For years, China has dominated the market for rare earth elements
Which are used in all kinds of modern technology.
But now, China’s grip on the market might be slipping.
Welcome to China Uncensored, I’m Chris Chappell.
The Chinese Communist Party has made China so essential to Western supply chains, that
even if the West wanted to decouple economically, it would be very difficult and possibly risky.
Case in point: Rare earth elements.
Rare earth elements are used for things like cell phones, computers, and electric vehicles.
And China controls most of the market for them.
“Analysis by the … International Energy Agency suggests China accounts for 60 percent
of global rare earth extraction and 87 percent of processing.”
This is a big problem because in addition to tech we use every day, they’re used in
a lot of critical military technology as well.
We did an episode about the US military buying F-35 fighter jets from Lockheed Martin that
had rare earth metals from China in them.
The military basically said “yeah, it’s bad to be using Chinese materials, but not
bad enough we’re not going to use them.”
So, it granted them a waiver and gave Lockheed Martin a slap on the wrist.
My favorite Chinese state-run media, the Global Times, claimed this “exposed” the United
States’ dependence on China’s rare earth products.
The US was already talking about this two presidents ago.
“This case involves rare earth materials, which are used by American manufacturers to
make high-tech products, like advanced batteries that power everything from hybrid cars to
cell phones.
We want our companies building those products right here in America.
But to do that, American manufacturers need to have access to rare earth materials, which
China supplies.”
You know, on the one hand it’s reassuring to hear that Western leaders recognize the
threat that this poses to their economies and national security.
But on the other hand—it’s been *10 years* since that speech, and everyone is still *so,
so* dependent on China.
In 2020, the US imported 78% of its rare earths from China.
Which is risky, because we’ve seen the Chinese Communist Party use rare earths as a political
weapon.
In 2010, China stopped rare earth exports to Japan over a dispute..
“This … disrupted Japan’s automotive industry, led to global [price] spikes, and
generated a global rush to secure supplies.”
And if you think “well, that was more than 10 years ago, a lot has changed since then”...
let me remind you that China started a trade war with Australia after it called for an
investigation into the origins of Covid.
The Chinese Communist Party often uses trade to make other countries bow to its will.
And it’s already threatened to use rare earth elements as a bargaining chip.
In 2019, Xi Jinping made a visit to a rare-earth magnet factory in Jiangxi province.
A few days later, an editorial by state-run Xinhua news warned that by “waging a trade
war against China, the United States risks losing the supply of materials that are vital
to sustaining its technological strength.”
Hu Xijin, the former editor-in-chief of the Global Times, claimed that the government
was seriously considering weaponizing exports of rare earth elements to the US.
Now the answer to this problem may seem simple—find new sources of rare earths.
The problem is, that’s a lot easier said than done.
Since that trade spat with China 12 years ago, Japan still hasn’t managed to wean
itself off of China’s rare earth elements.
According to the Observatory of Economic Activity, Japan went from importing 74% of its rare
earths from China in 2010 to 27% in 2020.
While that’s a big decrease, it’s not yet zero.
And believe me, Japan has tried hard not to give China that kind of leverage again.
One obstacle to doing this is that while rare earths aren’t as rare as say gold, what
*is* difficult is finding them in large enough quantities to make mining them profitable.
I mean, it’s so much cheaper to just buy them from China!
Then there’s the costly and environmentally hazardous process of refining them.
This is the Baogang Tailings Dam in China’s Inner Mongolia region.
Thanks to rare earth mining and processing, it’s now a lake full of toxic sludge.
This is why China owns so much of the market.
Who wants to deal with lakefuls of hazardous waste?
This is why Western countries like to outsource it to China, which has cheap labor and very
few environmental regulations.
Out of sight, out of mind, right?
China also leads the market because its biggest producers of rare earths are owned and subsidized
by the state.
“State-owned producers recurrently dialed up production and flooded global markets with
cheap supplies to drive out for-profit Western competitors.”
Ah yes.
Nothing like good old market manipulation to press your competitive advantage.
Unfortunately, the demand for rare earths is only growing around the world.
Which means the West is still very much dependent on China.
That’s because newer “green” technology like wind turbines and electric vehicles use
even more rare earths than older forms of technology.
And so this problem is just going to get worse.
This is why the US and its allies are scrambling to come up with new sources.
And they’re looking everywhere you can imagine.
More on that, after the break.
Welcome back.
China owns a big share of the rare earths market, and that gives it a lot of leverage
because they’re essential to modern technology.
But China’s grip on the market might not last much longer.
“From 98% of global mined production in 2010, China’s market share had fallen to
58% by 2020.”
That’s largely due to China’s own mistakes.
Ever since China banned rare earth exports to Japan over a territorial dispute and a
price hike in 2011, Japan and its allies have been trying to limit their reliance on China.
Countries have been investing in their own rare earth mines, as well as the mines of
their allies, a practice known as “friendshoring.”
Including Australia, Canada, the US, and the EU.
China’s control of the market, along with the cost and environmental issues, have pushed
countries to look for alternatives.
But there’s more going on.
And this is where China may see its grip on the market really slipping.
Researchers at the University of Cambridge have discovered a way to make hard magnets
without using rare earth metals at all.
“[They] found a way to produce tetrataenite,an alloy of iron and nickel, which can replace
magnets made from rare earths.”
Tetrataenite is found on meteors, but researchers say it can be replicated in a lab in a matter
of *seconds.*
Not only is it a lot cheaper to produce, but it also doesn’t come with the same environmental
problems as mining does.
And the main bonus is that it doesn’t have to come from China.
Although if it does go commercial, I’m sure China will try to steal that technology and
sell it to us even cheaper.
The president of a technology consultancy company told NPR that “[It’s] one of the
most interesting things I've seen in the [rare earths] space, and I look at a dozen of these
sorts of discoveries a week.
Ninety-nine point nine percent of them will never become commercial.
This one actually might.”
Researchers are also working on refining rare earths from coal ash,
mining them in the ocean,
and even someday mining them in space.
But analysts still expect it to take years for the West to wean itself off of China’s
rare earths.
And China Uncensored is able to keep making episodes like this because of viewers like
you.
Which is why it’s time for me to answer a question from a China Uncensored viewer
who’s part of the 50-Cent Army.
That’s the group of fans who directly support us through Patreon or Locals.
Today’s question comes from...
Ian Pendleton on Patreon: “What do you think would happen to all the artificial islands
China made in the South China Sea if the CCP were ever forced to abandon them?
Would they be left to be reclaimed by nature?
Or would the other competing nations want to take them over and use the islands as bases
for their own armed forces?”
https://www.patreon.com/posts/chinas-of-cosco-74371795
Spoils of war, Ian.
Spoils of war.
Whoever wins the war over Taiwan gets to decide what to do with the islands.
I’m assuming, of course, that the Chinese Communist Party won’t just abandon them
for some reason.
It's possible some of them will be given to neighboring countries who have territorial
claims, like Vietnam, Malaysia, or the Philippines.
Ideally, they would only use them the way Taiwan uses the one island *it* controls in
the South China Sea.
That one’s called Taiping Island, or Itu Abu.
Taiwan uses it for search and rescue missions, as well as for defending against a Chinese
invasion.
That could be the future of some of China’s militarized islands.
Or who knows?—they might all get bombed into oblivion during the war.
Thanks for your question, Ian.
And thank you to everyone else who supports the show.
Be like Ian and support China Uncensored by going to Patreon.com/ChinaUncensored and contributing
a dollar or more per episode.
As one of the perks, you can ask me questions that I’ll answer on the show.
Once again I’m Chris Chappell, see you next time.