Worried About China's Monopoly on Rare Elements? Restart American Production

800px-MountainPassCA.jpg

A dispute over a fishing boat collision took a strange turn yesterday when the New York Times reported that China had halted exports of rare earth elements to Japan.

Since the report, Chinese officials have disputed that any such ban is in place. Regardless of the facts or outcome of this particular situation, the bare fact remains: China has a virtual monopoly on the mining and production of the 17 rare earth elements and could stop shipments of the metals to any country at any time.

That would impact all kinds of products and processes from glassmaking to lightbulbs to batteries to wind turbine production. Even the American defense industry is dependent on rare earth elements from China, as a Government Accountability Office report found earlier this year.

The M1A2 Abrams tank has a navigation system that requires the elements. The Aegis Spy-1 radar needs them, too. Already, supply crunches have caused production delays in military technology, the GAO reported.

The wind and electric vehicle industries also require large amounts of rare earth elements, and fear a squeeze.

Given that two industries as diverse as green tech and defense both need rare earth metals, why is the United States so dependent on Chinese production? Is China just the only place we can get this stuff?

No. In California, there's a place called Mountain Pass. It looks like this.

MountainPass.jpg

For decades, most of the world's rare earth metals were mined and refined right there. The process of restarting production could begin at any time. The company that controls the pass, Molycorp, said it would take about $500 million to start mining again.

With that upfront investment, production hasn't restarted. Chinese rare earth elements are just cheaper. But this is the sort of problem that you need to get started on long before a crisis. The GAO found it might take 15 years for the entire production chain to be back online.

This isn't the sort of problem you can just throw money at and instantly fix, as rare earth elements industry analyst Jack Lifton noted this month.

"I don't know what possesses politicians to think that they can simply invent intellectual capital. You can't. It takes time. And once you fall behind in your specialty, you are behind. You have to catch up. It's not a matter of reading the latest papers; you also have to go back to what happened between the latest papers, and when you knew how to do it," Lifton said. "So I find the politicians and financial minds in America seem to have no knowledge whatsoever of manufacturing or mining. They just think that money solves all problems."

Some Congressional representatives are trying to get a domestic industry going. There is a bill before the house, the Rare Earths Supply-Chain Technology and Resources Transformation Act of 2010 or the RESTART Act, that, if funded properly, could get an American rare earth metal industry going.

But, according to a spokesman for the bill's sponsor, Mike Coffman, a Republican from Colorado, the bill hasn't seen much movement since it was introduced in April of this year.

It could get a boost from a long-awaited Department of Defense report that is due out from the agency's Industrial Policy wing in early October. It should examine the problem with far greater depth than the GAO report.

And the House Committee on Science and Technology passed a favorable judgment on a separate, more R&D focused bill this afternoon called the Rare Earths and Critical Materials Revitalization Act of 2010.

The point here is not to bash Chinese industrial policy. They need and want rare earth metals. They produce them on their soil. And they can do with them what they want. It's not their policies but ours that are the problem.

Again, here's Lifton summing up the issue:

China doesn't consider itself to be hoarding anything. They figure that they're using their own materials for their own needs. They question why we insist on using words like "control" and "hoard," because they ask, "If you needed the material, why shut your factories?"

So it's as simple as that. We really are foolish in America. We've shut down an industry that's strategic and critical, and all in the name of low cost. Now we're surprised that the consequences that are obvious in doing this have now come back to bite us. I'm not surprised, and neither is anybody else in China.
We could fix this problem. But unfortunately our politics works on the 15-minute timescale of fame, not the 15-year clock of industrial policy.
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