As China strengthens its grip over rare earth elements, the West is coming to realise how dependent they risk becoming on the nation over the coming years. Andrea Valentino speaks to Professor Kristin Vekasi, a China supply chain expert at the University of Maine, and Professor Marina Yue Zhang, an expert on Chinese manufacturing at the University of Technology Sydney, on how the country has come to dominate the global rare earth market, what the West can do to wrestle back some control – and what it all means for the future of geopolitics across the planet.
Analysing the dominance of China in the rare earth market. (Credit: Ivan Bandura on Unsplash)
For much of the past century, mining in China has had a robustly proletarian feel. Look up posters from the height of the Maoist era and you’ll see what I mean. One shows bare-armed workers, muscles rippling, marching confidently towards the future of socialism. Another presents a middle-aged miner, an orange helmet on his head, and his arm around his schoolboy son. Nor was mining’s association with global revolution merely a propaganda sop. Mao’s own path to the Forbidden City, after all, arguably began when he organised a 1922 strike among discontented coal miners in Jiangxi province. After their final victory over the Nationalists, China’s revolutionary elite put a huge weight on their ability to carve out iron and coal, training some 160,000 geologists in a matter of decades. Up to a point, Chinese mining’s Maoist heritage persists: it’s still the world’s biggest coal miner, while Communist Party apparatchiks continue to lean on powerful unions for support. In truth, however, much of Chinese mining has swapped heavy industry for high-tech – and nowhere is this clearer than in the realm of so-called ‘rare earth’ elements (REEs). This is clear from the numbers, with the People’s Republic accounting for 63% of the world’s rare earth mining.
That, in itself, is striking enough. And from neodymium to terbium, these 17 elements are increasingly critical to a series of important technologies, in fields as varied as electric cars and stadium scoreboards.
Yet, if the geological fates granted the Chinese a bounty beneath their feet, that’s far from the whole story. A rare earth mining giant it may be, after all, but the country has also been busy developing expertise in other related fields. As Politico has reported, China currently controls 85% of rare earth processing, as well as 92% of rare earth magnet production – a vital complement in military systems such as stealth aircraft and radars. With all this in mind, moreover, it should come as no surprise that China’s geopolitical rivals are rushing to catch up, with the US in particular investing in new mines and factories. However, with China reacting in kind – especially when it comes to lucrative markets in the developing world – the future of the sector remains fraught.
Inherit the earth
In the most basic sense, ‘rare earth’ minerals are a misnomer. Geologically speaking, these metals aren’t particularly unusual, even if extracting them is sometimes tricky. What can be in no doubt, however, is how crucial they are to contemporary society. “They are used,” emphasises Kristin Vekasi, “in most of the technology that makes our modern life possible.” Reflect on any number of industries and the associate professor at the University of Maine seems to have a point. Consider, for instance, the now-ubiquitous smartphone. The typical iPhone is built with eight separate REEs, from the lanthanum that gives the screen its vivid colour to the neodymium and dysprosium that make the device vibrate. It’s a similar story in other cutting-edge industries too: Elon Musk’s famous Teslas depend on several REEs for their motors.
All told, the global REEs market is predicted to hit the $9.6bn mark by 2026 – and much of that growth is being scooped up by China. In part, that can be understood by the relative prevalence of rare earths, not least in the Middle Kingdom itself. To give one example, the Bayan Obo field in the country’s north is the biggest such deposit on the planet, with China altogether controlling 30% of all the world’s REEs. Yet, as Beijing’s dominance in processing and magnet production implies, geographical happenstance isn’t the only factor at play here. As early as the 1950s, notes Marina Yue Zhang, Chinese leaders realised the importance of rare earths. “By 1990,” continues the associate professor at the University of Technology Sydney, “China [had] mastered the separation of REEs and [had] mapped a strategy of capturing and controlling the downstream production of REE-value-added products.”
Naturally, that begs the question of how Beijing has managed to corner the REE market so comprehensively. The answer has much to do with the centralised style of the Chinese state. As Vekasi explains, the country worked hard to develop new state-owned mining labs, even as it pumped money into REE-focused degrees. The fruits of these investments are still apparent: in February, senior Chinese mineralogists announced they’d discovered a new REE in Guangdong province. It goes without saying, meanwhile, that as a fundamentally free-market economy, the US has traditionally found it hard to keep up. In 2002, California’s Mountain Pass mine was closed after a toxic spill and wasn’t reopened for years due to Chinese competition – even as the latter were consolidated into a handful of major firms. Together with China’s historically lax attitude towards environmentalism, it’s no wonder that US rare earth production only accounts for around 15% of the total.
Burmese pays
The consequences of this divergence have become clear alongside the rise of China as a geopolitical power. In 2010, for example, a maritime dispute in the South China Sea saw Beijing ban REE exports to Japan: a decision which caused global prices to jump by over 300%. American policymakers, for their part, are increasingly conscious of the risks of a Chinese REE monopoly – especially when Beijing could use its influence to wreck the global economy as part of a future escalation in the situation involving Taiwan. In 2022, President Biden announced plans to invest $35m in MP Materials, at the time the US’s only rare earth mining and processing operation. That’s shadowed by broader moves across the Western alliance. In June 2022, the European Raw Materials Fund was launched with an initial budget of €2bn, even as the Mountain Pass facility was slated to reopen.
To an extent, experts believe these attempts to ‘decouple’ Western REE needs from China are paying off, with Vekasi stressing that beyond mining, Beijing’s rivals are also “working on other downstream technologies” independent of Chinese supply chains. With that in mind, the aspirations of a new Texan firm to mine 300,000 metric tonnes of rare earth oxides over the next several years don’t seem completely far-fetched. Not that Beijing is watching these events serenely. Already, CCP officials have created a new state-owned REE enterprise, which will soon control up to 70% of the country’s sector. And though China’s erstwhile domestic industry is slowing down – as Zhang says, China now imports more REEs than it exports – that’s being replaced by significant overseas investment. Partnering with a bewildering range of foreign governments, Chinese rare earth concerns are gobbling up mining contracts from Africa to Asia. A particular example here is Burma. Bordering the People’s Republic, the valleys and rice paddies of Kachin state exported over a $1bn worth of rare earths to China between May 2017 and October 2021. The Democratic Republic of Congo is another area of interest: across Africa’s biggest country, Chinese investors control an estimated 70% of the mines.
Once again, you get the sense that the authoritarian nature of Chinese politics gives Xi Jinping an inherent advantage here. Unlike democratic countries, obliged to at least feign an interest in human rights, China can happily trade with even the grubbiest of REE-rich regimes. Burma is a case in point: according to the Global Witness NGO, there’s a “high risk” that proceeds from rare earth sales to China directly fund the crushing of internal dissent. And though recent protests by locals did temporarily halt foreign operations in the country, neither China nor Burma seem particularly worried about the environmental impact of Kachin’s mines – clear from the treeless, pockmarked landscapes diggers leave behind.
Under pressure
What about the future? Vekasi believes time is of the essence – in more ways than one. From an economic perspective, researchers believe global demand for some REEs, especially given the rise of green-friendly alternatives to fossil fuels, will grow by almost 50% through the middle of this century. With that in mind, the University of Maine academic suggests it makes sense for the US and her allies to rush towards a situation where they’re not “enmeshed in a Chinese supply chain”. In the same vein, Vekasi says there’s pressure on Beijing as well. It may have lorded over REEs for decades – but it’s equally clear that this preeminence may soon end. If, in other words, Xi Jinping is planning on using REEs as a way of cowing the Western alliance over Taiwan, the time to act is short. “If China wants to have that geopolitical leverage to actually use economic coercion with critical minerals?” asks Vekasi rhetorically. “Five years.”
Given the potentially catastrophic consequences of any showdown over Taiwan, that timeline feels ominously short. But Zhang is more sanguine. “It’s not likely that China will use the ‘wild card’ of REE in geopolitical struggle,” she argues. “China has benefited greatly from globalisation in the past two decades.” Another factor, Zhang adds, are Beijing’s own problems decoupling from Western technology, limiting the CCP’s ability to start its own bout of economic warfare. All the same, the possibility remains for the future of Chinese mining, in all its forms, to be just as revolutionary as its past.
This article first appeared in World Mining Frontiers magazine.