Rare-earth elements, critical for modern technologies, are at the center of global strategic competition. While not inherently scarce, these elements are challenging to extract and refine, with China currently dominating global processing and refining capacities. In response to this dependency, the United States is implementing a range of initiatives to bolster domestic production and processing, including significant government investments and technological advancements. However, efforts to diversify the global supply chain face various environmental, economic, and geological challenges, as demonstrated by the complexities associated with potential mining in regions like Greenland.
Rare-Earth Elements: Essential Components for Modern Technology
Rare-earth elements, a group of 17 metallic elements including neodymium and dysprosium, are fundamental components across various advanced technologies. These materials are crucial for products such as smartphones, electric vehicles (EVs), wind turbines, military aircraft (e.g., an F-35 aircraft may contain over 900 pounds of rare-earth materials), military drones, advanced aerospace systems, next-generation computing, robotics, medical devices, and quantum hardware. The demand for high-torque, compact EV motors, which rely on these elements, is increasing by approximately 33% annually. Although rare earths are not considered scarce, their extraction and refinement into usable forms are challenging due to their dispersed nature and the environmental impact of processing.
China's Role in the Global Supply Chain
China has played a central role in the global rare-earth sector since the 1980s, a strategic focus highlighted by Deng Xiaoping in 1992. The shift in global production from countries like the United States to China was influenced by factors such as lower environmental standards, reduced labor costs, and changes in U.S. regulations regarding rare-earth processing and disposal costs, including the closure of the U.S. Bureau of Mines in 1996.
Currently, China possesses the largest rare-earth reserves globally, estimated at 44 million metric tons, and holds approximately 34% of the world's proven rare-earth ore reserves. China controls approximately 70% of global rare-earth mining production, 85% of refining, and 98% of processing capacities. The country also holds 80% of rare-earth patents and has established extensive university programs dedicated to rare-earth research and processing, advancing purity standards essential for cutting-edge technology. Beijing has utilized its position by implementing export controls on rare earths and related products, demonstrating its capacity to influence critical global supply chains. China also implemented new environmental and safety regulations for rare-earth processing last year and imports raw ore from regions like Southeast Asia and Africa to solidify its role as a global refining hub.
United States Initiatives for Domestic Production
The United States is implementing strategies to increase domestic production and processing of rare-earth elements with the goal of reducing reliance on foreign supply. This involves a public-private approach, including federal loans and equity stakes in key mining operations and startups.
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Key Investments and Partnerships:
- The Pentagon's Office of Strategic Capital (OSC) has established a partnership involving Indiana-based ReElement Technologies and Vulcan Elements, a North Carolina firm producing rare-earth magnets for military applications.
- The U.S. government became the largest shareholder in MP Materials with a $400 million investment from the Pentagon's OSC. MP Materials operates the Mountain Pass mine in California, which previously sent its ore to China for refining but is now expanding its on-site processing capabilities. The Mountain Pass mine had experienced production halts in the past due to environmental concerns related to wastewater spills.
- Financial commitments include a $620 million loan from the Pentagon's OSC to Vulcan Elements, an $80 million loan to ReElement Technologies for expanding recycling and processing operations, and an additional $50 million from the Department of Commerce under the CHIPS and Science Act. These investments are part of a broader $7.5 billion allocation towards securing critical minerals.
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Technological Developments:
- ReElement Technologies states it has developed a more efficient and environmentally sustainable method for rare-earth processing and recycling, utilizing chromatography. This specialized filtration process, developed at Purdue University, aims to extract and purify metals from raw ore and recycle rare earths from old magnets.
- The company operates a commercialization facility in Noblesville, Indiana, with a larger production site in Marion, Indiana, projected to begin operations next year.
- ReElement Technologies CEO Mark Jensen states the company aims to be the largest producer of rare earth oxides in the United States by the end of 2026.
- In partnership with Vulcan Elements, ReElement aims to produce 10,000 metric tons of neodymium-iron-boron magnets within the next few years. This target represents a fraction of the approximately 230,000 tons produced globally in 2024, according to the Institute of Electrical and Electronics Engineers (IEEE). Research indicates ReElement's current operations are compact compared to traditional processing facilities.
Challenges in Diversifying Supply Chains
Efforts to diversify the global rare-earth supply chain face several complex challenges:
- Environmental and Extraction Concerns: Experts advocate for processing methods that reduce energy and water intensity and toxicity. The U.S. possesses sufficient rare-earth resources but faces challenges in environmentally and socially responsible extraction and processing. China's historical processing capabilities scaled faster partly due to differing regulatory environments regarding environmental considerations. Developing rare-earth deposits is complex, requiring a source, transportation, concentration, and specific extraction methods.
- Economic Viability: Developing rare-earth production can be economically challenging, partly due to China's historical practice of influencing market prices by increasing supply. RAND Corporation estimates suggest that establishing a self-sufficient rare-earth supply chain in the U.S. would require at least a decade and $10-15 billion to create comprehensive ecosystems for extraction, refining, production, and downstream applications.
- Greenland as a Potential Source: Former President Donald Trump expressed interest in rare-earth reserves in Greenland, whose Kanana region contains significant deposits of critical raw materials. However, Greenland faces substantial obstacles to mining development, including:
- Remoteness and Infrastructure: The island lacks crucial infrastructure such as roads, railways, and local power generation, necessitating extensive development for any mining project.
- Environmental Impact: Concerns exist regarding the fragile Arctic environment, the use of toxic chemicals required to separate minerals, and the common co-occurrence of rare earths with radioactive uranium.
- Geological Complexity: Rare earths in Greenland are frequently found in eudialyte rock, for which a profitable extraction process has not yet been established. This contrasts with other regions where these elements are typically found in carbonatite formations with proven extraction methods.
- High Costs and Development Time: Operating in a harsh climate requires substantial investment, specialized personnel, and faces long development timelines, with many projects not advancing beyond the exploratory stage.
Industry experts suggest that prioritizing existing rare-earth projects in more accessible locations within the U.S. and allied nations, such as Australia, may be more viable for quickly expanding the rare-earth supply chain outside of China.
Geopolitical and Economic Implications
The strategic importance of rare-earth elements has significant geopolitical and economic implications. A 2024 study by RAND Corporation indicated that a 90-day disruption in rare-earth supply could halt production lines at 78% of U.S. defense contractors. This dependency extends to critical technologies in areas like next-generation computing, robotics, medical devices, and quantum hardware, affecting innovation through China-controlled supply chains and export measures. Rare-earth minerals are increasingly viewed as strategic assets influencing the geopolitical landscape and are considered central to the global economy in the AI and automation era.