Over the past several years, China’s powerful grip on rare earth elements has motivated action by Congress and multiple presidents.
Millions in government funding went to an American rare earth and critical mineral refinery and a rare earth separation plant.
Just last week, Reps. Guy Reschenthaler (R-Penn.) and Eric Swalwell (D-Calif.) reintroduced a bill that would create a tax credit for rare earth magnet production at home.
Yet, a soon-to-be-released paper argues that America’s leaders have failed to address what it characterizes as “China’s top-down, sovereign-monopoly.”
A coauthor of that analysis, mine owner and consultant James Kennedy, criticized the bill.
“The tax credit will result in massive and exclusive production of low-temperature magnets,” he told The Epoch Times in an April 28 interview.
Kennedy’s analysis highlights China’s control over the commercial separation of several important rare earths–namely holmium, terbium, and dysprosium.
Those three elements are crucial for making the high-temperature neodymium magnets in electric cars, weapons systems, and other applications.
Kennedy said that without access to those elements in a separated form, American companies will only be capable of producing low-temperature magnets.
“No one will make high-temperature magnets because the tax credit would not cover the differential in cost,” Kennedy told The Epoch Times.
It would, he added, “assure China retains control over high-temperature magnets and thus EVs [electric vehicles], wind, and U.S. weapon systems.”
He made the point even more starkly in an April 17 interview with The Epoch Times. As far as high-temperature magnets are concerned, America isn’t even in China’s league.
“This is not a misprint–China controls 100 percent,” he said.
China’s Rare Earths Juggernaut
Kennedy coauthored his paper with rare earth experts from around the planet. Some remained anonymous because drawing attention to China’s market power could jeopardize their careers.
The analysis warns Americans not to ignore China’s strategic vision on rare earths, arguing that past assessments by the United States and its allies have erred by assuming the country mainly thinks in terms of financial gain.
“China’s motivations are not merely economic in the traditional sense. Rather, these mineral resources are being leveraged as a geopolitical fulcrum for China’s economic advantage and technological domination of downstream technologies and related industries,” it states.
As rare earth elements have become a geostrategic flash point, the United States and its allies have stepped up support for miners and processors outside of China.
For example, the Department of Defense awarded Australia’s Lynas Rare Earths $120 million in 2022 to construct a Texas-based rare earth separation plant.
Pavel Molchanov, an energy analyst with the investment services firm Raymond James, noted that China’s share of rare earth mining has declined recently.
BP’s latest energy review shows that China produced 59 percent of the world’s rare earths in 2021. That’s down from much closer to 100 percent in 2010, according to statistics gathered by the U.S. Geological Survey.
“Historically, there was no political concern around rare earth supply outside of China,” Molchanov told The Epoch Times in an April 25 interview.
“Therefore, if the project-level economics were not very attractive, then it simply would not get done.”
He attributed the shift in the West’s attitude to “China’s aggressiveness and lack of predictability on the world stage,” citing its posture on Taiwan and its support for Russia against Ukraine.
Molchanov also pointed out that America isn’t alone in seeking to decouple from China even as it pursues ambitious (or aggressive) climate goals that will increase demand for Chinese-dominated materials. The European Union also wants to reduce its dependence on China for rare earths.
“As we look towards the end of this decade, I think China will be well below half of the world’s rare earths supply,” Molchanov said.
Kennedy thinks it’s a little too early for the United States and its allies to celebrate.
“When China went from producing 97 percent of the world’s rare earths to roughly 60 percent now, everyone went around blowing their victory horns. We’re not winning. We’re a stooge. We just got played,” he told The Epoch Times.
Kennedy believes China is deliberately moving mining outside its borders while expanding its control over magnets and other valuable downstream products.
“China didn’t want to pollute its country anymore or exhaust its resources, so it created a margin opportunity for producers, and that is where we are at this exact moment,” he said.
“If they could do that, they can also reverse it,” he added.
Military Weakness
These days, rare earths and other critical materials often enter the news cycle in connection with the so-called “green transition” from fossil fuels and the internal combustion engine to wind power, solar power, and EVs.
“The energy transition has barely begun and the U.S. finds itself increasingly dependent on China for rare earths and other critical materials,” said Guillaume Pitron, a French journalist known for writing about rare earths and other raw materials, in the foreword to Kennedy’s analysis.
Yet Molchanov emphasized that EVs and similar technologies are a relatively small part of the rare earths story.
“Neodymium is used in electric vehicles, but I certainly do not want to portray this as purely a question of sustainability or energy transmission. It’s actually much more of a national security issue pertaining to aerospace and military applications,” he said.
An anonymous critical minerals adviser agreed with Molchanov about rare earths’ importance to defense.
The adviser, who was involved in drafting Kennedy’s report, told The Epoch Times how the U.S. bungled critical materials, opening up an opportunity for China: after the events of 9/11 and well into Francis Fukuyama’s “End of History,” America was all-in against terrorism.
“While China was expanding in different regions, the U.S. had its eye off the ball. When it finally got terrorism to a low boil, it realized, ‘Wait a minute, they’re all over the world. They’re all over Africa.’ They’re picking up all these resources–kind of like playing Monopoly with someone, and they’re even buying up Baltic Avenue and Mediterranean Avenue, even the little tiny crappy pieces,” the adviser said in an April 26 interview.
“Strategic competition is always a competition for strategic resources,” he added.
Current military technologies already make rare earths a vulnerability. In addition, Western governments are pursuing defense electrification policies that could place more stress on that weak point.
During a recent Senate Armed Services Committee hearing, Energy Secretary Jennifer Granholm affirmed her support for the Biden administration’s push for rapid electrification of military vehicles.
The British Army announced plans for “battlefield electrification,” including through the expanded use of EVs.
Molchanov noted that China is not the only country with large reserves of rare earth metals.
According to BP’s latest energy review, Brazil and Russia are also particularly rich in the elements, with reserves dwarfing those of Australia and the United States.
The Russia-Ukraine war has only cemented Russia’s close connections with China.
The anonymous critical minerals adviser described America’s involvement in the Russia-Ukraine war as “a total distraction,” including when it comes to critical minerals.
Brazil, meanwhile, has entered into many new agreements with China under its new left-wing president, Luiz Inácio Lula da Silva.
Arrogance and Miseducation
In Kennedy’s view, the rare earths issue is in keeping with a broader trend of Western hubris. Washington insiders, he said, have often let him know they haven’t bothered to read that country’s own English-language reports on its “One Belt, One Road” and “Made in China 2025” strategies.
Westerners, he said, are “so arrogant that if they read the reports, they just think that it’s Chinese grandstanding. But it’s not. They’re very consistently delivering on their goals. Look at us. We don’t deliver on any of our goals but we do a tremendous amount of grandstanding, a lot of virtue signaling,” he told The Epoch Times.
For many analysts who have spoken with The Epoch Times, problems with the quality of STEM education in the United States are a serious issue for the country as it competes with China on rare earths and other critical minerals.
Kennedy’s analysis stressed China’s numerous university programs, national laboratories, and other research endeavors devoted to rare earths. The United States and the West, by contrast, are barely competing.
In a recent interview with The Epoch Times, the Claremont Institute’s David P. Goldman described engineering education in the United States as “alarmingly poor.”
“The smartest kids go to the big tech companies, where they hope to become millionaires by the time they’re 26,” he said.
“A lot of the science degrees go to foreigners,” the anonymous critical minerals adviser told The Epoch Times.
“This education deficit is probably going to be one of the most painful things that we face as a country,” Kennedy said, adding that many professors who might have been able to teach the relevant skills four decades ago are retired or deceased.
Rep. Reschenthaler declined to comment to The Epoch Times.
