The Next Heavy Metal Crisis

Why you should care about the rare earth elements shortage

From lasers and X-rays to solar panels and batteries, rare earth metals are quietly ubiquitous. Currently, about 97% of the world's supply comes from China, which cornered the market in the 1990s. The country uses its stash to power its own green leadership in wind power than other technologies.

But just as demand for rare earth metals is soaring for both American consumers and the defense industry, China has cut back its exports to the rest of the world to meet its own production needs. Between 2009 and 2010, it reduced exports by 9% as global demand increased, causing rare earth prices to rise 10% in January alone. "There was a lot of gnashing of teeth worldwide," says Keith Delaney, executive director of the Rare Earth Industry and Technology Association.

That's making American manufacturers sweat. Laser-guided weapons rely on rare earth elements to function. Hybrid cars can use up to 25 pounds of these precious metals in advanced electric motors. A single wind turbine uses up to a ton.

But mining rare earth metals can produce toxic waste, which in China has been linked with crop devastation and human health crises due to water contamination.

Stuck between the need to use these metals and the challenge of extracting them safely, the U.S. is devising a long term plan to battle China's supply crunch. The Colorado-based Molycorp Minerals company is reopening its Mountain Pass mine in the Mojave Desert after ten years. It's scheduled to produce 20,000 tons of rare earth metal by the end of 2012 and 40,000 tons by 2014. But its deep resources may not be enough. Worldwide demand outside of China for the rare earth metals totals about 60,000 tons per year. In 2010, China exported only 40,000 tons.

Other states like Idaho do have untapped rare earth metal caches. And companies in Texas and Alaska also say they have reserves. The catch is that they take 5 to 12 years to develop. New entrants face steep learning curves, adds Delaney.

"The government wants really good energy efficient technology like wind power," says Mark Smith, the CEO of Molycorp. "But how do you make that happen without the materials?" He adds that "we're close to a borderline crisis right now."

Consumers are safe -- for now. Gadgets like iPods and Blackberries use rare earth metal amounts as small as pixie dust. And they're usually embedded in electronics imported from China anyway, explains Delaney. "China wants to be an exporter of finished products like MP3 players," he says.

But the country's desire to dominate green industries like wind turbines and electronic vehicles sets up voracious demand for its own rare earth metals. The result may make China a rare earth importer within five years.

If the U.S. can get online, this could be a rare opportunity for America to seize share of the export market. Last year, Congress initiated the ReSTART initiative aimed at getting a foothold in the rare earth minerals market again. A new law requires the Secretary of Defense to develop a plan for getting access to rare earth metals by 2015, and there's more legislation afoot, says Delaney, that addresses research and development and loan guarantees to create a supply chain infrastructure.

"In many ways, we're feeling pressured by the U.S. government," says Smith. "We have conversations weekly with the Department of Defense."

But the consequences of rare earth shortages are clear. "Lack of resources could hamper our competitiveness in green technologies," says Smith. "We're already seeing what's happening."