Battle for Rare Earth Elements (REEs) Supply Chain

Monopolizing the supply chain of critical minerals, especially rare earth elements (REEs), which are vital to the advancement of the fourth industrial revolution, is another space of heightening conflicts over security and trade, between the People’s Republic of China (PRC) and the United States of America (USA).

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Monopolizing the supply chain of critical minerals, especially rare earth elements (REEs), which are vital to the advancement of the fourth industrial revolution, is another space of heightening conflicts over security and trade, between the People’s Republic of China (PRC) and the United States of America (USA). The digital revolution, which included 5G networks and Artificial Intelligence (AI), fueled states’ desire to obtain and secure access to essential critical minerals, which are key components in developing high-tech applications, resulting in a global race for REEs. The COVID-19 pandemic also highlighted the significance of the digital era. However, the US is heavily reliant on imports of such critical minerals, especially from China. The buoyancy of the supply chain and uninterrupted flow of critical minerals are crucial for the US monetary prosperity and national defense.

The rare earth elements (REEs) are the most important critical mineral group, consisting of 17 periodic table elements with “magnetic and conductive properties.” Lithium, chromium, cobalt, graphite, copper, and manganese are also significant manufacturing elements. The extraction of rare earth elements (REEs) is difficult because it is capital intensive and takes a long time to begin the mining cycle. Furthermore, not all these minerals are equally valuable. The abundant minerals seem to be mostly light rare earth, whereas high property rare earth is expensive, difficult to extract, and extremely rare. REEs are used in electronics, defensive lines, and even clean energy. Its disruption will have a direct impact on the state in all sectors.

China has dominated this billion-dollar market for the past 20-30 years, accounting for 95 percent of total annual production. Deng Xiaoping, a Chinese statesman, said in 1992, “The Middle East has oil, China has rare earth.” China produces minerals 132,000mt per year out of the total output of 170,000mt, while the US produces (26,000mt), Australia (21,000mt), and India (21,000mt) (3000mt).

Countries cannot deal with mining because the REEs industry is capital intensive. However, if the countries attempt to process than separation of rare earth oxides, processing rare earth metals and alloys, and manufacturing end magnets is difficult, for this, the countries depend on China, with minerals exported crude materials to the big man, who then converts that into finished elements to be utilized in end products, resulting in the new colonialism.

It is obvious that China is the most dominant state in the REEs market, and if China wishes to halt the supply chain of these critical minerals, it can, and no one can object. The most well-known example is the transformation of the “2010 fishing boat incident with Japan” into “2010 rare earth crisis.” The sole development factor gives China monopolistic control, which is not acceptable to other countries whose economies rely on manufacturing high-tech goods, such as the US.

The US is dependent on international suppliers of these critical minerals, creating a strategic vulnerability in the defense and military sectors. These minerals are critical to the US’ economic stability and national security. “0.15 grams of palladium are being used in the manufacture of the iPhone, 472 kg in the F-35 fighter jet, and 4 tons in the Virginia class submarine.” In a situation where the US is heavily reliant on 80% import of critical REE minerals.

With the acknowledgment of the rising threat to the US dominant role in high technology, Larry Wortzel, a USA military veteran said that “Never put a nation’s industrial base at the mercy of an increasingly arrogant and hostile potential enemy like China.”  To address the growing hostile potential adversary, former US President Donald Trump offered to buy Greenland in 2019, owing primarily to the value of the Kvanefjeld mine. As a result of environmental change, Greenland’s islands are liquefying at an alarming pace, allowing access to land rich in these critical minerals.

The Five Eyes Intelligence Agency has also begun to target China on a variety of topics. They are targeting China in view of the growing critical minerals supply chain strains, as the US has begun to regard China as a “dangerous enemy” and a “Red storm rising.” There are also indications that China is attempting to “surpass the US as a superpower by 2049” through the BRI initiative to monitor full-fledged routes to critical minerals supply chains. The Quadrilateral Security Dialogue (QUAD) grouping also aimed to crack China’s leverage.

Under the bitter trade battle or a fight for REEs, the US reported collaboration with Australia to grow and fund a billion-dollar industry. With four advanced planning stage firms, Australia is the second-largest producer of REEs after China (three companies operating mining operations in Australia and one in Tanzania).  With the dropping of BRI projects, Australia is playing an active “puppet” role to curb the supply chain thread for the US. Fundamentally, all eyes are currently on the Australia and estimations are circulating that “they can liberate the region’s democracies and like-minded countries from China”.

The eventual fate of this severe fight is yet not satisfactory and clear. In any case, endeavors are being made to stranglehold China’s supremacy, but the 20 to 30 years of market dominance cannot be easily annihilated.  The race for REEs is gradually transforming into a battle, as this is the battle fermenting underneath the radar, and the battle for the secret ingredient will immerse all states in a gigantic disruption.

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