Explainer: US Dependence on China's Rare Earth – Trade War Vulnerability

(Reuters) – Rare earths are used in a wide range of consumer products, from iPhones to electric car engines, to military jet engines, satellites and lasers.

Growing tensions between the United States and China have raised fears that Beijing may use its dominant position as a supplier of rare earths to reinforce the trade war between the two world economic powers.

China supplied 80% of the rare earths imported by the United States between 2014 and 2017.

According to research firm Adamas Intelligence, China has at least 85% of the world's capacity to turn rare earth ores into materials manufacturers.

It would take years to build enough processing plants to match China's processing capacity of 220,000 tons, or five times the total capacity of the rest of the world.

Alternative processing plants would have a hard time competing with China's low costs in the future, if trade tensions receded.

WHAT ARE THE RARE LANDS USED?

Rare earths are used in rechargeable batteries for electric and hybrid cars, advanced ceramics, computers, DVD players, wind turbines, catalysts in cars and petroleum refineries, screens, TVs, lighting fixtures, lasers, optical fibers, superconductors and glass polishing.

Several rare earth elements, such as neodymium and dysprosium, are essential for engines used in electric vehicles.

Some rare earth minerals are essential in military equipment such as reactors, missile guidance systems, missile defense systems, satellites, as well as in lasers.

Since 2010, the government and the private sector have been building up rare earth stocks and components that use them, according to Eugene Gholz, a former Pentagon supply chain expert, who teaches at the University of Notre Dame .

Some manufacturers have also reduced their use of such elements or substituted them for other metals, he said.

WHAT COMPANIES ARE THE MOST DEPENDENT OF CHINESE SUPPLIES?

Companies such as Raytheon Co., Lockheed Martin Corp and BAE Systems Plc all manufacture sophisticated rare earth metal missiles in their guidance systems and sensors. Lockheed and BAE declined to comment. Raytheon has not responded to a request for comment.

Apple Inc. uses rare earth elements in speakers, cameras, and to vibrate phones.

The United States imported $ 160 million worth of rare earth compounds and metals in 2018, up almost 17% from 2017. About 60% of these were used in refining catalysts in the United States. oil and in vehicle engines.

WHAT ARE THE RARE LANDS AND WHERE ARE THEY?

The rare earth metals form a group of 17 elements – lanthanum, cerium, praseodymium, neodymium, promethium, samarium, europium, gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium, lutetium, scandium, yttrium – which appear to low concentrations the soil.

Although they are more abundant than their name suggests, their treatment is expensive.

(GRAPHIC link-rare earth production: tmsnrt.rs/2I4ixHG).

Importers have made limited efforts to reduce their rare earth consumption and reliance on China after a diplomatic dispute between China and Japan in 2010. Japan has accused China of suspending its rare earth supplies for political reasons , generating worldwide recognition of the risks of dependence on a supplier. China denied interrupting supplies.

The Mountain California Pass is the only US facility that operates rare earths. But MP Materials, owner of Mountain Pass, ships annually about 50,000 tonnes of rare earth concentrate that he extracts from California to China for treatment. China imposed a 25% tariff on these imports during the trade war.

In May, the Australian company Lynas Corporation Ltd announced the signing of a memorandum of understanding with the Texan company Blue Line Corp. for the construction of a rare earth treatment facility in the United States.

Rare earths are also exploited in Australia, Brazil, India, Russia and Vietnam.

How are rare earths affected by US tariffs?

Until now, the US government has exempted rare earth tariffs on Chinese products.

OPTIONS TO REDUCE CONFIDENCE ON CHINESE IMPORTS

In May, US senators tabled a bill to encourage the development of domestic supplies.

To date, recycling is not a major source of rare earth minerals.

Congress is also considering federal funding to develop ways to extract rare earth coal ash, a by-product of coal-fired power plants, but it could take a decade to make the process viable for more industrial use. broad, said Eric Williams, professor of sustainable development. at the Rochester Institute of Technology.

How have rare earth prices responded to growing tensions?

Export prices for a rare earth element have stabilized sharply since Chinese President Xi Jinping's visit to a rare earth processing company in southern China on May 20.

The price of metallic neodymium – used in magnets and loudspeakers – has increased by 26.5% since May 20th. Metal dysprosium (used in lasers), erbium oxide and gadolinium oxide (used in medical imaging and fuel cells) have increased by approximately 10%.

(GRAPHIC-Rare earth export prices rise after China shook the sword link of the trade war: tmsnrt.rs/2Id5tQ2).