Tariffs may shake markets, but 'rare earths' can cripple industries. China holds the cards, and the US knows it.Practically all commentaries or write ups about Trump's tariff on China make it appear the Americans are bumbling idiots when the Chinese reciprocate with a ban on 'rare earth' minerals. As the narrative goes, China produces about 70-80 % of world production of REE (rare earth elements) and the US imports about 60-70% of their needs from China. REEs are used in many industries, especially in the defence and high technology industries. China's ban of export of REEs is therefore an existential threat to US national security and can cripple many industries. Trump's tariff on China is thus suicidal. But is this what the status really is?
Why REEs are important:
REEs are indispensible across industries that define national power - military, energy, technology, and manufacturing. This is a rough distribution of the global application of REES and it's importance :
* Permanent magnets (44%) - Used in advanced military systems (fighter jets, guided missiles, radars, EVs, wind turbines. It is critical for military superiority and green energy initiatives.
* Catalysts (17%) - Used in catalytic converters. Critical for petroleum refinery and reducing emissions in vehicles. Energy security depends on efficient fuel production.
* Polishing powders (11%) - Used in high precision optics (camera lenses, smartphone screens, fibre optics, semiconductor manufacturing). Critical for tech industry, telecommunications, advanced optics in military equipment such as satellites, targeting systems.
* Metallurgical applications (7%) Used to improve the strength and durability of high performance alloys. It is critical for used in aerospace, defence and industrial machinery industries.
* Glass Manufacturing (6%) - Used in lasers, specialised optics, radiation-resistance glass for nuclear applications, protective coatings for astronauts' visors. It is vital for space technology, military optics, nuclear energy safety and scientific research.
* Ceramics (3%) - It is a key component in high temperature semiconductors, aerospace coatings and fuel cells. Critical for enhancing the efficiency of power generation, hypersonic missile technology,and next-generation energy storage.
* Battery alloys (1%) - Used in rechargeable batteries for hybrid/electric vehicles, defence applications and backup power systems. Critical to support energy independence.
The consumption of REEs for permanent magnets is so high due to demand for clean energy technologies and advanced electronics. For these applications, the usual temporary magnets cannot be used. Temporary magnets require an external energy source, such as electromagnets use electricity. Once the energy is cut, there is no magnetic field. Permanent magnets do not require an energy source. Their magnetic field is turned on forever.
What are REEs:
17 metallic elements that share similar chemical properties make up rare earth. They are divided into light and heavy rare earths based on their atomic weight. LREEs - Lanthanum (Eu), Cerium (Ce), Praseodymium (Pr), Neodymium (Nd), Promethium (Pm) and Samarium (Sm). HREEs are - Europium (Eu), Gadolinium (Gd), Terbium (Tb), Dysprosium (Dy), Holmium (Ho), Erbium (Er), Thulium (Tm) Ytterbium (Yb), Lutetium (Lu), Yttrium (Y), Scandium (Sc).
Rare earth is not rare!!!:
The term 'rare earth' is an anomaly. It is actually not rare. It is in fact found all over the world. You can also find them under the ground you are standing on in Singapore. It exist in abundance in the Earth's crust. The average crustal concentration of REEs is 68 parts per million, which is more abundant than say copper. Even the least abundant of them, thulium and lutetium, is 200 times more abundant than gold. REEs are found in certain mineral ores such as bastnasite, monazite, xenotime and eudialyte. The REOs (rare earth oxides) need to be mined, the REEs extracted and processed. The whole operation is both expansive and expensive which explains, why there are only a handful of companies and countries involved in the production of REEs.
Why China is the biggest producer of REEs:
If rare earth is present everywhere, why are countries all over the world not mining for it? Why China is the biggest producer? Smarter readers would have jumped the gun and caught it. It came to me almost immediately, and I'm not that smart. Because rare earth is not found in concentration, vast amounts of waste product has to be removed for every ton of REE processed. For China's 240,000 tons (2023) of ores mined, who knows how many million tons of earth or waste product has to be removed annually. It's a potential for huge ecological disaster. In first world countries, regulation and numerous environmental protection laws make it extremely difficult to issue rare earth mining licence. China is lax on environmental regulation.
Unregulated and illegal rare earth mining has caused severe ecological disasters in China, specifically in Baotou, Inner Mongolia (home to Bayan Obo Mine, largest REO mine in the world), Ganzhou, Jianxi Province, Guangdong, Fujian, Sichuan, Guangzi and Yunnan Provinces. Disasters included toxic tailing with radioactive and chemical waste contamination, acid leaching, deforestation, sulfuric acid runoff, loss of biodiversity, landslides, habitat destruction, water contamination. Farmlands get poisoned, lakes turned toxic, and communities suffered displacement and long term health issues from radiation exposure, air pollution and heavy metal consumption.
Another point you probably do not know. Before you get REEs (rare earth elements) you need to mine or extract the REOs (rare earth oxides -- these are the unprocessed REEs). REOs need to be refined and processed, which is an expensive proposition. Due to its massive production, China has economy of scale, so most countries export their production to China for processing.
US vs China (2023 data):
REOs mined - China 240,000 tons (69% of world output). US 43,000 tons (12% world output).
REOs imported - China 133,000 tons of REOs.US - nil.
REES processed: China 170,000 tons (70-80% of world supply). US - insignificant.
REES exported: China 55,000 tons. US nil.
REES imported : China nil. US 9,680 tons.
US lacks infrastructure for refining and depends on China for about 60-70% of it's REE needs. China's import of unprocessed REOs in 2023 was a 40% jump over 2022, indicating an attempt at stockpiling.
Significant players:
1. China - China Northern Rare Earth High-Tech Co Ltd, Inner Mongolia - world's larges rare earth producer. It mines and processes.
2. China - Shenghe Resources Holding Co Lrd. Partly state-owned. It mines and processes. Has expanded globally through strategic investments to secure a steady stream of REOs.
3. Australia - Iluka Resources. Originally in sand mining but has expanded ton rare earth mining and processing.
4. Australia - Lynas Rare Earths Ltd. It's main mine is in Mount Weld, Western Australia. Has a subsidiary that mines rare earth in Gebeng, Kuantan, Malaysia.
5. Greenland - Energy Transition Minerals Ltd. Australian-owned company.
6. Canada -- Avalon Advanced Materials Ltd
7. US - MP Materials Corp. It owns and operates the only rare earth mining company in America at the Mountain Pass in California.
Mountain Pass Mine, California:
1952 - opened by Molycorp.
1960s-1980s - was the word's leading REE producer.
1998 - environmental violations forced it to shut down processing operations.
2002 - operation shut down due to declining prices as a result of Chinese competition.
2010 - Molycorp restarted operations due to China's export restrictions.
2015 - operations shut down when Molycorp went bankrupt.
2017 - MP Materials acquired the mine and operations restarted.
2020 - MP expanded operations. Plans for processing operations.
Is Trump's tariff on China so stupid as everybody say:
The US had long recognised its strategic vulnerability in REEs in the 1990s. It became a front burner issue of national security in 2010 when China restricted its export of REEs to Japan following a territorial dispute. Trump has taken various steps to reduce dependency on China.
Trump's initiatives:
1. 2017 - Defence Production Act (1950): Trump invoked the DPA for $millions to fund REE production, refining and magnet production in US. Recipients of such grants include MP Materials.
2. 2017 - Executive Order 13817. Directed federal agencies to identify and reduce dependencies on foreign-sourced critical minerals.
3. 2018 - The first US Critical Minerals List was compiled.
4. 2018 - Defense Authorisation Act which prohibited US military sourcing REEs from China, Russia, Iran and N Korea.
5. 2018-2020 - Trump imposed tariffs on REE imports, but later exempted rare earth magnets.
6. 2020 - Trump issued Presidential Determination on Rare Earths for National Security. Directed Pentagon to fund US REE mining and processing projects.
7. 2020 - DPA and Pentagon funding helped MP Materials to go public via SPAC (a Special Purpose Acquisition Company allows a company an easy path to go public without the IPO process.)
8. 2020 - Awarded $30.4m grants to Lynas (Australia) and MP Materials to build rare earth separation and processing facilities in the US. It also laid the groundwork for permanent magnet production in US.
9. 2020 - DOE pushed for research into alternative materials and recycling programs.
Trump brought awareness of US vulnerability of critical minerals to the fore and initiated major policy shifts after years of neglect by Bush and Obama administrations. Biden followed through this policy shift with :
10. 2022 - CHIPS and Sciences Act. This provided more incentives for US and allies (Australia and Japan) in rare earth mining and processing.
11. 2023 - More grants to MP Materials and Lynas to expand US refining capacity and new plant developments in Texas and California..
US alternatives to rare earth:
Trump's policies jumpstarted US push for rare earth independence in mining, refining and processing as well as developing alternative materials to replace REEs in key applications and recycling efforts. Examples:
- Use of iron nitride (Fe16N2) to replace neodtmium-based magnets in motors.
- Manganese bismuth (MnBi) to replace neodymium-based magnets in high temperature applications.
- Lithium iron phosphate LFP) battteries which avoid the use of rare earth unlike nickel-based hydride (NiMH) batteries.
- Sodium-ion batteries is a potential alternative to lithium-ion and NiMH batteries.
- Zeolites can be used to replace cerium-based catylysts in refining and chemical processes.
- Graphene may be used as a substitute for yttrium in superconductors.
- Magnesium diboride (MgB2) could be used instead of REE in high-temperature superconductors.
US has invested efforts in REE recycling from electronic waste, magnets, and batteries. Examples:
- Urban Mining Co (Texas) - pursuing rare earth magnet recycling for defense industry.
- Phoenix Tailings (Massuschusetts) recycling rare earth from mining waste.
- DOE investing in REE recycling technology through national labs.
- University of Kentucky - recovering REES from coal ash and waste.
At the moment, as US races to build infrastructure and invest in alternatives and partner supply chains, especially with Australia, China still dominates in REE refining. Trump now returns to where he left off. One wonders at perhaps 4 lost years of US race for REE independence during Trump's absence.
There is no public data, but it is apparent and there is market talk, that as it receives major funding from the government and racing to develop refining and processing infrastructure, MP Materials has been stockpiling REO productions. Meanwhile, its stock price is trending up. Critical industry + government grants and funding = good future. Does Temasek have a buy advisory on this?
Trump's public speaking style of syntactical trainwrecks, leaving sentences unfinished, and often repeating a trailer phrase, leads the literati crowd to consider him a scatter-brain. He often drops teasers without details, leaving one wondering if those are just some wild ideas or is there some policy under development. In one of his interviews, Trump mentioned:
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The term 'rare earth' is an anomaly. It is actually not rare. It is in fact found all over the world. You can also find them under the ground you are standing on in Singapore. It exist in abundance in the Earth's crust. The average crustal concentration of REEs is 68 parts per million, which is more abundant than say copper. Even the least abundant of them, thulium and lutetium, is 200 times more abundant than gold. REEs are found in certain mineral ores such as bastnasite, monazite, xenotime and eudialyte. The REOs (rare earth oxides) need to be mined, the REEs extracted and processed. The whole operation is both expansive and expensive which explains, why there are only a handful of companies and countries involved in the production of REEs.
Why China is the biggest producer of REEs:
If rare earth is present everywhere, why are countries all over the world not mining for it? Why China is the biggest producer? Smarter readers would have jumped the gun and caught it. It came to me almost immediately, and I'm not that smart. Because rare earth is not found in concentration, vast amounts of waste product has to be removed for every ton of REE processed. For China's 240,000 tons (2023) of ores mined, who knows how many million tons of earth or waste product has to be removed annually. It's a potential for huge ecological disaster. In first world countries, regulation and numerous environmental protection laws make it extremely difficult to issue rare earth mining licence. China is lax on environmental regulation.
Unregulated and illegal rare earth mining has caused severe ecological disasters in China, specifically in Baotou, Inner Mongolia (home to Bayan Obo Mine, largest REO mine in the world), Ganzhou, Jianxi Province, Guangdong, Fujian, Sichuan, Guangzi and Yunnan Provinces. Disasters included toxic tailing with radioactive and chemical waste contamination, acid leaching, deforestation, sulfuric acid runoff, loss of biodiversity, landslides, habitat destruction, water contamination. Farmlands get poisoned, lakes turned toxic, and communities suffered displacement and long term health issues from radiation exposure, air pollution and heavy metal consumption.
Another point you probably do not know. Before you get REEs (rare earth elements) you need to mine or extract the REOs (rare earth oxides -- these are the unprocessed REEs). REOs need to be refined and processed, which is an expensive proposition. Due to its massive production, China has economy of scale, so most countries export their production to China for processing.
US vs China (2023 data):
REOs mined - China 240,000 tons (69% of world output). US 43,000 tons (12% world output).
REOs imported - China 133,000 tons of REOs.US - nil.
REES processed: China 170,000 tons (70-80% of world supply). US - insignificant.
REES exported: China 55,000 tons. US nil.
REES imported : China nil. US 9,680 tons.
US lacks infrastructure for refining and depends on China for about 60-70% of it's REE needs. China's import of unprocessed REOs in 2023 was a 40% jump over 2022, indicating an attempt at stockpiling.
Significant players:
1. China - China Northern Rare Earth High-Tech Co Ltd, Inner Mongolia - world's larges rare earth producer. It mines and processes.
2. China - Shenghe Resources Holding Co Lrd. Partly state-owned. It mines and processes. Has expanded globally through strategic investments to secure a steady stream of REOs.
3. Australia - Iluka Resources. Originally in sand mining but has expanded ton rare earth mining and processing.
4. Australia - Lynas Rare Earths Ltd. It's main mine is in Mount Weld, Western Australia. Has a subsidiary that mines rare earth in Gebeng, Kuantan, Malaysia.
5. Greenland - Energy Transition Minerals Ltd. Australian-owned company.
6. Canada -- Avalon Advanced Materials Ltd
7. US - MP Materials Corp. It owns and operates the only rare earth mining company in America at the Mountain Pass in California.
Mountain Pass Mine, California:
1952 - opened by Molycorp.
1960s-1980s - was the word's leading REE producer.
1998 - environmental violations forced it to shut down processing operations.
2002 - operation shut down due to declining prices as a result of Chinese competition.
2010 - Molycorp restarted operations due to China's export restrictions.
2015 - operations shut down when Molycorp went bankrupt.
2017 - MP Materials acquired the mine and operations restarted.
2020 - MP expanded operations. Plans for processing operations.
Is Trump's tariff on China so stupid as everybody say:
The US had long recognised its strategic vulnerability in REEs in the 1990s. It became a front burner issue of national security in 2010 when China restricted its export of REEs to Japan following a territorial dispute. Trump has taken various steps to reduce dependency on China.
Trump's initiatives:
1. 2017 - Defence Production Act (1950): Trump invoked the DPA for $millions to fund REE production, refining and magnet production in US. Recipients of such grants include MP Materials.
2. 2017 - Executive Order 13817. Directed federal agencies to identify and reduce dependencies on foreign-sourced critical minerals.
3. 2018 - The first US Critical Minerals List was compiled.
4. 2018 - Defense Authorisation Act which prohibited US military sourcing REEs from China, Russia, Iran and N Korea.
5. 2018-2020 - Trump imposed tariffs on REE imports, but later exempted rare earth magnets.
6. 2020 - Trump issued Presidential Determination on Rare Earths for National Security. Directed Pentagon to fund US REE mining and processing projects.
7. 2020 - DPA and Pentagon funding helped MP Materials to go public via SPAC (a Special Purpose Acquisition Company allows a company an easy path to go public without the IPO process.)
8. 2020 - Awarded $30.4m grants to Lynas (Australia) and MP Materials to build rare earth separation and processing facilities in the US. It also laid the groundwork for permanent magnet production in US.
9. 2020 - DOE pushed for research into alternative materials and recycling programs.
Trump brought awareness of US vulnerability of critical minerals to the fore and initiated major policy shifts after years of neglect by Bush and Obama administrations. Biden followed through this policy shift with :
10. 2022 - CHIPS and Sciences Act. This provided more incentives for US and allies (Australia and Japan) in rare earth mining and processing.
11. 2023 - More grants to MP Materials and Lynas to expand US refining capacity and new plant developments in Texas and California..
US alternatives to rare earth:
Trump's policies jumpstarted US push for rare earth independence in mining, refining and processing as well as developing alternative materials to replace REEs in key applications and recycling efforts. Examples:
- Use of iron nitride (Fe16N2) to replace neodtmium-based magnets in motors.
- Manganese bismuth (MnBi) to replace neodymium-based magnets in high temperature applications.
- Lithium iron phosphate LFP) battteries which avoid the use of rare earth unlike nickel-based hydride (NiMH) batteries.
- Sodium-ion batteries is a potential alternative to lithium-ion and NiMH batteries.
- Zeolites can be used to replace cerium-based catylysts in refining and chemical processes.
- Graphene may be used as a substitute for yttrium in superconductors.
- Magnesium diboride (MgB2) could be used instead of REE in high-temperature superconductors.
US has invested efforts in REE recycling from electronic waste, magnets, and batteries. Examples:
- Urban Mining Co (Texas) - pursuing rare earth magnet recycling for defense industry.
- Phoenix Tailings (Massuschusetts) recycling rare earth from mining waste.
- DOE investing in REE recycling technology through national labs.
- University of Kentucky - recovering REES from coal ash and waste.
At the moment, as US races to build infrastructure and invest in alternatives and partner supply chains, especially with Australia, China still dominates in REE refining. Trump now returns to where he left off. One wonders at perhaps 4 lost years of US race for REE independence during Trump's absence.
There is no public data, but it is apparent and there is market talk, that as it receives major funding from the government and racing to develop refining and processing infrastructure, MP Materials has been stockpiling REO productions. Meanwhile, its stock price is trending up. Critical industry + government grants and funding = good future. Does Temasek have a buy advisory on this?
Trump's public speaking style of syntactical trainwrecks, leaving sentences unfinished, and often repeating a trailer phrase, leads the literati crowd to consider him a scatter-brain. He often drops teasers without details, leaving one wondering if those are just some wild ideas or is there some policy under development. In one of his interviews, Trump mentioned:
"There is method to my madness, you do know that, right?"
This platform has withdrawn it's subscriber widget. If you like blogs like this and wish to know whenever there is a new post, click the button to my FB and follow me there. I usually intro my new blogs there. Thanks.
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