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Rare Earth Minerals: A timeline of US -China Industry Developments

By: Edward Kemelmakher

Introduction:

Have you ever stopped to think about the “made in China” label on some of the electronics you own? Or, have you stopped to think about what those electronics are made of? Well, chances are not only is the phone or computer you’re reading this on made in China, but the metals inside it were harvested and processed there too!

 

Rare Earth Metals (REMs) are some of the most important materials in the technology and defense sectors. As foreign as they may sound, these seventeen elements are not only abundant as some of the most common elements in the Earth’s crust but also as the elements we most frequently interact with.

What makes these elements rare, however, is the complexity in processing them, and the fact that China accounted for 85% of worldwide REM exports in 2016. 

 

Analyzing the progress of China’s monopoly on the REM market from an environmental perspective is crucial due to their indispensability for the production of renewable energy infrastructure like solar panels and wind turbines. REMs are necessary for creating permanent magnets and batteries, as well as Electric Vehicles (EVs) — vehicles with an electric motor that are cleaner for the environment than traditional gasoline powered engines. 

 

But as much as REMs can assist developed countries in producing important technologies, REM mining and processing can be disastrous for the environment due to various mining sites’ proximity to deposits that contain water with toxic and radioactive materials. The extraction process itself is hazardous as these toxins and radioactive waste can leak when the metals are extracted. 

 

Environmental damage increases during the processing phase, with processing plants often releasing large quantities of hazardous substances into the atmosphere. The problem’s severity has also attracted the European Union’s attention – they published a comprehensive report of the environmental damage rare earth mines in China have caused in 2014.

 

Damage from REM mining and processing has become an international focus in recent years as China passed environmental regulations on REM extraction limiting the emission of pollutants and toxic waste. Due to environmental and strategic concerns posed by China's REM sector, the U.S. is also taking steps to kickstart its own rare earth industry, reopening its largest mines in 2018, and providing billions in federal government subsidies to the industry.

 

The following timeline compares REM industry developments in the U.S. and China to highlight the environmental damage from REM mining and the policies being implemented to curb it as competition grows in the global rare earth industry.

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China Timeline:

U.S. Timeline:

1986

March 1986: China founds the State Key Laboratory of Rare Earth Research Utilization

Paramount Leader Deng Xiaoping approves the National High Technology Research and Development Program aka the 863 Program. The program aims to develop China's technology sector through state-funded research and development and examine how REMs can be leveraged in the global economy. Deng also introduces tax cuts for exporters of REMs, spurring competitive growth between foreign and domestic REMs companies in the industry.

1958

1958: Small-scale production of REMs in China begins

China begins to send mined REMs to Baotou, a city in China 150 kilometers south of Bayan Obo, where the Baotou Iron and Steel Group processes the REMs into usable magnets for electronics and machining equipment. The company also continues to explore Bayan Obo, discovering the largest known concentration of REMs in one mining site in the world.

1991

1991: China begins to regulate and restrict the REM industry

China declares rare earths “a protected and strategic mineral”, referring to the restricted participation of only foreign investors in rare earth processing as part of a joint venture with Chinese firms. 

 

In line with this policy, China begins to suspend foreign investment from all countries and stop all foreign projects that damage the environment and natural resources to consolidate its domestic market. 

 

Additionally, the federal government begins to implement REM export quotas to develop its own domestic REM sector and attract foreign firms to move their processing operations to China.

1994

1994: China starts underselling REMs in the international market

China begins nationalizing a major part of its domestic REM industry and establishes a cartel of REM producers including the China Northern Rare Earth Group, which now set prices on government orders. U.S. companies decline in the global REM market as they become unable to compete due to less state investment

2005

2005: China begins to acknowledge REM Environmental Damage

Xu Guangxian, a Chinese chemist and a leader in China's rare earth market, publishes a paper exposing the radioactive waste that spilled into the Yellow River from the Baotou processing plant. Guangxian finds that for every ton of rare earths processed as much as 12,000 cubic meters of toxic waste was produced for over 40 years. Local sources corroborate reports in Guangxian, detailing how the Baotou processing plant’s dumping of waste into the Yellow River killed or contaminated most of the region’s fish.

 

Villagers explained that the Chinese government chose to move the villagers farther from the toxic waste rather than cleaning and filtering the contaminated water, expressing their ignorance for the environmental issue. 

2009

July 2009: China passes new regulations to protect the environment

China’s 11th Five Year Plan vows, “China will never develop the rare earth industry at the expense of its environment,” which encourages the Ministry of Environmental Protection to formulate the “Rare Earth Industry Pollutant Discharge Standards”. The regulation limits atmospheric pollutants like sulfur dioxide and 14 types of water pollutants. 

 

The Ministry of Environmental Protection estimates the regulation will cost the industry ¥1.4 billion to implement environmental protection efforts and additional cleanup costs.

2012

June 20th, 2012: China's State Council releases first white paper on Rare Earth industry

China’s State Council writes a white paper explaining the government’s policies and acknowledges the government’s poor enforcement of regulations toward the REM industry. It also encourages REM companies to initiate a ¥4 billion environmental remediation and cleanup effort by primarily funding initiatives to increase pollution control and improve technology to be less environmentally damaging. Additionally, the government promises to crack down on mines that operate without government licenses or oversight in addition to mines that exceed Chinese production quotas. 

2013

June 20th, 2012: China's State Council releases first white paper on Rare Earth industry

The China Water Risk group (CWR) publishes an investigative report exposing a large black market industry for rare earth mining and processing in China. Black market miners use inefficient and "primitive" smelting and separation techniques that are not processed or regulated by the Chinese government before dumping the waste into rivers.

 

REM experts dub various villages like Dalahe located alongside the yellow river in Inner Mongolia as “cancer villages” due to the amount of various illegal mines present in the villages. 

 

Multiple villagers contract pancreatic and lung cancer as well as Leukemia from REM mining and waste dumps, leading to complaints that the Chinese government has turned a blind eye to black market mining and has yet to compensate villagers who were forced to relocate.

2014

2014: EU publishes a report on the environmental damage of REM mining

Paramount Leader Deng Xiaoping approves the National High Technology Research and Development Program aka the 863 Program. The program aims to develop China's technology sector through state-funded research and development and examine how REMs can be leveraged in the global economy. Deng also introduces tax cuts for exporters of REMs, spurring competitive growth between foreign and domestic REMs companies in the industry.

2019

2019: China’s Ministry of Industry cracks down on illegal mining

The Ministry of Industry and Information Technology (MIIT) writes a memorandum directed at the public, clarifying how black market miners’ illegal mining and processing of REMs has caused environmental damage in China. They promise measures like a license suspension and a "traceability system" to stop domestic Chinese producers from using illegal REMs for all law-breaking companies in the REM industry.

2022

2019: China’s Ministry of Industry cracks down on illegal mining

The Chinese government announces the merger of three of its six largest rare earth companies — Aluminum Corporation of China, China Minmetals Corporation, and Ganzhou Rare Earth Group Co., Ltd. — into a direct state-owned conglomerate, which controls 70% of China's rare earth production and 40% on the global level.

 

Various industry analysts believe the merger will allow China to increase competitiveness in the REMs industry amid growing global competition from the U.S. and Australia in addition to increasing production efficiency and pricing power.

 

The merger is of concern to countries throughout Europe and Asia that are dependent on China’s rare earth supply as they might be forced to accept whatever prices the new conglomerate decides on.

1949

1949: U.S. prospectors discovers Rare Earths Metals

Prospectors Herbert S. Woodward, Clarence Watkins, and P.A. Simon discover a large reserve of lanthanum, lithium, and thorium REMs at a mine in Mountain Pass, California, which becomes known as the largest stockpile of REMs on Earth at the time.

 

Excited by the commercial and military prospects of a domestic rare earth mine, the United States Geological Survey (USGS) begins mapping the site and searching for potential buyers of the land. 

1970

1970: EPA is established

U.S. President Richard Nixon establishes the Environmental Protection Agency — a federal institution that strictly regulates REM mining and processing facilities by limiting emission levels at the facilities. The EPA amends the definition of source material — material containing uranium or thorium — which resultedly categorizes REM byproducts as source material. REMs then undergo extensive licensing, regulatory, disposal, and liability rules due to their new classification. 

 

The added costs from regulations lead to the shutdown of American mining and processing companies like Kerr-McGee and the Michigan Chemical Corporation. Customers of such rare earth companies like Kerr-McGee begin to transition towards cheaper Chinese Rare Earth magnets

1950: REM extraction begins

The Molybdenum Corporation of America (Molycorp), a mineral extraction company, purchases ownership of the Mountain Pass Mine and begins processing REMs two years later.

1950

1980

1980: Molycorp becomes a leader in Rare Earth Production

After spending millions on advanced REM separation plants — facilities that remove specific rare earth metals like neodymium from large minerals like bastnaesite — Molycorp overtakes the Baotou Iron and Steel Group to become the world's leading supplier of REMs, accounting for 70% of global supply. 

 

Meanwhile, the Chinese government sends Chinese scientists as exchange students to American universities to learn more about REMs as part of its efforts to become the global leader in the REM industry. 

1985: EPA sets strict regulations

The EPA implements standards on the petroleum cracking industry as it is responsible for the making of gasoline and is a major importer of REMs. These standards heavily limited the amount of rare earths that could be used as catalysts in petroleum refining. By removing one of the key uses of REMs, EPA regulations cause U.S. demand for rare earths to plummet, a sharp decline in the price of REMs, and a cut in U.S. production to offset the price decline.

1985

1998

1998: Mountain Pass Mine closes

A ruptured pipeline at the Mountain Pass mine causes a 300,000 gallon spillage of radioactive waste into the Mojave desert, contaminating a majority of the surrounding land. 

 

The cleanup costs, compounded with competition from Chinese REM producers like Baotou Steel, force Molycorp into bankruptcy. After a failed cleanup attempt, Molycorp decides to cease operations at the Mountain Pass mine, and the U.S. effectively withdraws from the rare earth industry. Most of Molycorp’s customers then turn to China for a supply of rare earths.  

2012

August 27, 2012: Molycorp re-opens the Mountain Pass mine

After raising nearly $5 billion upon entering the New York Stock Exchange, Molycorp obtains all the environmental permits from the U.S. government needed to resume operations at the Mountain Pass mine. Molycorp decides to re-open the Mountain Pass mine due to the large breadth of REMs located in one mining site. 

 

The operation becomes unprofitable as Molycorp fails to meet environmental standards and supply the funds necessary for the extremely high start-up costs. Despite the attempt to once again rival the Chinese foothold in the rare earth industry, Molycorp does not make significant gains in the international rare earths market.

2016: Molycorp declares bankruptcy

After years of financial losses, Molycorp files for bankruptcy with over $1.4 billion in debt, forcing the Mountain Pass to shut down once more and solidifies China’s position as the leader in global rare earth mining and processing. 

2016

January, 2018: Mountain Pass is purchased

U.S. President Donald Trump and the Department of Defense encourages MP Materials — an American-led mining consortium — and its acquisition of Mountain Pass out of bankruptcy as an attempt to revive the U.S. rare earth industry.

2018

2020

2020: U.S. President Donald Trump passes an executive order on Rare Earths

U.S. President Donald Trump signs Executive Order #13817, declaring a national emergency for the U.S. mining industry. The order allocates $2 billion in government spending for the use of rare earth elements in munitions, missiles, and microelectronics.

 

The order calls for eliminating excessive government regulations and creating more cost-effective approaches to establish new rare earth mining sites and reopen old ones by making new investments of venture capital to the REM industry more feasible. 


The order overall reflects President Trump’s efforts to “reduce the Nation’s vulnerability to disruptions in the supply of critical minerals” while limiting China’s monopoly on REMs within the context of the trade war between the U.S. and China.

2021

2021: USA Rare Earth Company plans to mine in Texas

Texas’ lax regulations on emissions, state subsidies, and tax breaks encourage U.S. rare earth companies like the USA Rare Earth Company to open a mine and operational processing facility in Texas by 2023.

The USA Rare Earth Company’s Texan mine will be the first domestic mine in the U.S. to open outside of California, and the first company to domestically process the rare earths it mines. The establishment of the new mine indicates both the increasing growth of the U.S. REM industry and the U.S. government’s attempt to occupy a purely domestic supply of REMs independent from China.

1935

1935: China discovers REMS

He Zuolin, a Chinese prospector and professor of geology at the Chinese Academy of Sciences, discovers rare earth elements in the depths of the Bayan Obo iron ore mine in Inner Mongolia. 

 

Further excavations throughout 1935 by the Japanese North China Development Corporation uncovers all 15 rare earth elements as well as radioactive waste at the Bayan Obo site. The site becomes the first mine to contain all REMs at one site due to prior discoveries occurring in separate locations. 

2019

2019: Texas begins mining rare earths

Australian rare earth company Lynas Rare Earths begins the construction of a rare earth processing plant in Texas using funding from the Department of Defense to circumvent China’s monopoly on rare earth processing. 

 

China retaliates against Lynus with a wave of fake social media accounts to protest the new mines in Texas, warning Texans about potential radiation poisoning, toxic waste and threats to livelihood from a rare earth element refinery that Lynas plans to finish constructing by 2025. 

 

Experts believe these social media attacks suggest that Beijing is willing to widen the array of tools it leverages to protect its interests in strategic sectors, going as far as causing possible business or reputational harm to commercial entities.

Conclusion:

Because of their use in electric vehicles, renewable energy infrastructure, and semiconductors, U.S. and Chinese experts write that demand for rare earth minerals will continue to skyrocket in the coming years. Both U.S. and Chinese policymakers are stressing the importance of REMs as a resource critical to national security, which urges the understanding of rare earth policies in both countries.

 

As China threatens to withhold REMs from adversarial countries like Japan and the U.S. establishes domestic supply chains for rare earths, REMs are increasingly becoming a key topic of interest for not just experts but also for people like you and me. After all, REMs are responsible for the construction of day-to-day items like cell phones and computers, so paying attention to disruptions in REM supply that affect the prices and availability of these items is crucial! 

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