I was surprised to learn just how critical the so-called "rare earth elements" are in the development of complex electronics for the high-performance consumer and military/defense markets. While the recent developments have been occurring most strongly in the China R&D institutes, the US has begun to fail—and it may be too late to catch up. Once again, the US does the basic fundamental research and leaves it to others to succeed with the profitable applications of rare earths.
More precious than gold, more difficult to mine than diamonds, and more dangerous than nuclear wastes, the 17 rare earth elements are sometimes thought to be the "oil" of the 21st century. That appears to be the view of the Chinese government, which is moving rapidly to restrict the supply of the more valuable rare earths. Already the Chinese control more than 90% of the world's needs for rare earth elements. Not only are these elements finding extensive use in consumer electronics devices but they are also critical in advanced defense systems.
Rare earth elements are not scarce. In fact, they exist widely in iron-ore deposits scattered around the world. The catch is that the concentrations are very low, making extraction quite difficult and very costly. Typically, several rare earth elements will exist in open-cast mining for iron ore where separation may be difficult in any kind of a large-scale operation for a single rare earth element.
There are a number of small US companies involved in rare earth metals extraction, but these companies have a hard time competing with the Chinese. The US used to be a leader in the mining of such exotic elements as scandium, yttrium, lanthanum, and thulium, but the last working North American mine closed its operations in 2002, in the face of increasing environmental regulations and cheaper product from China. Recently, the miner's new owner, MolyCorp Minerals, filed a $500 million IPO in order to build new resources and reopen the mine. However, injection of funds may be a case of "too little and too late."
The major Japanese automobile manufacturers and electronics makers are already getting anxious about the supply of such rare earth metals as neodymium (used in laptop computers) and lanthanum (used in batteries for hybrid autos). While the use of neodymium (or the lack of it on the open markets) is not yet critical, a major new application (for example, control systems for electric cars) could produce a huge demand that only the Chinese could meet.
The worldwide demand for rare earth metals is projected to reach 180,000 tons in 2012, up markedly from 134,000 tons in 2009. China has reduced its exports from 50,000 tons annually to 30,000 tons, thus forcing some customers to deplete their stockpiles. Some industry observers see these stockpiles becoming fully depleted in a few years. However, it is likely that a tightening of the rare earths market will cause most US suppliers to stop building new processors and to quit the market.
Clearly, the US has to develop or subsidize rare earth developments to hold its own against its Chinese competitors. In my view, the Chinese are in the lead for raw materials refining, processing techniques, and applications. Given the current requirements for slashing defense budgets, I see little likelihood of significant US research and development happening any time soon. Within a decade, the US could be completely dependent on Chinese sources for rare earth metals for advanced electronics systems.
For an excellent review of China's grip on rare earth research and development and extraction, I recommend you read "China's Rare Earth Element Industry: What can the West learn?" by Cindy Hurst, an analyst for the US Army's Foreign Military Studies Office, Ft. Leavenworth, KS, published by the Institute for the Analysis of Global Security, a Washington, DC-based non-profit think-tank (www.iags.org).
Can we afford to lag behind the Chinese in races for both R&D and manufacturing expertise for rare earths?