WASHINGTON – Pentagon seeks funds to reduce US reliance on China’s rare earth metals

WASHINGTON (REUTERS) – The US Defense Department is seeking new federal funds to bolster domestic production of rare earth minerals and reduce dependence on China, the Pentagon said on Wednesday (May 29), amid mounting concern in Washington about Beijing’s role as a supplier.

The Pentagon’s request was outlined in a report that has been sent to the White House and briefed to Congress, said Air Force Lieutenant Colonel Mike Andrews, a Pentagon spokesman.

Rare earths are a group of 17 chemical elements used in both consumer products, from iPhones to electric car motors, and critical military applications including jet engines, satellites and lasers.

Rising tensions between the United States and China have sparked concerns that Beijing could use its dominant position as a supplier of rare earths for leverage in the trade war between the world’s top two economic powers.

Between 2004 and 2017, China accounted for 80 per cent of US rare earth imports. Few alternative suppliers have been able to compete with China, which is home to 37 per cent of global rare earths reserves.

“The department continues to work closely with the president, Congress and US industry to improve US competitiveness in the mineral market,” Andrews told Reuters.

He gave no details but said the report was tied to a federal program designed to bolster domestic production capabilities through targeted economic incentives.

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While China has so far not explicitly said it would restrict rare earths sales to the United States, Chinese media has strongly implied this will happen.

In a commentary headlined “United States, don’t underestimate China’s ability to strike back”, the official People’s Daily noted the United States’ “uncomfortable”dependence on rare earths from China.

“Will rare earths become a counter weapon for China to hit back against the pressure the United States has put on for no reason at all? The answer is no mystery,” it said.

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GROWING CONCERN

John Neuffer, president of the Semiconductor Industry Association, said the chances of China restricting rare earth exports were growing.

“I do expect the other shoe to drop,” he told an event hosted by the Washington International Trade Association.

The Pentagon has repeatedly flagged its concerns about American reliance on China for rare earth minerals, including in a 2018 report on vulnerabilities in the US defence industrial base.

The Defence Production Act Title III programme was designed “to create, maintain, protect, expand, or restore domestic industrial base capabilities,” according to a Defence Department website.

The website https: www.businessdefense.gov/DPA-Title-III/Overviewnoted that the programme gives the president “broad authority to ensure the timely availability of essential domestic industrial resources to support national defence and homeland security requirements through the use of highly tailored economic incentives.”

John Luddy, vice president for national security policy at the Aerospace Industries Association, said US government funding could be used to bolster production, processing capacity and stockpiling of critical supplies.

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Industry officials liken Washington’s potential role to the way government funding ensures the capability to launch sensitive military and intelligence satellites into space – another costly initiative.

The Defence Department accounts for about 1 per cent of US demand, which in turn accounts for about 9 per cent of global demand for rare earths, according to a 2016 report from the congressional US Government Accountability Office.

Companies such as Raytheon, Lockheed Martin and BAE Systems all make sophisticated missiles that use rare earths metals in their guidance systems, and sensors.

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Lanthanum, for example, is needed to manufacture night-vision devices.

Few alternative suppliers were able to compete with China, which is home to 37 per cent of global rare earths reserves.

California’s Mountain Pass mine is the only operating US rare earths facility. But MP Materials, owner of Mountain Pass, ships the roughly 50,000 tonnes of rare earth concentrate it extracts each year from California to China for processing.

China has imposed a tariff of 25 per cent on those imports during the trade war.

At least three US-based companies have rare earth processing plants under construction or in the planning stages, including one that is set to open next year at Mountain Pass mine to produce about 5,000 tonnes of two popular types of rare earths annually, according to a source familiar with the matter.

The other two aren’t expected to open until 2022 at the earliest.

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