Rare Earth

A story in today's Wall Street Journal highlights U.S. national security officials' concerns about China's control of certain minerals and metals that are used in a whole bunch of applications -- from jet fighter engines to flat panel displays:

China's control of a key minerals market has U.S. military thinkers and policy makers alike worried about access to materials that are essential for 21st-century technology like smartphones—and smart bombs.

The concern over supplies of so-called rare-earth elements was highlighted this week by a report that Chinese customs officials had blocked exports of the materials to Japan. On Thursday, Beijing denied those reports. "China doesn't block rare-earth exports to Japan," said Chen Rongkai, a spokesman for China's Ministry of Commerce.

At issue is a group of 17 metallic elements with magnetic properties suited for high-tech applications such as computer hard drives and digital cameras. Rare-earth elements are also key to "green" technology: Energy-efficient light bulbs use europium and yttrium, while hybrid car batteries and wind-power turbines use neodymium.

While rare-earth ore deposits are found around the globe, China's dominance in mining and processing the elements has raised alarms in Washington. According to an April 2010 Government Accountability Office report, China now produces approximately 97% of the world's rare-earth oxides, the raw materials that can be further refined into metals and blended into alloys that can be made into finished components.

Over the past year, China has imposed global export quotas on the elements. Its Commerce Ministry has said total exports for the year would be capped at just under 30,300 metric tons, down 40% from last year. Only 7,976 tons of that were allocated for the second half of this year. Experts say much of that has already been shipped.

That has spurred anxiety among government officials and industry executives. Delegations from the U.S., Germany, and Japan have implored Beijing to recognize how critical they consider sustained supply. . . .

The fiscal year 2010 defense authorization bill contains a provision that, if passed, would direct the Pentagon to address national security issues related to rare-earth materials in the defense supply chain. As Inside the Pentagon reported in June:

A congressionally mandated Government Accountability Office report on rare earth materials in DOD's supply chain, issued in April, said that current capabilities to process rare earth metals into finished materials (such as precision-guided munitions, lasers, communication systems and radar systems) are "limited mostly to Chinese sources" and bolstered vertical integration may "increase China's total market power and dominance."

As a result, the Senate Armed Services Committee wants DOD acquisition chief Ashton Carter to report to Congress on national security issues related to rare earth materials in the defense supply chain by March 15, 2011.

The report must include the steps that DOD has taken to identify and address national security risks due to the department's dependence on Chinese sources for rare earth materials and which DOD plans to take within the next two years to identify and address such risks, authorizers add. The DOD report should also indicate whether direct investment by the U.S. government is needed to minimize national security risks associated with an interruption of supply and when the department plans to have a comprehensive plan to deal with these risks, the committee states.

Last month, the Federation of American Scientists' Secrecy News blog highlighted a Congressional Research Service report on rare earth elements. According to the report:

The concentration of production of rare earth elements (REEs) outside the United States raises the important issue of supply vulnerability. REEs are used for new energy technologies and national security applications. Is the United States vulnerable to supply disruptions of REEs? Are these elements essential to U.S. national security and economic well-being?

There are 17 rare earth elements (REEs), 15 within the chemical group called lanthanides, plus yttrium and scandium. The lanthanides consist of the following: lanthanum, cerium, praseodymium, neodymium, promethium, samarium, europium, gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium, and lutetium. Rare earths are moderately abundant in the earth’s crust, some even more abundant than copper, lead, gold, and platinum. While more abundant than many other minerals, REE are not concentrated enough to make them easily exploitable economically. The United States was once self-reliant in domestically produced REEs, but over the past 15 years has become 100% reliant on imports, primarily from China, because of lower-cost operations.

In February 2009, a Pentagon board ruled that specialty metals are not materials critical to national security for which only a U.S. source should be tapped, eliminating a national security reason for the Defense Department to ensure a long-term domestic supply of such materials. As InsideDefense.com reported at the time:

John Young, the defense acquisition executive, submitted the finding to Congress in a Jan. 26 report mandated by lawmakers. The report followed a Dec. 12 meeting of the Strategic Materials Protection Board, chaired by Young and composed of representatives from the Office of the Secretary of Defense, the service acquisition executive offices and the under secretary of defense for intelligence.

The Strategic Materials Protection Board discussed and approved the definitions of strategic and critical materials proposed by the executive secretary during its meeting, the report states.

"As a result of the modified definition for critical materials, any material designated as critical will require a risk assessment and a strategy to ensure domestic availability," the committee explains.

The status of specialty metals used to make sensors, armored vehicles, satellites and other items has long been a congressional concern. The Fiscal Year 2007 Defense Authorization Act mandated the creation of the Strategic Materials Protection Board to oversee their use.

A year later, the FY-08 Defense Authorization Act directed the board to assess the extent to which domestic producers of strategic materials are investing in a sustained way in the processes, infrastructure, workforce training and facilities needed for the continued domestic production of such materials.

The Jan. 26 report concludes that the critical nature of a material is a function of its importance in DOD applications. It also assesses the extent to which department actions are required to shape and sustain the market and the impact and likelihood of supply disruption.