America Scrambles in Face of Chinese Threats

America Scrambles in Face of Chinese Threats

As the trade war between the United States and China proceeds apace, Beijing believes that it has an ace in the hole that could seriously harm the American high-tech sector, according to CNBC:

“The biggest Chinese newspaper explicitly warned the U.S. on Wednesday that China would cut off rare earth minerals as a countermeasure in the escalated trade battle, using a history-laden expression the publication has used ahead of full-on wars.

’We advise the U.S. side not to underestimate the Chinese side’s ability to safeguard its development rights and interests. Don’t say we didn’t warn you!’ the People’s Daily said in a commentary titled ‘United States, don’t underestimate China’s ability to strike back.’ The publication is the official newspaper of the Communist Party of China.

“The phrase ‘Don’t say we didn’t warn you’ has been used before by the People’s Daily in 1962 before China’s border war with India and ahead of the 1979 China-Vietnam War.”

Rare earths are materials that are used in a wide range of modern products, ranging from smartphones to electric cars to wind turbines. Unfortunately, 80 percent of the world’s production of rare earths comes from China.

The only rare earth mine in the United States is located in Mountain Pass, California. Even the product mined in the United States, about 50,000 tons a year, has to be shipped to China for processing. However, the American mine is developing its own refining facilities and should be independent of China by 2020.

Bloomberg suggests that a second rare earth processing plant could be opened in Texas. Also, Japan believes that it has found a source of the valuable mineral that could be provided on a “semi-infinite basis.” Meanwhile, large deposits of rare earths have been found in Alaska.

These alternate sources of rare earths are years away from being developed. Also, creating new sources of the material will have to jump through environmental hurdles. Nevertheless, the United States, especially the Defense Department which relies on rare earths for a variety of weapons systems, is keen to develop new sources of the material sooner rather than later.

However, a potential source of rare earths has been found in coal sludge, according to Ars Technica:

“Treated sludge from West Virginia coal mines contain heavy rare-earths in particular, which are valuable and have few suppliers outside of China. ‘Studies show that the Appalachian basin could produce 800 tons of rare-earth elements per year, approximately the amount the defense industry would need.’” A group of senators is pushing legislation that would fund research and development in the separation of rare earths from coal and coal byproducts. Ironically, such a process would provide an alternate market for the coal industry as power production switches away from coal.

The ultimate solution to fulfilling rare earths demand and breaking China’s stranglehold on the product may reside beyond the Earth. According to an old article in Industry Week:

“They are a precious commodity — so precious scientists are now looking beyond Earth’s reaches for new supplies, with moon and asteroid mining becoming a lucrative prospect, according to researchers and tech firms gathered in Sydney for the world’s first formal ‘Off-Earth Mining Forum.’”

The conference took place in 2013, but the concept of space mining has become more relevant. The need for alternate sources of rare earths provides an imperative for President Trump’s Artemis return to the moon program. Some of the commercial partners of the effort are anxious to start prospecting the moon for the valuable material. As the cost of space travel continues to decline, such operations are bound to be more cost competitive.

China should look at the example of the Arab oil embargos of the 1970s before it starts issuing threats to hold back its supplies of rare earths. For a time, the Arabic Gulf states were able to amass a great deal of money and, to a certain extent, influence policy of countries dependent on its oil and gas. However, the dominance of the Arab states in the production of oil and their willingness to use it provided an incentive for other countries, especially the United States, to find alternate sources. Fracking technology has broken American dependence on foreign oil and gas and has made the United States a petroleum exporting country

China should enjoy its near monopoly in rare earths while it lasts. It will not last forever.


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