The United States has frequently taken measures to challenge China's rare earth monopoly position! What will the United States do next to ban the Ministry of Defense from buying Chinese rare earths?

In the trade conflict between China and the United States, there is one thing that could be an unavoidable pain point for the United States: rare earths.

On July 10, 2018, the Office of the US Trade Representative released a new round of taxes on the Trump administration, saying it would soon impose an additional 10 per cent tariff on $200 billion worth of Chinese goods. This includes all rare earth oxides, compounds, metals and rare earth permanent magnets, as well as end products for rare earth applications.

On August 13, the President of the United States signed the 2019 JohnS.. McCain Defense Authorization Act (NDAA). Section 871 of the new legislation prohibits the US Department of Defense from buying rare earth magnets from China, Russia, Iran and North Korea.

After the announcement of the bill, the Canadian Nova Scotia Halifax-Ucole rare Metals Company expressed support for the bill, Ucole President and Chief Executive Officer Jim McKenzie said that this is a turning point in the reconstruction of the independent rare earth industry in the United States. It is also an important turning point for rare earth investors.

From the US Defense Authorization Act banning the import of rare earth magnets from China and imposing tariffs, it seems that the United States is gradually moving away from its dependence on Chinese rare earths and wants to build its own (REE) supply chain of rare earths in the United States. But the problem is that China accounts for about 85 per cent of the world's mining of rare earths and produces 90 per cent of rare earth magnets. In 2016, the United States imported 90% of its rare earth magnets from China. Can the United States end its strategic vulnerability to dependence on key foreign minerals?

Distribution of rare Earth Resources in the World

According to the latest data from the US address Survey, the global reserves of rare earth REO in 2017 are about 120 million tons, while China's reserves are 44 million tons, accounting for 36.67 per cent of the world's total reserves. Second, Brazil, Russia and Vietnam also account for 22 million tons, 18 million tons and 22 million tons of rare earth reserves, respectively. Among them, the United States also accounts for 1.4 million tons of rare earth resources.

(source: United States Geological Survey)

Rare earth: "industrial gold", not a false name

Rare earth, also known as rare earth element, is the general name of 17 kinds of metal elements such as lanthanide, Scandium and yttrium in the chemical periodic table. It is an important non-renewable strategic material.

It has unique magnetic, optical, electrical and chemical properties and can be combined with other elements to form new materials with different uses. There are 250 kinds of rare earth minerals in nature. The first rare earth was discovered by Finnish chemist Kadolin (John Gadolin). The first rare earth "element" (yttrium soil, or Y2O3) was separated from a heavy bituminous ore in 1794. because there were few rare earth minerals discovered in the 18th century, only a small amount of insoluble oxides could be prepared by chemical method. Historically, it has been customary to call this oxide "earth", hence the name rare earth.

Rare earth elements have been widely used in automotive, electronics, aerospace, robotics, telecommunications and health care industries, petrochemical, metallurgy, machinery, and other fields. Two of the rare earths, neodymium and praseodymium, are key raw materials for superstrong permanent magnets and are critical to the electronics, technology and automotive industries.

In general, different rare earths have many important uses in different fields:

1. Military

Rare earth is known as "industrial gold", and its most remarkable function is that it can greatly improve the quality and performance of other products. For example, it can greatly improve the tactical performance of steel, aluminum alloy, magnesium alloy and titanium alloy used for making tanks, aircraft and projectiles. Rare earths are also high-tech "lubricants" for electronics, laser, nuclear industry, superconductivity and so on.

2. Metallurgical industry

The addition of rare earth metals, fluoride and silicide to steel can play the role of refining, desulphurization, neutralization and low melting point harmful impurities, and can improve the workability of steel. Rare earth nodular cast iron, especially suitable for the production of complex ductile iron parts with special requirements, is widely used in automobile, tractor, diesel engine and other mechanical manufacturing industry. The addition of rare earth metals to non-ferrous alloys such as magnesium, aluminum, copper, zinc and nickel can improve the mechanical properties of the alloys at room temperature and high temperature.

3. Petrochemical industry

The molecular sieve catalyst made of rare earth has the advantages of high activity, good selectivity and strong resistance to heavy metal poisoning, so it is widely used in petroleum catalytic cracking process. In the process of synthesizing NH3, using a small amount of rare earth nitrate as co-catalyst, the gas volume of treatment is 1.5 times larger than that of Ni-Al catalyst, and the compound rare earth oxide can also be used as a catalyst for tail gas purification of internal combustion engine.

4. Glass ceramics

Rare earth oxide can be widely used as polishing powder for polishing optical glass, lens, picture tube, plastic and metal tableware, etc. In the process of melting glass, ceria has a strong oxidation effect on iron and can reduce the content of iron in glass. Adding rare earth oxide can make optical glass and special glass for different purposes; adding rare earth to ceramic glaze and porcelain glaze can reduce the fragmentation of glaze and make the products show different color and luster.

5. New materials

Rare earth cobalt and neodymium iron boron permanent magnet materials are widely used in electronic and aerospace industry, garnet ferrite single crystal and polycrystal formed by pure rare earth oxide and iron oxide, which can be used in microwave and electronic industry. Yttrium aluminum garnet and neodymium glass made of high purity neodymium oxide can be used as solid laser materials, and rare earth hexaborate can be used as cathode materials for electron emission.

As a result, the United States has named 35 minerals, including rare earths, cobalt, lithium, vanadium and uranium, "critical to the U. S. economy and national security," and is vulnerable to supply disruptions, according to foreign media reports. In 2008, rare earth materials have been listed as the "key material strategy" by the US Department of Energy, and have become the strategic resources competed by the world's major economies, especially in Europe, the United States and other countries and regions pay more attention to rare earth materials. In early 2010, the European Union announced the establishment of strategic reserves of rare earths.

In fact, it is reported that the US Department of Defense procures 750000 tons of minerals and metals each year. Many of them are critical to subbombs, turbine engines, advanced radar and military weapons.

Why did the United States choose to import rare earths from other countries?

It is precisely because of the vital value of rare earths, it is argued that with the increasing demand for rare earths in the modern high-tech industry, some of the rare earth materials have exceeded the price of gold and are genuine rare precious metals.

Rare earths can also be called "the three most important resources in the world" with semiconductors and petroleum energy. According to the data, there is no shortage of rare earth minerals in the United States. In the 1960s and 1980s, the United States was the largest mining and exporting country of rare earths in the world. Mountain Pass rare earth ore in southeastern California has high grade (7% to 8%). Rare earth REO reserves range from 140 to 3.76 million tons, with an annual production capacity of 40, 000 tons, which can be used by the United States for 280 years.

So, since the United States has rare earth resources, why has the United States been importing from other countries but not mining?

According to an article published on the US Defense website two years ago, the last rare earth mine in the United States stopped mining in 1998, and in the same year, Magnequench, the most important rare earth smelter in the United States, (located in Anderson, Indiana, USA) was acquired by a company in Asia, after which McGonagall's mining plant was closed, and the US rare earth mining industry completely disappeared.

On the whole, the United States did not mine domestic rare earth mines before, mainly because it did not have the ability to resume production, and heavy mining regulatory policies made it impossible for American companies to mine rare earth materials at low cost, in addition, The lack of "management" ability of the United States to enterprises is also a reason that can not be ignored.

1. Lack of ability to resume production

In the early 1960s and early 1980s, the United States maintained its position as the world's largest supplier of rare earths for 20 years, but with the increase in exports from other countries, American companies were no longer able to compete in terms of costs. In the 1990s, many rare earth development enterprises closed down one after another, and gradually stopped mining rare earths in our country after 1998. Therefore, although the United States has this relatively rich rare earth resources, but it is difficult to resume the mining of rare earth minerals in the short term. Therefore, we choose to import a large number of rare earth materials from other countries.

2. Onerous mining regulatory policies

Because the chemical properties of rare earths determine the way of mining, extraction and separation, and these methods generally cause environmental pollution. If the development of rare earths is not good, or even excessive mining will not only cause huge losses to the national economy, but also cause great damage to the entire ecological environment. A series of environmental problems include soil erosion, landslides, ground cracks and subsidence, destruction of fertile land, eutrophication of water sources in mining areas, heavy metal pollution and so on.

However, the United States has strict environmental protection requirements, heavy mining regulatory policies make it impossible for American rare earth enterprises to mine at low cost, and the high resource and environmental cost has become one of the main reasons why the United States does not exploit its own rare earth resources.

3. The "management" of the enterprise is insufficient.

The United States does not have the ability to "manage" its businesses, so it will not be easy to return from a state of little mining technology and market capacity to a state of competence.

China's rare earth status is hard to shake!

China is the only country in the world that can provide all 17 rare earth metals, especially heavy rare earths with prominent military uses. China accounts for the vast majority. Baiyun Obo Mine in China is the largest rare earth mine in the world, accounting for 83% of the reserves of rare earth resources in China.

In the last century, with China's reform and opening up, advanced mining technology and equipment, coupled with the strong support of the government, China's low labor force and loose environmental standards made the Baiyunebo rare earth mine in Inner Mongolia (taste 5%). REO reserves of 36 million tons, annual production capacity of 100000 tons), Fujian and Hunan, together with heavy rare earth minerals, quickly became the world's largest rare earth production country, and quickly occupied the global market with "cabbage price". In 2006, rare earth mines in many countries were basically shut down. Over the past decade, China has contributed an average of more than 90 per cent of global rare earth production and supply each year, while it has about 37 per cent of global rare earth reserves.

There is a view that China's rare earths are compared with OPEC oil, "there is oil in the Middle East, China has rare earths" is a statement of the status of China's rare earth resources. China has a better position in the rare earth world than OPEC, which accounts for more than 60% of the oil trade.

It can be said that the more dependent the United States on Chinese rare earths, the more China will be able to grasp the lifeblood of rare earth resources.

According to Chinese customs data, in 2017, China exported 3350.85 tons of rare earth permanent magnet materials to the United States, accounting for 11.2 percent of China's total exports of rare earth permanent magnet materials. The export value is nearly 150 million US dollars, accounting for 10.2% of the total export of rare earth permanent magnet materials in China. But in the US, 78 per cent of total imports of rare earths in 2017 came from China, according to USGS statistics. It can be seen that the consumption of rare earths in the United States is highly dependent on China, and alternative sources of imports almost do not exist. For China, new US legislation banning the Defense Department from buying rare earth magnets from China has had a limited impact on the country's rare earth industry.

The website of the US "Capitol Hill" reported a few days ago that if China cuts off the source of rare earths, the United States will not be able to make most advanced weapons systems. In addition, a large number of aircraft, computers, smartphones and other industrial lines that need rare earth metals will also be forced to close. It can be seen that if the United States increases restrictions on China's import of rare earths and raises barriers, it will inevitably increase the cost of buying rare earths for US manufacturers, and these costs will also be passed on to consumer goods. In the end, it is the interests of the American people that White House officials keep saying they want to protect.

Thus it can be seen that the dominant position of rare earths, especially heavy rare earths, will not change for the time being. Considering the lack of cost advantage of American light rare earth products compared with Chinese light rare earth products, some foreign rare earth development and smelting separation projects will face a series of operational pressure problems, and even fall into the position of loss.

How will the United States deal with the rare earth crisis after banning imports of Chinese rare earths?

Earlier, according to the CRS report of the US Congress, China is also aware of the strategic value of rare earths, raising prices while beginning to restrict exports as a weapon.

The United States has also proposed measures to deal with a range of rare earth concerns, such as finding alternative ways to extract rare earths from by-products of coal mines or to find alternatives.

In addition, there are reports that the United States began banning imports of specific metals last summer, and the government pledged $40 million to step up domestic exploration for rare earth companies. After China teamed up to acquire the only rare earth mine in the United States, it focused on rare earth companies.

Although there are no public plans to make the United States fully self-sufficient in mineral supplies, recent developments, such as rare earth yttrium and praseodymium, were hit by tariffs earlier this month. On the face of it, the country's goal is to stimulate domestic production of minerals at the expense of foreign exports.

In a foreign media report that "NioCorp's Elk Creek project is optimistic", the view is that NioCorp, the US mining operator, may be an early beneficiary of the growing emphasis on the domestic mining industry. In addition to producing titanium, its Elk Creek project in Nebraska is the only source of niobium and scandium in North America.

The mine is currently under development and NioCorp is expected to start production in 2021 and is expected to be able to produce up to 2.9 million tons of titanium dioxide, 643800 tons of niobium pentoxide and 7800 tons of scandium over its 32-year life span. NioCorp estimates that the business will generate $17.6 billion over its life cycle and an operating margin of $12.2 billion.

The industry remains optimistic that Trump's ideal of self-sufficiency can be realized. "the United States is sitting on huge mineral resources and reserves that may be wider than those," Ned Mamula, a part-time scholar of geological sciences at the Center for Scientific Research, and Stephen Moore, chief economist of the Heritage Foundation, wrote in a national review. "

Similarly, in a March 2018 newsletter from Hogan Lovell Law firm, US lawyer Korey J Christensen concluded, "in the coming months, industry participants may see attempts to overturn regulatory leases and permissible barriers. It may also increase the amount of land available to the federal government for mineral development.

Despite the potential local interest of US mining companies in tariffs, Mr Trump focused on "all aspects of the supply chain" in his initial order, given the limited niobium reserves in the US. It is unclear whether concerns in the United States will continue to grow. As Green points out, "the key mineral problems in the United States have become worse and worse," and Trump's latest policy is likely to increase pressure on American miners, rather than necessarily achieving positive results across the country.

In addition, Arafura Resources also plans to become a long-term and safe supplier of neodymium and praseodymium (NdPr) in the next few years.

The project, located 135 kilometers north of the Stewart Highway in Alice Springs, Australia's Northern Territory, is expected to have a mine life of 30 years. Arafura's mineral ownership rights in the project are guaranteed by three exploration licenses (ELs). The cornerstone asset of the project is the Nolans Bore rare earth phosphate deposit, which is one of the largest and most concentrated deposits of the same type in the world. The deposit contains 56 million tons of compliant mineral resources, with an average grade of 2.6 per cent of rare earth oxide (TREO), extending 215 metres below the surface. 2/3 of the rare earth content is highly credible, measuring and indicating resources. Nolans is expected to provide 10 per cent of global demand for neodymium and praseodymium by 2020.

In the report, the view is that the latest US Defense Department ban could excite many rare earth mining projects. Who will replace the 90% shortage of U. S. military imports from China? Nolans is one of the largest and more advanced NdPr projects in the world, providing investors with an attractive investment in Arafura Resources.

The dispute over rare earths has long existed.

As early as 2012, China had disputes with the United States, Japan and other state-owned rare earths.

The rare earth case stems from the gradual restriction on the export of rare earths and other precious natural resources under the background of the gradual deterioration of the ecological environment in China.

Since 1985, China has implemented the export tax rebate policy for rare earth products.

Since 1999, China has implemented quota management for the export of rare earth products.

Since January 1, 2004, the export tax rebate for rare earth metals has been adjusted from 13% to zero, and the export tax rebate rate for inorganic or organic compounds of rare earth metals, yttrium, scandium and their mixtures has been adjusted from 17% and 13% to 5%.

Since May 1, 2005, the export tax rebates for rare earth metals, rare earth oxides, rare earth salts and other products have been abolished, and the number of export quota enterprises has been greatly reduced.

In 2006, the Ministry of Land and Resources of China stopped the issuance of new rare earth mining licenses. And released on November 1, 2006, will impose export duties on rare earth products from June 1, 2007, with a tax rate of 10%.

In April 2009, China once again issued a new "rare earth mining total control target", continue to compress the new mining license, control the mining of rare earth minerals from the source, and put forward the target of limiting the export quota of rare earths within six years.

In addition, in terms of investment management, foreign-funded rare earth mines are prohibited, foreign investors are allowed to invest in rare earth smelting and separation projects in the form of joint ventures and cooperation, and foreign investors are encouraged to invest in rare earth deep processing, new rare earth materials and rare earth application projects.

With the introduction of these restrictions, the interests of these countries, represented by the United States, Japan and Europe, which have long relied on Chinese rare earths, have been touched in the international community. On March 13, 2012, the United States, Japan and Europe put forward consultation requirements for China's regulatory measures on tungsten, molybdenum and rare earths, and resorted to the WTO dispute settlement mechanism. On the 15th of the same month, China formally received a request for consultations from the United States, Japan and Europe, which is known as the "United States v. China rare Earth case."

It can be seen that rare earth materials, as "industrial gold", have been concerned by countries all over the world. The United States, Japan, Europe and other countries have taken the opportunity to "collect wool" from China's rare earths.

The "fragile US Defense Industry Foundation" report released by the US Defense Department a few days ago pointed out that the United States has shown an "astonishing" dependence on key materials from China, which is the only source of imports of rare earths and energetic materials in the United States. Therefore, it is difficult to find a corresponding number of alternatives at home or outside China in the short term, even if the Muntinpas mine has been trial-produced, but it is not a matter of the day if you want to restore the rare earth smelting and separation industry chain. At the same time, it is also very difficult to find the corresponding number of rare earth materials provided by rare earth manufacturers other than China. But on the other hand, it will also help stimulate increased investment in resource exploration in the United States.

For China, whether the US Defense Authorization Act prohibits the import of rare earth magnets from China or impose tariffs on rare earth products, it may increase the environmental and tax costs of the rare earth industry. It is not only conducive to environmental protection, but also plays a role in promoting the high-end processing of rare strategic resources.