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The Future Of Trade Wars Lie In The Control Of Rare Earths & China Has Stranglehold


The capsules in the photograph accompanying the post contain the most potent weapons for a global trade war. It started out there in the Mojave Desert in California in the Mountain Pass mine, once the world’s foremost supplier of valuable rare earth minerals — 17 elements deemed critical to modern society. Weapons that were with the US and now given away to the Chinese. US rare earth is now shipped out of its mines to China to be exported back to the US in processed products.
Rare earths are used in rechargeable batteries for electric and hybrid cars, advanced ceramics, computers, DVD players, wind turbines, catalysts in cars and oil refineries, monitors, televisions, lighting, lasers, fiber optics, superconductors and glass polishing. Several rare earth elements, such as neodymium and dysprosium, are critical to the motors used in electric vehicles.These include critical “rare earth minerals” like yttrium (used for charging electronic devices like smartphones), cerium and lanthanum (used for touch screens), and neodymium (used in electric car batteries).
In an age where China controls 80 percent of the global output of these minerals, it is strange to believe that a once-dominant source sits within the United States. Stranger still is the tale of how this mine came to supply the Chinese rare earths industry. 
In 2008 a group of investors formed Molycorp and convinced Wall Street to resurrect Mountain Pass under an audacious plan dubbed “Project Phoenix.” With the promise of wealth to be generated from new (but untested) technologies, Molycorp bullishly claimed that it could compete with (or even underprice) China’s near-monopoly. 
Wall Street and the Pentagon supported the project. For the Pentagon, and for an administration often indifferent to mining interests, it was a dream come true: Private investors would deliver a secure supply chain without the U.S. government’s help.
At first the situation looked promising. Chinese companies restricted rare earth exports to Japan over a diplomatic dispute in 2010, leading prices to spike. Molycorp’s stock would later soar. The cash-rich company announced several acquisitions — processing plants in Arizona and Estonia as well as a Canadian rare earth technology group named Neo Materials that had extensive operations in China.
But in actuality, Molycorp was struggling to stay solvent. Those new innovative technologies? They didn’t generate significant revenue or work as designed. By 2013, the company’s revenues were in free fall. The president and CEO stepped down amid an investigation by the U.S. Securities and Exchange Commission into the accuracy of the company’s public disclosures.
By 2017, it was obvious that in the showdown between Molycorp and China, the Chinese had won. Mountain Pass was now sending US-mined rare earth concentrate to China for processing. The dream of a one-stop American rare earths solution was over, and the private sector had little appetite for reviving it.
As the company’s fortunes dwindled, its new CEO oversaw much of Molycorp’s most profitable assets being transferred to Chinese-linked Neo Materials, where he formerly served as CEO. The majority of Neo Materials’ revenue-producing operations are now in China. To make matters worse, the Mountain Pass mine was purchased out of bankruptcy by a consortium that included a Chinese-owned firm.
Despite being an early mover, India could not develop itself as a manufacturer of rare earth metals even with the fifth largest reservoir in the world. Although India set up an exclusive firm to extract rare earth, it did not devise a separate guiding policy to expand the production of rare earth. Answering a parliamentary question in 2015, Modi confirmed that India had not undertaken any significant step to move ahead in the production value chain of rare earth metals.
Many of us, in our patriotic zeal following the Covid19 pandemic feel that we can snap ties with China and stop importing products from them. The reality is that in every electronic product regardless of wherever you manufacture there is a sprinkling of Chinese rare earth within. For India this is a great opportunity to seize the moment by teaming up with countries like Japan which has excellent technologies to extract rare earth. We can work with other countries in the chart to create a rare earth consortium if we are to have any hope of challenging China.
( Abhijit Roy is a Technology writer contributing to Easternlink)

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