Rare Earth

China's ownership of 95 percent of the supply of rare-earth minerals that are crucial to high-tech equipment -- military and civilian -- has in recent years caused concern among lawmakers on Capitol Hill.

A new Congressional Research Service report -- originally obtained by Secrecy News -- notes that lawmakers in their 2011 Defense Authorization Act called on the defense secretary to "conduct an assessment of rare earth supply chain issues and develop a plan to address any vulnerabilities."

The law mandated that the secretary "assess which rare earths met the following criteria: (1) the rare earth material was critical to the production, sustainment, or operation of significant U.S. military equipment; and (2) the rare earth material was subject to interruption of supply, based on actions or events outside the control of the U.S. government."

DOD subsequently issued its report in March 2012, which found there wasn't that much to worry about:

Rare earth materials are widely used within the defense industrial base. However, such end uses represent a small fraction of U.S. consumption. As a result, when looked at in isolation, the growing U.S. supply of these materials is increasingly capable of meeting the consumption of the defense industrial base. Over the past year, there have been a number of positive developments with regard to both supply and demand within the rare earth materials markets. Reactions to market forces have resulted in positive developments, such as prices decreasing by half from their peak levels in July 2011, increased investment and domestic supply of rare earth materials, corporate restructuring within the supply chain, and lower forecasts for non-Chinese consumption. By 2015, the Department believes this will help to stabilize overall markets and improve the availability of rare earth materials.

The Department remains committed to pursuing a three-pronged approach to this important issue: diversification of supply, pursuit of substitutes, and a focus on reclamation of waste as part of a larger U.S. Government recycling effort. In addition to the many positive developments that indicate an increasingly diverse and robust domestic and global supply chain for rare earth materials, the Department will continue to monitor these supply chains, prepare possible contingency plans for ensuring their availability, and implement such plans as appropriate.

The Sept. 17 CRS report also notes that Mountain Pass, CA-based mining company Molycorp recently announced it was buying Canadian company Neo Material Technologies. "Neo Material Technologies makes specialty materials from rare earths at factories based in China and Thailand. Molycorp also announced the start of its new heavy rare earth production facilities, Project Phoenix, which will process rare earth oxides from ore mined from the Mountain Pass facilities," CRS states.

Given all that, the CRS report states that Congress "may choose to use its oversight role to seek more complete answers" to four questions:

* Given Molycorp's purchase of Neo Material Technologies and the potential for the possible migration of domestic rare earth minerals to Molycorp's processing facilities in China, how may this move affect the domestic supply of rare earth minerals for the production of U.S. defense weapon systems?

* Given that DOD's assessment of future supply and demand was based on previous estimates using 2010 data, could there be new concern for a possible rare earth material supply shortage or vulnerability that could affect national security?

* Are there substitutes for rare earth materials that are economic, efficient, and available?

* Does dependence on foreign sources alone for rare earths pose a national security threat?

CRS concludes with this:

Congress may encourage DOD to develop a collaborative, long-term strategy designed to identify any material weaknesses and vulnerabilities associated with rare earths and to protect long-term U.S. national security interests.