35 fighter jets, drones, wind turbines, radar systems and nuclear reactors.

The vulnerability of rare earth supply chains has been a growing concern for governments worldwide in an era of heightened geopolitical tensions.

Last month, China banned exports of gallium, germanium and antimony to the US after the administration of President Joe Biden announced its latest curbs on the sale of advanced chips and machinery to the country.

The move was widely viewed as symbolic as the US has other sources of gallium and germanium.

But it nonetheless marked an escalation in Beijing’s use of rare earths as a tool for geopolitical advantage after declaring rare earths property of the state in October and banning the export of technologies used for extracting and separating the materials late last year.

It also recalled the Chinese government’s decision in 2010 to briefly ban exports of such minerals to Japan amid a maritime border dispute between the sides.

With Trump pledging to impose a swath of new trade restrictions on China – ranging from a 10 percent tariff on Chinese goods over Beijing’s failure to curb fentanyl exports, to a 60 percent tariff for unfair trade practices – Beijing could further restrict rare earths to respond in kind.

Even if the Chinese government did not retaliate with export bans, Trump’s tariffs would potentially make the minerals much more expensive to obtain.

“Looking ahead 12–18 months, the global geopolitical landscape is rife with wildcards that could in an instant materially impact the outlook for supply chains and the economies they serve,” Ryan Castilloux, a rare earths expert at Canada-based research and advisory firm Adamas Intelligence, told Al Jazeera.

Washington is particularly concerned about rare earths such as neodymium, praseodymium, dysprosium, and terbium, Castilloux said, which are used to make powerful neodymium magnets – also known as NdFeB magnets.

Rare earths and finished products such as rare-earth magnets, which are multiple times stronger than standard magnets, are considered a “vulnerability for US manufacturers and the defence industry” because the US and its allies have yet to develop an alternative source than China, Castilloux said, although projects to produce the minerals are under way elsewhere, including three US states and Estonia.

Washington has made the establishment of a “sustainable mine-to-magnet supply chain” a top priority.

In March, Danielle Miller, acting deputy assistant secretary of defence for industrial base resilience, said efforts to build such a pipeline capable of supporting all US defence requirements by 2027 were “on track”.

Despite plentiful reserves of rare earths in numerous countries, from Angola and Australia to Brazil, Canada and South Africa, expanding the supply chain beyond China is a challenging undertaking.

China has been able to maintain dominance of the industry thanks to its economies of scale, government subsidies, and its accumulation of massive stockpiles that have allowed it to undercut competitors with “irrationally low prices”, said Neha Mukherjee, a senior analyst for critical minerals at Benchmark Mineral Intelligence.

Rare earths are by-products of mining other minerals such as iron ore, and they are not produced in predictable quantities. As a result, quantities and therefore prices of different rare earths can vary greatly among the 17 minerals.

Mukherjee said China is focused on keeping rare earth prices stable to support its domestic EV industry, even if doing so comes at the expense of the mining sector.

China’s near-monopoly and unbeatable prices have historically made operating rare earth mines and processing facilities an unattractive proposition for many investors.

“They’re discouraging anyone from becoming a competitor. It just doesn’t make viable economics to develop a mine when you can buy the semi-processed materials at a competitive rate,” Mike Walden, senior director of TechCet, a consulting firm specialising in electronics supply chains, told Al Jazeera.

The timeline is also long, taking 10-20 years from exploration to construction, Walden added.

A watershed moment for US efforts to secure rare earth supplies was the reopening of the Mountain Pass Mine in California’s Mojave Desert – first discovered in the 1870s – by MP Materials in 2018.

The company has since opened a magnet factory in Texas.

Other rare earth-related facilities outside China include a mine in Yellowknife, Canada, a magnet recycler in the US state of Texas, and a rare earth magnet factory in the US state of South Carolina, with more projects in development across North America.

Since 2022, the US Department of Defence and the Department of Energy have awarded more than $440m to rare earth companies, with additional tax credits provided by the Inflation Reduction Act.

Such projects could help the US weather the storm if China cut off exports of rare earths, although the country could still struggle to achieve total self-reliance, said Walden.

“The key point here is there are operational facilities in North America. Is it enough to necessarily support all North American demand? The answer to that is no. Is it enough to support the strategic demand of North America? The answer to that appears to be yes,” he said, referring to Washington’s priority areas such as defence and energy.

Even as mines have been opened or reopened outside of China, rare earth minerals are still sent there for processing in many cases, analysts said.

China controls 99 percent of the processing of heavy rare earths, a subset of rare earths that are less abundant but nevertheless critical to the production of EVs, wind turbines, and fibre optic cables.

North America is not the only region trying to play catch-up. In January, Brazil’s first rare earth mine at Serra Verde opened for commercial production after 15 years in development.

Europe has rare earth processing facilities in France, Estonia, and Germany, but has yet to open any mines despite holding massive rare earth deposits in Sweden, Finland, Norway and Spain.

Australia also has significant mining and processing facilities in operation, and the government is pouring hundreds of millions into developing more.

Benchmark Mineral Intelligence’s Mukherjee said that such initiatives are still not enough to reduce dependence on China.

“There’s a dire need for a circular economy. There’s a dire need for recycling facilities. There’s a dire need for processed midstream and upstream facilities to develop in the US, and there should be a lot of funding redirected that way,” she said.

Some of the hesitation – particularly in Europe – has been due to the environmental costs associated with rare earth mining and processing, including the separation and removal of the radioactive materials uranium and thorium.

Mining and processing produce large quantities of waste rock and can unleash residual concentrations of rare earths, radionuclides, heavy metals, and acids into the surrounding air, soil and groundwater, according to a 2021 Canadian study.

Australia’s Lynas Rare Earths, the largest rare earth processing company outside of China, was subject to large protests in Malaysia in 2019 over the toxic waste produced by their rare earth processing facilities there.

Analysts say some of these concerns could be overcome with new technology and automation to meet the higher environmental standards demanded by many governments, but this would take time and money.

The industry could, ironically, get a further boost if Beijing were to block its exports, said Adamas Intelligence’s Castilloux.

“The last time China limited rare earth exports, it resulted in years of demand destruction as many end-users looked to reduce their consumption or switch to alternatives in the years to follow,” he said.

“A restriction on magnet exports, even if short-lived, would likely hypercharge government investments into alternative supply chains at home and abroad.”

With days to go until Trump re-enters the White House, there is significant uncertainty about how he might approach the rare earth industry.

During his first presidency, he issued an executive order declaring rare earths to be a national emergency due to the US’s reliance on a “foreign adversary” to acquire them.

Trump is widely expected to roll back environmental regulations that create barriers to opening and operating mines, but he has also expressed opposition to key funding initiatives such as the Inflation Reduction Act and the Bipartisan Infrastructure Law.

Some analysts have expressed concern that Trump could invoke the International Emergency Economic Powers Act to impose tariffs on mineral imports like rare earths, or direct the Secretary of Commerce to open a Section 232 investigation into the national security implications of such imports, like he did for aluminium in 2018, despite their critical importance to the economy.

In the meantime, the industry is preparing for a bumpy road ahead, said Walden, and stockpiling resources accordingly.

“There have been preparations. Everyone’s anticipating, not at cooling off, but actually further escalating. So a tit-for-tat: retaliation, next step, retaliation, next step,” he said.