US Dependence On Chinese Rare Earth Minerals Is A Security Risk- Sen. Mark Kelly

The Biden administration’s push to reduce U.S. reliance on Chinese imports has renewed domestic efforts to produce rare earth minerals, critical to the production of electric vehicles and electronics.

A new bipartisan Senate bill is aiming to accelerate that timeline, by banning defence contractors from sourcing those materials in the first place.

In an interview with Yahoo Finance Live, the bill's co-sponsor Sen. Mark Kelly (D, AZ) called Chinese rare earth minerals "a national security risk" and urged the Pentagon to act quickly to eliminate the metals from military weapons systems.

“We've got to stop relying on Chinese rare earth in our defence industry. It's a national security risk to us. If China decided to cut us off on those rare earth minerals right now, this would have a serious impact on our national defence,” Kelly said. “So, this requires that DOD and the Department of Interior work together to build a stockpile of rare earth minerals.”

The bill marks the latest U.S. attempt to break China’s near-monopoly on a group of 17 metals that are crucial to the development of everything from smart electronic devices to wind turbines. The country controls nearly 80% of rare earth imports, according to data from the U.S. Geological Survey, while the U.S. claims just one rare earth mine and has no capability to process the minerals.

Last month, China moved to strengthen its hold on the market by consolidating key producers within a new conglomerate to double down on the development of mines in China.

Kelly’s legislation, known as ​​the Restoring Essential Energy and Security Holdings Onshore for Rare Earths Act of 2022, specifically calls for the U.S. Department of Defense and Interior to develop a strategic reserve of rare earth and products large enough to meet the needs of one year, by 2025. It also bans the use of Chinese metals in sensitive military systems by 2026 and requires defence contractors to track and disclose the origins of the metals used in equipment it delivers to the Pentagon.

“This sets the parameters, to put the United States in a position that we have to choose to do this. We build this stockpile, defence contractors will have access to it, and we will build the supply chain of rare earth that we need,” Kelly said. “We don't want to continue to be in the situation where our adversary, could cut us off from things that we need for our national defence.”

The U.S. has been here before.

For decades, the only rare earth mine in the country is in Mountain Pass, California, and it has dominated global supply. But, concerns around its environmental impact, treatment of workers, and regulation slowed output in the 1980s.

That coincided with China’s aggressive move to capture global market share through government subsidies, lax environmental standards, and lower labour costs. By 2010, China accounted for 97% of the global rare earth supply.

Over the years, Beijing has sought to use its leadership in the metals space as leverage in geopolitics. In 2010, China halted all rare earth exports to Japan, after the country detained a Chinese fishing captain near disputed islands in the South China Sea. Later that year, China slashed its export quota for the metals to protect domestic supply, inflaming trade ties with the U.S. and its allies.

But the U.S. attempts to revive its domestic metals industry have been fraught with challenges. Fears of a rare earth shortage prompted Molycorp Inc. to reopen the Mountain Pass mine in 2010. That same year, the company was listed on the New York Stock Exchange, only to see its price collapse. Poor investment decisions ultimately led to its demise, with the company filing for bankruptcy five years later. Las Vegas-based MP Materials (MP), which bought the mine in 2017, has been attempting to revive domestic production since.

The Biden administration’s larger focus to reduce U.S. reliance on Chinese supply chains may provide a tailwind to the industry. Last year, the president signed an executive order, calling for a review of the domestic supply chain on critical resources, including rare earth and electric car batteries. This fall, the U.S. Department of Energy announced $30 million in funding to national labs to build-out materials critical to clean energy technology.

Kelly said his legislation will push the U.S. to double down on those efforts.

“We do not have a significant enough supply here in the United States today. And this legislation will fix that,” he said. “We can build this strategic reserve of rare earth minerals over time if we focus on it. And if we choose to do it.”

SOURCE: Yahoo Finance

Image Source: USA Today