QUICKLOOK: The Dominance of China's Rare-Earth Elements Market
PDF debrief: An Exploration of China's Control over Vital Resources and its Global Implications
Rare-Earth Elements (REEs) are a group of seventeen elements that are of significant importance to various sectors, including the defense industry, clean-energy technologies, and the semiconductor industry. Over the past few decades, China has emerged as the dominant player in the global REE market, leveraging its vast reserves, high tolerance for environmental degradation, and low cost of exploitation. This dominance has led to a significant shift in the global REE market dynamics, with many Western mining companies going bankrupt or significantly reducing their operations due to plunging global REE prices. This paper provides a comprehensive assessment of the current situation regarding the supply chain for REEs, China's dominance in this market, and the proposed solutions for Western countries.
China's dominance in the global REE market is a result of over five decades of focused efforts. The country has developed high-profile national programs and devoted laboratories and teams exclusively to the study of REEs. This long-term focus has yielded significant results and set the conditions for the country to expand its output of REEs in the late 1970s and 1980s. Chinese leaders declared these elements "strategic" mineral resources, and with the country's high tolerance for environmental degradation and low cost of exploitation, increased production and exports throughout the 1990s. This increase caused global REE prices to plunge, resulting in many Western mining companies going bankrupt or significantly reducing their operations.
The current market environment is such that Beijing is unable to use limit pricing due to its own shortages and strategic goals set by the US government. This situation presents an opportunity for Western countries to counter China's dominance. However, the challenges are significant. Certain REEs do not exist in the United States, and others are not available in economical quantities. Therefore, refining specific rare-earth elements may not be cost-effective domestically. Furthermore, if the US expands its mining without developing a domestic refining and manufacturing capacity, it will merely shift its dependency risk along the supply chain.
To address these challenges, Western nations can implement public policies, technological breakthroughs, and cooperation. The United States, the European Union, Japan, and Australia have started setting up new programs involving coordination and research funding for domestic operations. Establishing a viable supply chain for REEs will take years and will require the United States to remain focused on long-term solutions. These efforts should include stockpiling and recycling, increasing domestic production and refining, and investing in joint ventures with trusted strategic partners. To succeed, these ventures will require significant public investments and enduring public support.
The global REE market presents significant challenges and opportunities for Western countries. While China's dominance poses a threat to national security and economic stability, it also provides an impetus for Western countries to develop their own capabilities and reduce their dependency on China. By implementing strategic public policies, fostering technological breakthroughs, and promoting international cooperation, Western countries can counter China's dominance and secure their own supply chains for REEs. However, these efforts will require a long-term commitment, significant public investments, and enduring public support.