China controls the majority of rare earths and is looking to assert greater control over the sector. It will combine three rare-earths producers to create a single state-owned company with nearly 70% share of domestic production with a American companies dependent on rare earths the motive is clear.
China wants to give the impression the move is to accelerate the development of resources and processing technology. However. two factors stand out. One is an attempt to give Beijing control over the mining sector after its disastrous trade war with Australia leaving it vulnerable to the energy crisis that has crippled it. The second is the ongoing and prolonged trade tensions with US President Biden’s adminisration with the US industrial complex reliant on rare earths as is US technology companies like Apple.
Three Companies Combine To Form New Rare Earth Power
- China Minmetals Corporation (CMC), a major state-owned resource company,
- China Aluminum Corporation, a major state-owned nonferrous metals company,
- Government of Ganzhou City in Jiangxi Province, region known for its rare earth deposits, are “planning a strategic reorganization” of their respective rare-earths subsidiaries, according to the listed subsidiary of CMC.
Key Facts
- China accounts for 60% of the world’s production of rare earths according to the U.S. Geological Survey.
- China’s saying in 2019 that “rare earths are an important strategic resource.” A draft law on rare earths was released in January and is being discussed at the National People’s Congress.
- The top export destinations are Japan (49% by value) followed by the U.S. (15%), according to Chinese media.
Reaction to US and Australia Move
The move follows U.S. looks to create an alternate supply chain for rare earths, joining forces with Australia who have deposits in Western Australia and Australian company has a processing plant in Malaysia and building one in Texas. Australia has a number of huge deposits in rare earths and minerals such as lithium needed in batteries and electric vehicles.
The new entity’s share of the production quotas:
- For medium and heavy rare earths in China will be nearly 70% Includes dysprosium and terbium. Essential for the production of high-performance magnet used in motors and other components of electric vehicles andin U.S. military drones and missiles.
- For rare earths as a whole, including light rare earths, will be nearly 40%.
- At the end of September, the Chinese government expanded the production quota for rare earths for 2021 by 20% compared with the previous year.
Geopolitical risks
There is the obvious risks of China controlling such a large proportion. There are other unforseen risks such as political instability in Myanmar, another top producer of rare earths. The price of dysprosium rose by about 60% and terbium rose 90% in China from a year ago.
America’s Biggest Defense Contractors Using Rare Earth
- Lockheed Martin Corp. (NYSE: LMT)
- The Boeing Co. (NYSE: BA)
- General Dynamics Corp. (NYSE: GD)
- Raytheon Company (NYSE: RTN)
- Northrop Grumman Corp. (NYSE: NOC)
- Huntington Ingalls Industries Inc. (NYSE: HII)
- BAE Systems plc L3 Technologies Inc. (NYSE: LLL)
- Leidos Holdings Inc. (NYSE: LDOS)
Military Reliant on Rare Earth Elements
Military uses include sophisticated missiles that use rare earths metals in their guidance systems and sensors.
Apple Inc uses rare earth elements in speakers, cameras and the so-called “haptic” engines that make its phones vibrate. Apple has been reported as saying the elements are not available from traditional recyclers because they are used in such small amounts they cannot be recovered.
Guidance and Control Systems
Joint Direct Attack Munitions missiles rely on rare earth elements for high-performance guidance systems. Modern-day smart weapons rely on sophisticated motors and actuators to steer them toward their targets. To accomplish this feat, these missiles and bombs incorporate rare earth elements such as terbium, dysprosium, samarium, praseodymium and neodymium. These are necessary for high-performance guidance systems. Neodymium is used in NIB (neodymium, iron and boron) supermagnets, and samarium-cobalt magnets resist corrosion and can operate at high temperatures. The bulk of the world’s production of neodymium comes from China, although central Turkey also maintains the largest proven reserve of elemental boron in the world. China also imposed strict strategic materials controls on rare earth elements including neodymium as well in 2010, causing the price of neodymium to peak at $500 per kilogram in mid-2011.
Defense and Electronic Warfare
The AN/ALQ-184 Electronic Attack Pod jamming device relies on the yttrium for operation. High-energy storage and amplification include storage batteries and electronic jamming devices (known as ECM pods) used in the field, as well as more exotic defensive systems in development, such as microwave-generating Area Denial Systems and Electromagnetic Railguns. Yttrium-iron-garnet (YIG) is a key material used in electronic countermeasures for what are known as dispersive delay lines and microwave filters. These filters are robust and guarantee a high signal-to-jamming ratio and are an essential component of electronic warfare systems.
The United States currently has no production of yttrium, and the Department of Defense projected a 93-ton shortfall of yttrium for military requirements in 2013. China accounts for 95 percent of rare earth production worldwide, and yttrium is found in ores such as fergusonite and monazite.
Electric Motors
The U.S. Navy’s new Zumwalt class of guided missile destroyer relies on rare earth elements for its batteries. The military is expected to become a major consumer, as the need for the next generation of electric motors grows. These motors feature compact and powerful magnets, and require such rare earth elements as terbium, dysprosium, samarium, praseodymium, and neodymium.
Systems such as the CMPS (Common Modular Power System) Future Combat vehicle, and the U.S. Navy’s Zumwalt DDG 1000 guided missile destroyer will also require rare earths in the next generation of electric motors, as will Hub Mounted Electric Traction Drives and Integrated Starter generators currently under development. China is by far the largest producer of samarium at 120,000 tons per year, versus U.S. production of only 5,000 tons.
China also controls the market in the other elements needed for electric motors; a GAO report from 2010 noted that China produces 75 percent of the world’s neodymium iron boron magnets, and 60 percent of the world’s samarium cobalt magnets. 2
Targeting and Weapons Systems
The Humvee-mounted Laser Avenger uses yttrium, europium and terbium. The Humvee-mounted Laser Avenger uses yttrium, europium and terbium. Modern-day weapons systems rely on high-powered lasers for targeting and acquisition. These include air- and vehicle-based laser systems, and such exotic weapons platforms as the SaberShot Photonic Disruptor, and the Humvee-mounted Laser Avenger used to counter Improvised Explosive Devices (IEDs). These rely on rare earth elements such as yttrium, europium and terbium to achieve high-powered energy resolution and amplification.
Europium has been used for years in the red phosphors of computer monitors and television screens.
Communications
The U.S. Navy An often-overlooked facet of military infrastructure, communications are essential to providing military commanders with an overall picture of the battlefield. These now incorporate numerous rare earth elements, including europium, lutetium, lanthanum, yttrium and neodymium. Terbium is also used in naval sonar systems, and rare earth elements are also used in radiation and chemical detection systems such as the Multipurpose Integrated Chemical Agent Alarm. Rare earth permanent magnets are used in waveguide tubes that amplify microwaves and are incorporated on radar systems and satellites.
Line of sight laser communications are also finding applications as well due to their faster transmission speeds, and Erbium-doped fiber amplifiers and signal repeaters can transmit large amounts of data quickly over a vast area.
Jet Engines
The rare earth element rhenium is a key component of jet engines. Rare earth elements used in modern-day jet engines are especially crucial and of strategic value. Rhenium is used as an alloy mixture added to molybdenum and tungsten, and erbium is added to vanadium to lower its hardness and make it more malleable for use in vanadium steel. Erbium was one of the six rare earth shortfalls that were identified under the 2013 Strategic and Critical Materials Report on Stockpile Requirements, and the primary source of erbium is now the ion-adsorption clays of southern China.
F-16 and F-15 jet engines contain 3 percent rhenium, while next generation fighter jet engines which will be used in the F-22 Raptor and the F-35 Joint Strike Fighter will utilize double that amount.
Jet engine makers General Electric, Rolls-Royce, and Pratt & Whitney account for over half of rhenium use worldwide, although there are plans to make next-generation engines that incorporate much lower amounts of the rare earth element. Chile has the largest known rhenium reserves, and the element is found along with copper deposits.
National Defense Stockpile Section 1411.
Since 2010, the U.S. government and private industry have built up stockpiles of rare earths and components that use them Eugene Gholz, a former senior Pentagon supply chain expert, who teaches at the University of Notre Dame has said.
Use of National Defense Stockpile for the Conservation of a Strategic and Critical Materials Supply Section 1411 would modify the President’s authority to maintain and manage a national defense stockpile, and allow the Defense Logistics Agency to more proactively engage in the market.
These changes would grant the President the authority to conserve strategic and critical materials.
(a) Presidential Responsibility for Conservation of Stockpile Materials – Section 98e(a) of Title 50, United States Code, is amended: (1) by redesignating paragraphs (5) and (6) as paragraphs (6) and (7), respectively; and (2) by inserting after paragraph (4) the following new paragraph (5): “(5) provide for the recovery of any strategic and critical material from excess materials made available for recovery purposes by other Federal agencies;”
(b) Uses of National Defense Stockpile Transaction Fund – Section 98h(b)(2) of Title 50, United States Code, is amended— (1) by redesignating subparagraphs (D) through (L) as subparagraphs (E) through (M), respectively; and (2) by inserting after subparagraph (C) the following new subparagraph (D): “(D) Encouraging the conservation of strategic and critical materials.”
(c) Development of Domestic Sources – Section 98h-6(a) of Title 50, United States Code, is amended, in the matter preceding paragraph (1), by inserting ‘and conservation’ after ‘development’. Section 1412. Authority to Acquire Additional Materials for the National Defense Stockpile Section 1412 would provide authority to acquire certain additional strategic and critical materials for the National Defense Stockpile. The materials anticipated to be acquired have been identified to meet the military, industrial, and essential civilian needs of the United States. (a) Acquisition Authority – Using funds available in the National Defense Stockpile Transaction Fund, the National Defense Stockpile Manager may acquire the following materials determined to be strategic and critical materials required to meet the defense, industrial, and essential civilian needs of the United States:
- Ferroniobium.
- Dysprosium Metal.
- Yttrium Oxide.
- Cadmium Zinc Tellurium Substrate Materials.
- Lithium Ion Precursors.
- Triamino-Trinitrobenzene and Insensitive High Explosive Molding Powders.
- (b) Amount of Authority – the National Defense Stockpile Manager may use up to $41,000,000 of the National Stockpile Transaction Fund for acquisition of the materials specified in subsection (a).
- (c) Fiscal Year Limitation – The authority under this section is available for purchases during Fiscal Year 2014 through Fiscal Year 2019.
Source: Geology.com, Nikkei Asia
From The TradersCommunity Research Desk