Guest Post by Nick Giambruno
The US and China are battling over who will be the world’s most dominant power.
It’s the ultimate geopolitical competition and a megatrend with enormous investment implications.
As tensions between the US and China continue to rise, I expect Washington and Beijing to focus on securing critical commodities and ensuring access to stable supplies.
That’s where rare earth elements (REEs) come in.
Many are unfamiliar with REEs, a collection of 17 obscure elements on the Periodic Table with atomic numbers 21, 39, and 57 to 71, despite their indispensable role in modern life.
For instance, neodymium is utilized in cell phones and laptops, europium in lasers, LEDs, and plasma displays, gadolinium in X-rays and MRI machines, and erbium, which amplifies light, is used in fiber optic cables.
REEs are also vital components in sophisticated military equipment such as guidance systems, drones, anti-missile systems, radars, and fighter jets. These advanced electronics cannot be manufactured without REEs.
In short, the US military and American consumers depend entirely on these obscure elements.
Below is a chart of global REE reserves by country. We can see that China dominates with 44 million tons of REE reserves while the US has just 1.5 million tons.
The truth is REEs are not really rare. For example, thulium, the rarest REE, is 125 times more common than gold.
The challenge lies in finding REEs in economically viable concentrations. And once you find them, mining and processing REEs is expensive and messy.
Approximately 40,000 kilograms of rock are needed to obtain about 250 kilograms of valuable isolated REEs.
(For context, one US top-line fighter jet unit, the F-35, contains nearly 427 kilograms of REEs; a Virginia-class nuclear submarine uses almost 4,200 kilograms of REEs.)
Additionally, REEs are often discovered alongside radioactive elements like uranium and thorium. Isolating them from other materials and the extraction process is expensive and creates toxic waste.
China has dominated the industry by subsidizing production and being less concerned about environmental and safety consequences. This allows China to produce REEs at much lower costs than its competitors—far below production costs.
According to a US Congressional report:
“[China] flooded the market by more than tripling the previous world supply of the materials. During this time, Chinese rare earth-producing firms were largely unprofitable but were allowed to survive through direct and indirect support by the Chinese government.
This backing enabled China’s rare earth industry to continue to mine and export these materials at prices far below the actual costs of production… Mines in the United States and elsewhere, unable to remain profitable against cheap Chinese exports, went out of business.”
Nobody can seriously challenge China’s monopoly, as it can maintain lower prices longer than any competitor can remain solvent.
As a result, China consolidated control of around 60% of global REE production.
China is even more dominant in REE processing.
Beijing is responsible for 95% of the world’s REE processing.
In other words, even though the US produces 38,000 tons of REEs per year, it is still totally dependent on China to process the elements into a usable form. All US REE production is shipped to China for processing.
China also consumes about 67% of the worldwide REE supply. Japan and the US consume most of the rest.
In short, that’s how China came to dominate this strategic industry, which gives Beijing significant geopolitical leverage.
China can restrict REE supplies instantly, which could cripple any country, including the US. This isn’t mere conjecture; China has exercised this power before, leading to dramatic effects.
In 2010, a collision between a Chinese fishing vessel and a Japanese coast guard boat led to the arrest of the Chinese captain. When Japan refused China’s demands for his release, China responded by cutting off all REE exports to Japan and reducing global exports by 40%.
Japan’s advanced economy had no alternatives to China’s REEs. Consequently, Tokyo swiftly capitulated, having no other option. Tokyo released the captain to China without pressing charges, marking a significant diplomatic triumph for Beijing while leaving Japan humiliated.
This incident caused the price of some REEs to soar between 2010 and 2011.
For example, according to Institute for Rare Earths and Metals in Switzerland, the price of lanthanum (La) skyrocketed by around 20x during this period.
An even bigger mania took off in publicly-traded REE stocks that lasted nearly a year.
The 2010 incident with Japan is solid evidence that China is able and willing to leverage REEs as a strategic weapon.
I think China will play this card again as its rivalry with the US heats up, leading to a price surge similar to—or even more explosive than—the one in 2010. Even a mere threat to restrict supplies could send prices skyrocketing.
We’ve already started to see this happen.
For example, the Biden administration has recently considered a broad semiconductor chip export ban on China.
In response, China announced export restrictions of its own on two strategic metals—gallium and germanium—which Western countries import from China for semiconductor production.
Germanium is employed in various applications, including high-speed computer chips, plastics, military technologies like night-vision devices, and sensors for satellite imagery.
Gallium is utilized in radar systems, radio communication devices, satellites, and LEDs.
According to the chart from Visual Capitalist below, the US imports 100% of its gallium and 50% of its germanium from China (click to enlarge).
A former top Chinese official said the restrictions on gallium and germanium were a “well-thought-out heavy punch” and “just the beginning.”
Unfortunately, most people have no idea what really happens when the two biggest world powers collide, let alone how to prepare…
The coming crisis will be much worse, much longer, and very different than what we’ve seen since World War II.
Countless millions throughout history were wiped out financially—or worse—as big powers collided.
Don’t be one of them.
That’s precisely why I just released an urgent new report with all the details, including what you must do to prepare.
It’s called The Most Dangerous Economic Crisis in 100 Years… the Top 3 Strategies You Need Right Now.
Click here to download the PDF now.
It is my sincere desire to provide readers of this site with the best unbiased information available, and a forum where it can be discussed openly, as our Founders intended. But it is not easy nor inexpensive to do so, especially when those who wish to prevent us from making the truth known, attack us without mercy on all fronts on a daily basis. So each time you visit the site, I would ask that you consider the value that you receive and have received from The Burning Platform and the community of which you are a vital part. I can't do it all alone, and I need your help and support to keep it alive. Please consider contributing an amount commensurate to the value that you receive from this site and community, or even by becoming a sustaining supporter through periodic contributions. [Burning Platform LLC - PO Box 1520 Kulpsville, PA 19443] or Paypal
-----------------------------------------------------
To donate via Stripe, click here.
-----------------------------------------------------
Use promo code ILMF2, and save up to 66% on all MyPillow purchases. (The Burning Platform benefits when you use this promo code.)
Joe Biden recently told CBS’ Scott Pelley that “we’re the United State of America – the most powerful country in the history of the world”.
So that answers that, right?
Mining companies in the US are already betting on this. There’s are several that are breaking ground on new mines and refineries for rare earth metals right now. China may have a current advantage, but I expect that to change over the next few years.
Just Sayin’
Thats trying to play catchup which at this point fraught with problems. Stating new mines and building plants to process ores is a years long venture, probably in the 3 – 5 yr spans.
If china and the usausa go to blows, they’ll cut off ALL REE’s to high tech manufacturing, period which would slow further building and developments to a crawl. Its not just REE’s either that the western world is dependent on China for manufacture. MOST of the pharmaceuticals and medical gear is made there as well. China positioned itself as a world manufacturing base for a reason. The CEO’s of the west sold out their countrymen when they offshored production for more profits in their pockets.
“The US and China are battling over who will be the world’s most dominant power.” Lol. Lol. China is a cesspool. It’s already dying.
FIFY