The geopolitics of rare earths: how to counter China’s dominance
A few days before Donald Trump ceded the Oval Office to Joe Biden, Beijing drew its sword when the Ministry of Industry and Information Technology declared that it is soliciting public opinion to further strengthen regulation over the rare earth industry.
The issue is particularly thorny for the United States, the European Union and Japan as the seventeen chemical elements that make up the rare earths group, better known as lanthanoids, are fundamental for the new technologies used for the production of clean energy. Furthermore, the are used, above all, in the manufacture of electronic components necessary for military and aerospace applications. According to Air Force Magazine, to produce a stealth multirole fighter Lockheed Martin F-35 Lightning II it takes 417kg of rare earths. For a missile destroyer Burke DDG-51 it takes 2,359kg and for a nuclear powered submarine SSN-774 Virginia, as many 4,173 kg are needed. These are considerable quantities meaning there is a high and real risk of disruption in the supply of such materials due to the trade positions that China can take, even if it is part of the World Trade Organization.
The principles of a hostile trade policy for rare earths reverberate in the corridors of Chinese power whenever Beijing finds itself in political and economic disputes, or when it wants to strengthen its negotiating position around diplomatic tables. It is a geopolitical tool to leverage behavioral changes in the countries China collides with, notably the United States and Japan. These principles were reportedly enunciated in the spring of 1992 by Deng Xiaoping shortly before his retirement from the political scene. During a visit to the Bayan Obo rare earth mine in the autonomous region of Inner Mongolia, he uttered with a smirk of satisfaction the premonitory maxim “The Middle East has oil; China has rare earths.”
Rare earths are indeed not rare in terms of average crustal abundance, but for the low concentration of their deposits. This makes mining costs so high that they are not economically justified, unless labor costs are extremely low or supported by state subsidies – as is the case in China.
Add this to the acceptance of the unfortunate effects on the environment and health generated by refining processes, and this is precisely why, around 1990, China became the largest producer in the world of rare earth elements. Its share has fluctuated over the years between 60% and 90% of the world production. However, in terms of reserves it has only 37% of the global share, as reported by the US Geological Survey.
If China holds the world production of rare earths and, therefore, the price control that allows it to crush any nascent or resurgent industry in other countries that might not favor certain behaviors, the question that arises is whether there are ways to compensate for this dominant position by acting outside the structures and superstructures of the World Trade Organization.
Three strategically viable paths appear at first glance: the extraction and refining of rare earths within their national borders, the reduction of the use of rare earths or their replacement, and finally the creation of an efficient system for recycling them from useful waste, particularly from electronic equipment such as batteries, permanent magnets and fluorescent lamps.
The third path is more viable than the first two as long as the recycling system is built on a large scale with supranational dimensions such as those of the European Union. The benefits obtained in the entire ecosystem must be taken into consideration, thus mitigating the ecological impact of the exploitation.
The European Commission, among others, expects the demand for rare earths to grow in the coming years at a dizzying rate due to the shift of consumer preferences towards products with high technological content and zero environmental impact. Therefore, the recovery of the elements of the rare earths group from electronic scrap is extremely important for both economic and environmental reasons, coherently fitting into a model that circularly enhances the flows of technical materials.
According to a study conducted in 2013 by the UN Environment Program, the volume of waste from electrical and electronic equipment in the world is estimated to be as much as 50 million tons per year, an enormous amount that, assuming a global population of seven billion, corresponds to about seven kilograms per person.
According to the European Statistical Office, in the 27 member countries, the amount of waste from electrical and electronic equipment generated in 2017 was 7.4 million tons, a value that grew by an average of 4.7% per year in the previous five years. Only 50% was recycled. The market value of electronic scrap is estimated by Frost & Sullivan, a market research firm in Mountain View, California, at around 1.3 billion euros, a seemingly small figure, but not for the many small and medium-sized enterprises in the European Union that could benefit from such an opportunity. European Commission data shows that the average turnover of small and medium-sized enterprises is about 200 thousand euros. Therefore, such a market value would generate turnover for about 6,500 small and medium-sized enterprises – a result by no means irrelevant since small and medium-sized enterprises represent 99.8% of all non-financial enterprises, of which 93% have fewer than ten employees.
The determining factor of any move towards recycling on an industrial scale is not the development of new technologies via the recovery of rare earths from waste from electrical and electronic equipment. Instead, it is economies of scale and the existence of an effective supply chain that guarantee the availability of waste to be recycled according to the refining technology that suits the product to be recycled and the metal to be recovered. One example is hydrometallurgy for hard disks. The priority, thus, is to address the existing gaps in the supply chain.
Therefore, there is a need to develop systems that include the collection, disassembly and sorting of useful waste containing rare earths in refining centers that use certain technologies to recover single rare earth elements from specific electronic components. For example, neodymium comes from computer hard disks or cerium from car catalytic converters. Currently, the logistics-production model that comes closest to this scheme is that of fluorescent lamps from which at least six lanthanides are recovered. This model that can be taken as a first reference to create a rare earth recycling industry on a large scale, in which, in a specific territory such as the European Union, companies would be placed in an integrated pyramidal structure containing at the top a very small number of very large companies focused on refining and smelting of metals. There would be a greater number in disassembly, pre-treatment and securing, and finally a much larger number of small and medium-sized enterprises destined for collection and reception – enterprises that will need, contrary to the common opinion, high technical, entrepreneurial and managerial technological knowledge.
Some might argue that the industry for the recovery of rare earths from waste from electrical and electronic equipment depends on the market prices of rare earths, but the current issue is not profit at all. The benefits of such an industrial transformation are multiple, from securing from the despotic Chinese monopoly our most advanced industries that use rare earths in the manufacture of high-tech components for aerospace, energy, automotive and electronic applications to community founded on the principles of the circular economy. The latter entails converting products destined for incineration into metals of high economic value, freeing our territory from mountains of waste, to end up with the generation of new well-qualified and well-paid jobs among researchers, technologists and highly-specialized technicians.