Strategic Resources

The Search for Rare Earth Elements

There are 17 classified rare earth elements, many of which have strategic purposes. Rare in name only, these elements are anything but scarce as they are found all over the world. The challenge rare earth elements pose is during extraction, as they exist in low concentrations and are difficult to separate from one another.
Beyond extraction and mining, rare earth elements have a complex supply chain which includes separation, refining, alloying and the manufacture of end-use products. Though the western world relies heavily on rare earth elements for commercial, technological and military purposes, the supply chain activities for them are primarily handled by China.

Given the western world’s reliance on major exporters of rare earth elements for the mining, refining and fabrication activities related to rare earth elements – such as China, who controls upwards of 95 per cent of rare earth element supply globally – there are certain vulnerabilities in geopolitical circumstances that can threaten the supply and challenge the ability to meet demand for these critical materials.

Demand for rare earth elements has consistently grown since the 1960s, gaining importance with the introduction of the television and other commercially available technologies that rely on rare earths for their manufacture. There are no viable substitutes for rare earth minerals. Rare earth elements are regarded for their properties and the ability to improve the performance of other material properties such as metallurgical alloys. They also heighten electrical conductivity and play an important role in the production of a number of commercial, technological and defence applications.

For example, scandium is necessary for the advancement of aerospace and other high performance equipment. Yttrium is a major player in the manufacture of televisions and cancer treatments, and it enhances alloy strength. Cerium is used in steel production. Praseodymium is used in the manufacture of magnets and lasers. Neodymium is also used in magnets, microphones, electric motors and lasers.

Samarium is another rare earth mineral that is utilized in cancer treatment, x-ray technology and in nuclear reactors. Gadolinium is used in shielding for nuclear reactors and nuclear marine propulsion. Terbium is found in fuel cells and sonar. Holmium is used in lasers and high-strength magnets. Erbium is used to amplify signals for fibre optic cabling and this only scratches the surface of their importance.

From cell phones, to televisions, computer hard drives, electric motors magnets, superconductors, microwaves and tools related to medical science, these everyday applications are reliant on rare earth minerals to function. It is hard to conceptualize the degree to which society is dependent on these resources.

Rare earth elements are also of paramount importance for the manufacture and functioning of renewable energy and green technology. Without rare earth elements there would be no hybrid vehicle batteries or motors, no wind turbines, no solar panels, and it would even limit the ability of high speed rail and other efforts to realize high-efficiency and sustainable solutions – advancements that are key to the future.

Most importantly, perhaps, is the role rare earth elements play from a military and national security standpoint. Rare earth elements are considered to be strategic resources that play a critical role in many defence related applications. These applications support military and national security programs.

Rare earth elements are essential to a number of defence and weapon systems including: precision guided missile systems and unmanned drones, lasers, radar and detection devices, sonar, advanced armour, communications, aircraft, displays and optical equipment, coatings, and even electronic counter measures, to name only a few.

Used for their unique properties, rare earth elements are necessary for the production of two high-powered magnets that play a significant role in many military and technological applications: samarium cobalt (SmCo) and neodymium iron boron (NdFeB).

As rare earth elements are not exchange-traded as precious metals are, but rather sold privately, issues of supply, demand, and thus price are not easily resolved. This was the case when China established itself as the market leader in the rare earth element market, stripping the title from the U.S. whose capacities were significantly reduced in the wake of the low-price competition from China.

From the 1960s to the 1980s the U.S. was the leader in the rare earth elements market. In the 1990s and into the new millennium, China’s rare earth element mining, extraction and processing capacities greatly increased, making the country the new global market leader, producing 90 to 95 per cent of all rare earth elements globally and leaving the U.S. dependent on importing these resources. The U.S. had lost much of its capacity to refine, fabricate and manufacture rare earth elements due to a historic lack of investment in these processes and capabilities since their heyday, prior to the rise of China as a major player in the rare earth mineral resource game.

In 2010, China substantially reduced its exports of rare earth elements, citing the reduction of environmental hazards as the reason for doing so. By restricting supply, prices drastically increased and initiated fears of shortages in the market. This forced the U.S. to re-evaluate its role in the global supply chain to insulate itself from future disruptions to supply. Action needed to be taken to stabilize geopolitical tensions and regulate supply and thus price. In 2012, the U.S. jointly filed a case with Japan against China with the World Trade Organization questioning the motives and the legality of China’s export restrictions.

The World Trade Organization deemed the actions to be contrary to China’s free trade agreements and China lifted the quota. Prices quickly stabilized and demand has continually decreased since that time, as countries have used past geopolitical tensions as the motivation necessary to identify and expand opportunities to participate more actively in supply channels.

As a result, Australia is experiencing a surge in opportunistic corporate activity, since it is lucky enough to possess a large supply of rare earth elements. Several ASX listed companies have sizeable resource reserves totalling around a third of the world’s known supply, making Australia the likely contender against China’s production.

Not only is the western world focused on attempting to diversify supply streams, investing significantly in exploration projects of their own to do so, there is also a renewed effort to identify alternatives to these materials; there has also been a much greater push to integrate recycling programs to retrieve rare earth elements that would have otherwise been wasted.

As well, there is a growing interest on the part of private sector to increase exploration activities and to improve domestic downstream processing and supply chain activities. Investment will likely support all facets of the industry: mining, separation, refining and eventually the manufacture of alloys and end-use products. Many private investors see no point in investing in mining alone, citing the need to also invest in related downstream and supply chain activities. Of course, bringing domestic production back online would have to be done with a certain level of secrecy so as to keep geopolitical tensions at a low, preventing China from feeling threatened in the marketplace.

Rare earth elements are not only strategic for military purposes; they are of paramount importance for the future of aerospace and technology. Wars have long been fought over access to resources and in this case, dealing with strategic resources, any disruptions to supply or vulnerabilities in demand could lead to new geopolitical tensions. They are critical to national security. In recognition of this, much time, effort, and resources must be invested in rare earth mining, refining, and processing capacities to mitigate supply shortages. By strengthening domestic supply and supply chain activities, the western world would in fact be strengthening security and economic strength, but the question that remains is: will China freely relinquish control and dominance of the rare earths market?

Strategic Resources

There are 17 classified rare earth elements, many of which have strategic purposes. Rare in name only, these elements are anything but scarce as they are found all over the world. The challenge rare earth elements pose is during extraction, as they exist in low concentrations and are difficult to separate from one another.

June 24, 2017, 8:23 AM AEST