With demand for rare earth elements increasing worldwide, recent events have exposed the intensifying friction between the world’s largest economies. For instance, in July 2023, China introduced tight export restrictions on rare earth elements. This action has propelled the United States and its like-minded allies to find other suppliers of these essential materials. All of this is problematic and highlights the lack of understanding surrounding the environmental and economic impacts of de-risking rare earth supply chains from China.
China’s new restrictions have severely affected its rare-earth magnet exports to the U.S. The most recent numbers from February show a dramatic 30% decrease in these exports. As advocates point out, the US’s objective to restore American mining capacity, particularly in concert with Japan, is a welcome one. They warn that this initiative is up against enormous challenges. It was suggested that reviving American mines would be cheaper and less harmful to the environment. This bitter reality has set off a firestorm of contention within the ranks of industry insiders.
In an effort to bolster its position in the rare earth sector, Cleveland-Cliffs has begun exploring opportunities within the United States. This project is part of a larger effort to loosen America’s reliance on Chinese products that are currently in complete control of the supply chain. Perhaps unsurprisingly, experts caution that the US-Australia critical minerals deal won’t have an immediate impact. Indeed, China continues to have a considerable advantage in the production of rare earth.
Their actions come as the European Union takes similar steps to combat its own dependence on China for rare earth elements. In fact, just a few days ago a senior EU official suggested that Japan and the EU partner to build rare earth resources in Greenland. They emphasized the importance of public-private partnerships to guarantee a reliable supply of these critical materials. Meanwhile, Germany’s rare-earth and magnet importers are closely monitoring China’s moves, fearing potential disruptions in their supply chains.
The race for rare earth resources goes even further than this conservation vs. traditional mining paradigm. Japan Steel has its eyes on the booming demand for magnesium molding machines in China. This shift is further testament to the fierce competition for rare earth applications in all industries. Given that 95% of the global supply remains under Chinese control, the imperative need to source alternatives grows exponentially.
Environmental issues are deeply intertwined with the push to break China’s monopoly on rare earths. The ecological destruction that comes from extracting these materials, among other concerns, has led to questions about the sustainability of new and expanded mining projects. Moving forward, stakeholders will need to navigate the competing priorities of a clear and present desire for resource independence and the need to protect the environment.