Rare Earth Minerals: Essential to the Supply Chain
Companies are only as strong as the weakest link in their supply chain. If you dig further into your supply chain, it is likely you will find dependencies on rare earth minerals. Rare earths are very relevant in sectors tied to electrification, defense, semiconductors, clean energy, data centers/ artificial intelligence, transportation etc. High-tech and advanced manufacturing sectors require rare earths. Therefore, anything with an electronic component such as a medical device, cell phone or baking equipment will require rare earths in the end-to-end supply chain. Thus, it should be of top concern to secure supply of rare earth minerals to meet customer needs and growth plans.
The China Rare Earth Mineral Threat
China has cut the world off from rare earth minerals multiple times this year. Most recently, China said that as of December 1st, a license will be required for foreign companies to export products with more than 0.1% of rare earths from China or that are made with Chinese production technology. According to Benchmark Mineral Data, China produces 71% of global mined rare earths and monopolizes 90% of global refining and separation capacity. In addition, China produces 30% of the world’s manufacturing output which impacts 80% of the world with end-to-end supply chains. Thus, this is a serious threat and risk for the world. Thus far, Trump has responded and threatened an additional 100% tariff in response. Stay tuned for developments.
Are Rare Earth Minerals Rare?
No, surprisingly, rare earth minerals are not rare. However, over several decades, China incentivized rare earth production and built near-total control over mining, refining, and processing capacity. They developed dominance in the sector by building their capacities, gaining export leverage and market dominance, supplementing costs and forcing companies to share intellectual property in exchange for access. In essence, they strong-armed partners, vertically integrated the full supply chain and didn’t follow the same set of laws as the rest of the world. In addition, their Belt & Road Initiative enabled them to invest in countries with key strategic stockpiles of rare earth minerals so that they could gain control on the world’s stage.
The U.S. has significant amounts of rare earth minerals. California contains bastnäsite ore, Texas has heavy rare earth elements, light REEs, lithium, beryllium, uranium, and other critical minerals. Nebraska has niobium and scandium. And, there was a recent executive orders signed to revive Alaska’s Ambler Road Project. This order directs federal agencies to permit a 211-mile access road to the Ambler mining district (a region believed to hold critical minerals). Since it can take considerable time to get rare earth projects off the ground, prioritized focus is required.
Strategies to Scale Rare Earth Production
Since rare earth minerals are not rare, the key question is what has to be done to secure supply for U.S. needs. The U.S. has plenty of rare earth minerals; however, permitting and environmental regulations tie them up for extended periods of time, the U.S. hasn’t prioritized rare earth minerals and supported private industry to make it competitive and feasible, and it hasn’t put the appropriate programs in place. Instead, we must do the following:
- Mine, mine & mine: The U.S. must start mining critical minerals and rare earths.
- Scale up processing & manufacturing capabilities: With 90% share, China dominates. Rapid investments and innovations are needed to scale rapidly.
- Expand industrial policy tools: Private companies cannot do this alone. They will need support, and so the U.S. government must expand items such as the Defense Production Act.
- Fix permitting timelines: No doubt, we must slash red tape to get these projects moving!
- Strategic stockpile: Similar to what the U.S. did during the pandemic with Operation Warp speed, strategic stockpiles must be a priority. Japan did this after China cut off rare earths in 2010. The U.S. must do the same.
- Develop recycling, recovery, and alternate technologies: In addition to strategic stockpiles, the U.S. should develop alternate technologies, similar to Japan after the 2010 export controls. The U.S. is strong in innovation and so should jump on this strategy.
- Strategic partnerships with allies: The USMCA is a solid regional agreement to build upon with Canada’s rare earths, Mexico’s lower labor costs etc. In addition, Argentina, Panama, Greenland, Ukraine and other countries can be partners.
- Creative & strategic partnerships with companies: Partner with competitors; search for partners in places you wouldn’t typically look. Find win-win-win scenarios and pursue them to vertically integrate with strategic partners and combine resources.
Education: Encourage training, education, apprenticeships and other innovative programs to build skills rapidly. Incent the best talent to engage in resolving this issue.
Can the U.S. Scale Up Fast Enough?
Yes, many actions are already underway. In fact, almost all of the key strategies are being pursued. For example, the U.S. Department of Defense made a direct equity investment in MP Materials, becoming its largest shareholder and acquiring around a 15 % stake. MP Materials is the only rare earth mine & integrated processing facility of scale in the U.S. In addition, Apple has announced a partnership with MP Materials, and GM has had a long-term supply agreement with them.
In addition, several auto companies are investing in and buying rare earth refining, extraction, and magnet technologies. JP Morgan also announced a major new initiative under which it would make direct investments of up to $10 billion into U.S. companies in “critical” sectors, including critical minerals / supply chain & advanced manufacturing (which implicitly covers rare earth technologies). The bottom line is that investments are spurting up around rare earths.
There are several emerging rare earth companies and startups such as USA Rare Earth. In addition, there are several startups focused on recycling, greener extraction, or rare earth‐free magnet tech such as RarEarth. Also, many companies and agencies are investing in technology innovation across the rare earth/ critical minerals space.
The Secretary of the Interior is prioritizing rare earth minerals. On his first day, Doug Burgum signed secretary’s orders to review and revise rules constraining energy and mineral development, with explicit mention of non-fuel minerals including rare earths. He is also focused on land, permitting and resource access. In fact, he frequently says “mine baby mine”.
Other countries are partnering to achieve this rare earth mineral imperative. For example, the U.S. and Japan agreed (in an announced trade-investment framework) that Japan would commit $550 billion in investments into the U.S. — including directed funding to core industries such as semiconductors, critical minerals (including rare earths), energy, pharmaceuticals, and manufacturing. Similarly, South Korea agreed to invest (or steer) $350 billion into U.S. projects, with part of that earmarked for “strategic industries” such as critical minerals, batteries, and magnets.
Path Forward
As positive as these investments seem, to replace a dominant player producing 71% of the world’s production and 90% of refining and processing requires scale. Even with vast efforts, it can be a drop in the bucket. Instead, the industry must think differently about partners and how to dramatically increase capabilities and capacities. Pursue supply chain visibility programs to determine dependencies and leverage SIOP (Sales Inventory Operations Planning) processes to better predict demand and align with capacity and supply plans. Search for strategic partnerships and other creative solutions to secure supply. Take control of your end-to-end supply chain (at least address practical realities proactively), or your weakest link will control you!
There is no doubt that utilizing artificial intelligence and advanced technologies will play a vital role as well. Pursue AI enabled mining, manufacturing, processing and supply chain planning. It can become a differentiator to entice an important strategic partner and support scale, efficiency, and resiliency. Download our complimentary eBook to learn more about using “AI and Advanced Technologies in Manufaturing: How AI Powers Smart Supply Chains and Smarter Decisions’.
If you are interested in reading more on this topic:
The Critical Minerals Imperative