The geopolitical dimension of the quest for Rare-Earth elements
Rare earth elements (REEs) are 17 chemical elements classified as metals in the periodic table, namely Lanthanum, Cerium, Praseodymium, Neodymium, Samarium, Europium, Gadolinium, Terbium, Dysprosium, Holmium, Erbium, Thulium, Ytterbium, Lutetium, Yttrium, Promethium, Scandium. Their strategic importance mainly stems from their large employment in the industry of consumer electronics, which includes smartphones, tablets, computers, but also televisions and domestic appliances. However, rare earths are also used in the medical sector, in which they are employed to treat some kinds of cancer and to carry out scientific research, and in the defense industry, in which they are used for the construction of radar, sonar, laser and missile guide systems. The relevance of REEs originates from both their physical and chemical characteristics, and their ability to enhance other minerals’ attributes, which therefore improves their technological applicability.
In the contemporary context of economic transformations, mainly steered by high tech development and the attempt to achieve global supremacy in technology innovation, the demand of rare earths and ferrous and non-ferrous metals, employed in their respective industries, has exponentially increased in the last years, making REEs even more precious and of geostrategic importance. The World Bank forecasts a further increase of rare earths demand, mainly driven by the energy transition towards green and renewable resources. Indeed, for example, the successful development of both hybrid vehicles and technology necessary for the production and exploitation of solar and wind energy highly depends on the use of these metals.
Despite their name, REEs are rather abundant. For example, in terms of amount, there are more rare earths than other ferrous and non-ferrous materials, like copper or nickel. Nonetheless, what actually makes them “rare” is both their geographical distribution and the extraction process, which causes significant negative impacts on the environment. Indeed, in their natural state, rare earths are found mixed with other minerals in different combinations, therefore they need to be diversified. Nevertheless, in order for the metals to be divided, acids and organic solvents are required, which however are dangerous for the ecologic context because of both CO2 emissions produced during the extraction, and the radioactive and chemical waste which is dumped in the environment. Moreover, depending on the metals’ concentration, different methods of extraction are employed. Therefore, specific technologies and know how are required accordingly to the metal that needs to be extracted. The production process, which includes metals refining and purification, requires different steps of mixing and filtering, which however take time to be carried out and have to take place in adequate facilities, that today are mainly located in China.
The majority of REEs fields are found in China, which owns about one third of the world’s reserves, followed by Vietnam and Brazil, Russia, India, Australia, Greenland and the United States. Currently, China is the unquestioned leader of this sector, of which it controls about 90% of the total world’s production, hence having almost a monopolistic control. China’s supremacy is due to different factors, like the presence of metals within its territory, less strict regulations on environmental protection and an effective production process know how.
China began to gain prominence in the rare earths global market in the 1980s, when its Government started to invest in favour of research of metals and extraction technology. Thanks to low labour costs and lenient environmental protection laws, Beijing has been able to satisfy the world REEs demand at a competitive price, gaining the world’s production supremacy in 2010. The development of the efficient refinery industry turned Beijing into the main global hub for metals treatment, including also the treatment of metals extracted in other parts of the world by non-Chinese corporations. This has discouraged other States from investing in the sector, to an extent that many opted for importing rare earths rather than directly producing them.
However, the monopoly allows Beijing to use the trade of rare earths also as a geopolitical weapon. For example, in 2010 China blocked REEs export to Japan as a form of reprisal against Tokyo. Indeed, Tokyo arrested the captain of a Chinese ship that was navigating the waters near the Senkaku islands in the East China Sea. The Senkaku islands are officially under Japan’s control, but they are claimed by China. China’s decision aimed at hindering Tokyo’s production chain, in particular the production chain of those industries of the electronics sector, which are highly developed but deeply dependent on REEs import. Indeed, in the short term Japanese production was affected by the REEs cuts, but Tokyo reacted by diversifying its supply sources, successfully managing to free itself from Chinese dependency, which decreased from 91 to 58% in the years after the crisis.
It is possible that what happened to Japan in 2010 could happen to other countries, which share the same economic dependency on China, like for example the United States. In fact, 80% of American demand of rare earths depends on import from China. However, recently Washington decided to take measures to move away from Beijing’s shadow. Indeed, Washington is afraid of a possible interruption of the supply chain for the electronics industry, after China vaguely threatened reprisals as a consequence of the trade war engaged by the United States.
Rare earths are of crucial importance for the economic and technological development of the United States, as well as of strategic interest for their defense industry. Indeed, American defense sector heavily depends on REEs, which are employed for example in lasers, drones, missile guidance and control systems, communication equipment, jet engines and missile systems. For this reason, the US Department of Defense and Department of Energy began financing recycle and domestic extraction programs with the purpose of strengthening the national ability to treat rare earths, in order to carry out domestically the refinery process and at the same time moving away from their dependency on China. For example, in the last months, the Pentagon approved a financing in favour of the private company MP Materials, which owns the Californian mine Mountain Pass, the only active source of rare earth in the United States, in order for the private company to intensify metals extraction. In addition, a memorandum of understanding was signed last year between the Lynas Corporation, the Australian company that treats rare earths and has a refinery facility in Malesia, and the Texan Blue Line Corporation, in order to begin the construction of a REEs treatment facility in Texas.
The almost total dependency on China makes import countries vulnerable to rare earths price variations. An example happened in 2010, when the Chinese Government started to decrease its national incentives to its export industries, cutting the incentives almost of 40%. As a consequence, export decreased while REEs price increased dramatically, shifting from 9,46 dollars per ton in 2009 to 66,96 dollars per ton in 2011, hampering American, Japanese and European technology industries production. Export was discouraged to favour domestic production of high technology products, on which Beijing largely invest. China’s aim would be to gain self-sufficiency and technology supremacy, a goal which was also made clear in the Made in China 2025 program announced in 2015, achievable also thanks to the exploitation of domestic rare earths. Indeed, Chinese national demand of these metals has been increasing sensibly, mainly driven by consumer electronics production.
The possibility that Beijing could further decrease REEs export to favour their domestic use could pave the way for alternative suppliers of raw materials. It would seem that Russia wants to insert itself here. Despite being the fourth country to own the largest REEs fields, Moscow only produces 1,3% of global output. However, a 1.5 million dollars plan of investment was announced in August, which would allow the Kremlin to boost its production up to a 10% target, which should be reached before 2030 and that would allow Moscow to become the second REEs world’s supplier.
Australia’s activities are of likewise importance. Indeed, in the last three years, Australia has been able to double its REEs production thanks to Lynas Corporation, which extracts metals from its mine site located in Mount Weld and then treats them in its facility in Malesia.
Nonetheless, it is possible that China will not be able to reach its ambitious goals by only exploiting its domestic rare earths, and therefore Beijing could be forced to invest in foreign strategic facilities, like the ones located in Africa, where China already exercises extensive control. Over the years, China has signed many deals with African countries to ensure itself an uninterrupted flow of rare earths and minerals employed in the high tech industry. For example, Chinese corporations are already working in Mozambique, Madagascar, Guinea, Democratic Republic of Congo and Malawi, where they extract materials which are then refined in their domestic facilities.
However, Beijing is not the only player in the mineral supply rush that is taking place in Africa. This metal rush, together with the increased importance of REEs in the global market, concerns also Moscow and the United States, and it could pave the way to new international geopolitical rivalries in Africa.
Indeed, Russia has been working to increase its role in the African mineral sector. For example, Russian companies are extracting in Madagascar, and in Zimbabwe, where there is a vast platinum reserve and where it is estimated there is also a huge Cerium and Lanthanum field.
At the same time, the United States began to approach the African continent in order to secure a lasting REEs supply. Indeed, the United States started negotiations with Burundi and Malawi, in order to obtain extraction rights and gain prominence in this market.
However, other States and organizations made their move in Africa in order to ensure a stable line of strategic materials supply. For example, the European Union, which imports 98% of its REEs consumption from China, published its Plan of Action in September, in order to increase its strategic independence and at the same time cut its dependency on China. In addition to promoting recycle projects, the European Commission claimed to be willing to sign new strategic partnerships with African countries, in order to secure a diversification of minerals supply for the Union.
The growing importance of REEs employment in the technology industry could seriously shape some international political, economic and security trends in the immediate future. Indeed, it seems that the use of minerals for the development of high technologies, together with their prominence in the global market, will be fundamental for both the promotion of national high tech industry, and for affecting other competitor States technology production.
Today, China still has a privileged and dominant position, granted by its domestic and rich REEs fields, its efficient refinery industry and its presence in Africa. In the short and medium term, it is hard to imagine a significant downgrade of China’s role in the REEs market. Beijing considers rare earths not only to be a matter of national security, but also the elements upon which its future economic transformation projects should be based.
Russia, despite lacking the capability that China has in the high tech sector, is planning to exploit its expertise in the mineral industry to become a prominent player in the REEs global market alongside China. Moscow, like Beijing, wants to pursue a strategy based on the development and exploitation of both national and African reserves.
If China and Russia manage to gain control of the majority of resources needed for technology development, other States could find themselves to be in a vulnerable position. Indeed, they would be dependent on foreign export, a dynamic that already happens in the energy field among production States and import States. In this context, it should not be excluded that Russia and China could decide to “militarize” rare earths and use them as a political pressure and economic deterrence weapon, as already happened, for example, in Europe for what concerns gas, and Japan concerning rare earths.
Indeed, it is the necessity to avoid such a scenario that pushed the United States and the European Union to begin a process of diversification of REEs supply chain, turning their attention on African resources and opportunities. Nonetheless, Moscow and Beijing have gained an advantage in the African continent that plausibly they will not want to lose.
