Open any Popular Science magazine and you are almost guaranteed to find a profile of the tireless work of research and development scientists and engineers building and incorporating longer lasting batteries or lower emission engines. Though the experiments performed in the laboratory drive these heralded improvements, much of this progress would be impossible without the incorporation of relatively trace amounts of exotic sounding metals and semiconductor materials. One striking example comes from the electronics industry. In the 1990s, computer chips were composed of only 16 elements. More than two decades later, computer chips now contain as many as 60 different elements, many of which are essential to the high speeds and performance we have grown accustomed to . In the energy sector, high performance magnets made with the rare earth metal neodynium have proven essential for wind-powered energy. More generally, for any new technology to successfully transition from lab bench to everyday use, the critical metals and minerals must be readily available so as to enable timely and cost-efficient mass production.
In the last several years, the U.S. Department of Defense and several high-tech companies that rely on these particular raw materials have found that the markets for many of these materials are overwhelmingly dominated by China. This market domination poses a two-pronged problem for the U.S. and other countries. On the economic front, a Chinese dominated raw materials market is unfavorable for non-Chinese high-tech research and manufacturing. On the foreign policy front, China currently has the capability to use its market control to coerce other countries into altering their foreign policy. As a result, all of these issues are being proactively addressed through both domestic and foreign policy initiatives.
Like any market for raw materials, the market for metals and minerals that enable distinctly 21st century energy and defense technologies is subject to volatility. The first safeguard against such volatility is a systematic understanding of the likelihood and impact of market disruption. The federal government commissioned the National Research Council (NRC) to create a matrix to rank the economic impacts of supply chain restrictions and likelihoods of each restriction. The NRC concluded that platinum group metals, rare earths, manganese, indium, and niobium had the highest economic impact and the highest chance of supply disruption. The Department of Energy, adopting the NRC’s matrix, also concluded that five of the rare earth minerals with a high chance of supply disruption were of high importance to the research and production of clean energy systems . This information reveals that the United States, in trying to reduce foreign dependence on a potentially volatile oil supply, finds itself saddled with a similar struggle in the non-fuel minerals market.
As mentioned earlier, China’s threefold role as producer, consumer, and exporter greatly influence the price stability and availability of rare earths and other critical non-fuel minerals. For example, China produces more than 50% of the eleven different materials that have been identified as having high economic importance, including antimony, tungsten, magnesium, and rare earths . Most notable is China’s 97% of global production of rare earths. More generally, China’s average market share of all of these high impact materials has increased from 49% in the year 2000 to 61% in 2008. Their export restrictions have followed suit. In 2000, China had only enacted a single export restriction on these materials, but in 2008 alone China had enacted ten new export restrictions . The RAND Corporation argues that these export restrictions are contributing to the creation of a two-tier pricing system, in which domestic Chinese manufacturers pay a lower price than the export price. This two-tier pricing system poses a barrier to the establishment of American as well as Australian and European high-tech manufacturing and energy systems.
China was able to attain this dominant position in the global mineral market through a combination of its large size and favorable geographic location, its many years of policy-driven investments in mining and processing, and its lax environmental and occupational health and safety standards . As China positions itself to become a major manufacturer and user of clean technologies such as wind turbines, high quality neodymium magnets, and the rare earth supply needed to manufacture them will be in even greater demand. One report estimates that China will be transitioning from 12 gigawatts of wind energy in 2009 to 100 gigawatts in 2020 . Their preexisting mining and processing capabilities continue to provide a strong base for more advanced manufacturing and energy implementation.
Additionally, this domination of the market for minerals such as antimony, tungsten, and the rare earths gives China a potentially undesirable level of political clout in matters unrelated to manufacturing and energy policy. In a relatively high-profile dispute, China restricted all exports of rare earths to Japan after the island nation detained a Chinese fishing trawler captain who had fished in waters claimed by both countries . This so called “resource weapon” was particularly effective against the island nation of Japan, given that it has to import a great percentage of raw materials critical to high-tech research and consumer goods. The effectiveness of this export restriction made U.S. policy makers sit up and take notice, and it brought together a subcommittee on strategic and critical minerals policy to address supply and demand in the event of foreign supply disruption .
Governmental action has gone beyond the collection, analysis, and dissemination of information. Since 2009, the U.S. government has filed two World Trade Organization disputes over raw material exports from China. In June 2009, the U.S. challenged China’s export policies regarding nine minerals. In March 2012, the Obama Administration announced the filing of a World Trade Organization case against China regarding its rare earths policy . These appeals to an international third-party are important, but typically take years to be resolved. Other policy steps with shorter time scales include the establishment of a non-defense economic stockpile, a streamlining of the mining permit process, and the improved implementation of recycling and reclamation technologies . With time, expertise, and a cautious implementation of these policies, the necessary minerals and materials will be in supply for the researchers who are developing the technologies of the future. Furthermore, a diverse source of rare earths and critical minerals could lessen future political strain between China and its global economic partners and hopefully improve global collaboration on the technologies that improve the quality of life for all global citizens.
1. Committee on Critical Mineral Impacts on the U.S. Economy. 2008. Minerals, Critical Minerals, and the U.S. Economy. Washington D.C.: National Academies Press.
2. Silberglitt, Richard, James T. Bartis, Brian G. Chow, David L. An, and Kyle Brady. Critical Materials: Present Danger to U.S. Manufacturing. Santa Monica: RAND Corporation.
3. Humphries, Marc. 2012. Rare Earth Elements: The Global Supply Chain. Congressional Research Service.
4. Bradsher, Keith. 2010. “Amid Tension, China Blocks Vital Exports to Japan.” The New York Times, September 22. Accessed August 16, 2013. http://www.nytimes.com/2010/09/23/business/global/23rare.html?pagewanted=all
5. U.S. House. Committee on Natural Resources. 2011. Strategic and Critical Minerals Policy: Domestic Minerals Supplies and Demands in a Time of Foreign Supply Disruptions. (H. Rpt. 112-33). Washington: Government Printing Office.
Jake Mullen is a third-year student at the University of Chicago majoring in Chemistry and Economics. He is interested in how the energy sector incorporates the discoveries of the physical sciences. Follow The Triple Helix Online on Twitter and join us on Facebook.