Rare earths are a set of elements that have an incredible degree of importance in the modern world. I want to go over and make mentally digestible to a layman the subject in general, and demonstrate how China managed to become the top leader in their mining and processing, and what this may mean going forward as we enter the New Cold War.

I’m going to split this into two parts: the first part will be about what rare earth elements (REEs) actually are, and how they’re mined and processed. This isn’t strictly necessarily for understanding the second part, which is how the industry has evolved, so I’ve put the first part in the comments for you to read if you so desire.

Also, if you wanna read the whole thing in one go rather than it being segmented across a bunch of comments, then I've put this on the site.

How Did The Rare Earth Industry Develop, and How Did China Conquer It?

Part 1.

So, you either read the introduction in the comments and know what an REE is, or you didn’t because you already have the basic idea that these are some important magic metals which countries need to make things that are technologically advanced, which is really all that’s important if you’re not interested in geology. Onwards!

While we could begin centuries ago with their discovery, I will skip past all the initial discoverers as it’s not really relevant to us. Instead, the story will begin - kind of - in the 1960s. Before this time, only about 2000 tons of REEs were produced every year, and these were mostly sourced from monazite and xenotime ores - two of the big three REE ores, if you didn’t read the introduction - and it was discovered in this decade that europium had properties that advanced the development of cathode ray tubes inside color televisions.

In 1964, the Mountain Pass mine in California began to be exploited, a source of bastnaesite ore (the third of the big three ores, and the most important REE ore today). The Mountain Pass mine was initially designed to extract europium, but other REEs were extracted with time, and with larger quantities to work with than previous, obscure sources, scientists could research their properties and find uses for them. This mine was the dominant source of light REEs (that is, the REEs on the left side of the lanthanide group, and much more common than the heavy REEs) in the West until the 1990s, and was owned by Molycorp.

However, in the 1980s, China entered the scene.

In 1986, Deng Xiaoping approved Program 863: The National High Technology Research and Development Program. This program focused on biotechnology, space, information, laser, automation, energy, and material science, and the objective of it was to close the gap between China and the rest of the world and achieve a strategic foothold. REEs were a part of each scientific area that Program 863 focused on - the potential value of these elements was very apparent to the Chinese scientific leadership. In 1997, China’s Ministry of Science and Technology introduced Program 973, which is the largest basic research program in China. Research projects inside this program could last five years and receive money on the order of a couple million dollars. These two programs were not the only programs relating to REEs, but they are by far the two most important ones.

To cover how China managed to acquire its REEs, we’ll need to go back to 1927. At this time, a geologist discovered iron deposits at a location called Bayan Obo in Inner Mongolia, China - and seven years later, the presence of bastnaesite and monazite was discovered too. In the 1950s, exploitation of the mine began for both iron and REEs. At this time, of course, there were few uses for REEs and so they were not particularly commercially exciting - but the iron ore mined here was, and provided the income necessary to keep extracting the REEs alongside the iron.

One of the key figures around this time was Xu Guangxian, who is regarded as the father of Chinese REE chemistry. Achieving a Ph.D. in chemistry in the United States and then returning to China after the outbreak of the Korean War, he went to work at Peking University. He initially researched metal extraction, and then in 1956 switched to radiation chemistry and the extraction of nuclear fuels, helping China eventually develop nuclear weapons. After the Cultural Revolution began in 1966, Xu turned to theoretical research, and then was accused of being a spy for the Kuomintang and imprisoned until 1972, after which he was released and returned to developing REE extraction methods, using what he learned from extracting uranium isotopes. In the 1990s, he chaired the chemistry sector of the National Natural Science Foundation. By 1999 he was still unsatisfied with Chinese REE development, and continued to push the industry hard. In 2009, he won the State Supreme Science and Technology prize, the Chinese equivalent to the Nobel Prize. He died at the age 94 in 2015. He was a steadfast supporter of the importance of the field of chemistry, despite it appearing to many STEM students as merely an accompanying field to the more exciting field of physics.

Back to the late 20th century. Global consumption of REEs was synergistic with Chinese production and research into their properties. Between 1978 and 1989, China increased its production by an average of 40% every year. As their production grew and Chinese REEs flooded the market, the profits that other countries could gain from REEs plunged, and in the 1990s, Western mines substantially reduced production or shut down entirely. In 1992, Deng Xiaoping proclaimed “There is oil in the Middle East; there is rare earth in China.” Seven years later, President Jiang Zemin wrote “Improve the development and application of rare earth, and change the resource advantage into economic superiority.”

Xu Guangxian established two state laboratories in China, both of which focus on REEs; the State Key Laboratory of Rare Earth Materials Chemistry and Applications in Peking University, Beijing; and the State Key Laboratory of Rare Earth Resource Utilization in Changchun. There are two other REE-dedicated laboratories in China: the Baotou Research Institute of Rare Earths, the largest rare earth research and development institution in the world; and the General Research Institute of Nonferrous Metals (though this one is, as the name suggests, not exclusively focused on REEs). Each of the four laboratories focuses on a different aspect of REEs. One focuses on applied research, one on basic research, and two on industrial applied research. There are additionally two publications dedicated to REEs: the Journal of Rare Earth and the China Rare Earth Information journal.

Chinese mines have also advanced beyond Bayan Obo, with other REE deposits exploited in Baotou, Shangdong, Jiangxi, Guangdong, Hunan, Guangxi, Fujian, and Sichuan, to name a few places.

China faced, and still faces, two major problems with REE production: it’s tremendously environmentally damaging, and production by illegal companies and smuggling disrupts markets.

According to the Chinese Society of Rare Earths, for every ton of REE produced: approximately 8.5 kilograms of fluorine and 13 kilograms of dust; approximately 10,000 cubic meters of waste gas including various acidic substances; 75 cubic meters of acidic wastewater; and one ton of radioactive waste residue, is produced. The water runoff contaminates the surrounding area and irrigated farmlands. One ton of REE also produces 2000 tons of mine tailings, which are the ground up rock left behind from mining it, which often contains radioactive thorium. These figures may have improved as years have gone by, but the environmental impact is still large to this day. Xu Guangxian wrote in 2005 of the consequences of this thorium entering the water in the local area and the Yellow River, upon which hundreds of millions of people depend.

In 2008, about 20,000 tons of REE minerals were smuggled out of the country; compare this to official production of 40,000 tons. The lack of control over the smugglers means that prices are kept low and illegal companies have even less concern for environmental impacts. China’s development plans in this field have routinely focused on introducing regulations and policies to combat smugglers. I have been unable to find decent figures for the current state of illegal mining in China, although this Reuters article from 2019 suggests that the crackdowns continue.

Post continues here.

  • SeventyTwoTrillion [he/him]
    ·
    2 years ago

    Part 3.

    These export tax increases were a violation of China’s WTO commitments, and the US filed a protest against this, followed by other Western countries. To quote Obama:

    “We want our companies building those products right here in America,” Obama said. “But to do that, American manufacturers need to have access to rare earth materials which China supplies. Now, if China would simply let the market work on its own, we’d have no objections.”

    Instead, Chinese policies “currently are preventing that from happening and they go against the very rules that China agreed to follow,” Obama continued.

    To which China responded:

    Beijing defended its approach Tuesday.

    “China has worked out its own policy on managing rare earths, which is in line with WTO regulations,” Liu Weimin, a spokesman for the Chinese Ministry of Foreign Affairs, said at a news conference. “Our policies tackle not only the export of rare earth but also its production and exploration.”

    The United States accuses China of hoarding the valuable minerals for its own use. But China said its restrictions are motivated by environmental concerns.

    In 2014, the WTO rejected China’s argument and ordered China to remove the ceiling on exports of REEs, and cancel its export taxes on them in 2015. In April 2015, China lifted export taxes. However, by this point, global prices for REEs had largely decreased - not always back down to levels before the crisis began, but the days of peak prices in 2011 were in the rear view mirror by 2015. The West would have been victorious… if they weren’t neoliberals.

    The lowering of China’s export taxes subsequently knocked Molycorp back into bankruptcy and stopping production at Mountain Pass, and Lynas’s stock price declined by literally 99% (but managed to survive and rebuild itself, sending its REE ore to Malaysia for processing). The return of the low “China price” brought China back to a near-monopoly position - though not quite as near-monopoly as its glory days pre-REE Crisis - and its competitors shrank as they could not compete.

    Molycorp was over and the Mountain Pass mine was shut down… until 2017, when it was acquired out of bankruptcy, revived, and today continues to produce REEs. It is the only REE mine in America today, and singlehandedly supplies about 15% of the global market. China could, for a time, take solace in the fact that the REE minerals were then sent to China for processing - until in early 2022, it was announced that it would instead be sending it to Japan. Meanwhile, Biden’s infrastructure plan has put renewed focus on rebuilding the industry, with some success. It will be difficult for the United States to rebuild a fully domestic REE processing chain, but it did have one before the 1990s - so, the logic goes, it can surely do so again. Lynas Corporation has received funding from the Pentagon to build two REE processing facilities, both in Texas. Efforts for REE recycling are receiving renewed attention too, as are attempts to construct vehicles that don’t use as many REEs.

    The problem for America will be the issues that have plagued China for the last three decades of their supremacy - for example, the environmental problems are substantial. And this course for full domestic self-sufficiency will take a decade, likely longer, in a declining Western empire.

    As for how China is getting on, I can’t say it much better than this article from 2022 does:

    Late last year, three of the previous six companies were merged to form the China Rare Earth Group Co., an industrial conglomerate that holds almost 70% of China’s annual heavy rare earth production quota. With the latest consolidation, the entire rare earth industry in China (especially upstream and midstream) is now under two mega-conglomerates, one in the north and the other in the south.

    Industrial consolidation serves multiple objectives. First, this is part of China’s efforts to boost cost competitiveness, increase production efficiency, and strengthen its grip over pricing. Second, it is seen as a way to curtail illegal rare earths exports and an opportunity to implement and enforce better environmental standards for the industry.

    Third, with consolidation, China is also empowering these large conglomerates to go global. The latter is important as China faces the increasing need to import rare earths products for feeding mid- and down-stream sectors.

    As a further measure, the central government has arranged to include two R&D companies in the new consolidated group to strengthen the power of domestic innovation in the rare earth industry. Innovation and technological advancements will define the future product and process innovations of China’s rare earth industry.

    As of now, China is able to produce only about half of the high-performance magnets that go into EVs and wind turbines. Japan and Germany account for the remaining high-performance magnets, with Japan’s Hitachi Metals owning most of the patents for advanced sintered NdFeB magnets. But these figures are likely to change.

    In the middle of 2019, as the trade war with China under Trump was gathering steam, we saw a return of the idea of an REE embargo by China. To quote from The Verge:

    One particularly chaotic option would be a ban on the export of rare earths — raw materials that are crucial for electronics. These elements are produced mostly in China, and used in the US for everything from electric cars to wind turbines, smartphones to missiles.

    Chinese state media have backed the idea, calling America’s dependence on Chinese rare earths “an ace in Beijing’s hand.” President Xi Jinping hinted at that possibility when he visited a rare earth facility at the beginning of this week.

    The Verge, and similarly sources that Naked Capitalism quotes from, were rather dismissive of this possibility, and given the example of how the 2010-15 REE Crisis resulted not in the West kissing the ring but instead a worldwide effort to construct alternate supplies, it is understandable why it is seen that way. And once again, as the sanctions war on China seems to be amping up, we see rumors and suggestions that maybe, just possibly, China might restrict REE exports to retaliate.

    Truthfully, I do not know if such things are being seriously considered in China, let alone how things would go. The China of 2023 is not the China of 2010, and the same goes for the West but with a reversal of power.

    But there are certainly some interesting lessons to draw from Russia’s experience being sanctioned over the Ukraine War. Russia did not even have a complete monopoly over European energy, and yet when it was slowly cut off, and the Nord Stream pipeline destroyed by the United States, it has resulted in a seemingly inevitable deindustrialization for the continent. High-energy industry like aluminium smelting has fallen drastically - though, of course, Europe boasts that they have survived the winter. Bankruptcies of all kinds have risen dramatically. The EU might well do worse than Russia this year in terms of economic growth, and the UK in particular seems to be locked in a depression in which their only recourse is advanced mortgage magic and frantically trading money back and forth to make it look like their economy isn’t going down because GDP isn’t.

    Mining cannot be turned on instantly. It would take several years to construct these alternate, domestic supply chains, especially under conditions of energy scarcity - and given that the US and China are set for a Great Divergence, a recession in the West does not appear to be causing economic turmoil in China, which would continue to develop its own REE supply chains and mining.

    So I do not know what will happen. Perhaps China will reason that it is best to continue trying to be the world’s largest REE producer and not rock the boat unless the West cuts them off first. Perhaps China will instead reason that this is a one-in-a-lifetime opportunity to fundamentally weaken the American Empire and take offensive action. But Western confidence that things will go well; that rare earths are not that rare; that China doesn’t understand its own weakness - we’ve heard similar things all before about Russia, the gas station masquerading as an economy, and look where we are now.