The U.S.-China Battle Over Rare Earth Minerals

Geopolitics of Rare Earths in Advanced Technology Products

The ongoing power struggle between the United States and China over rare earth minerals (REMs) is a complex, multifaceted issue with significant geopolitical and economic implications for the world.

What Are Rare Earth Minerals?

Rare earth elements (REEs) consist of 17 elements: 15 lanthanides (atomic numbers 57-71) and two chemically similar elements, scandium (Sc) and yttrium (Y). The 15 lanthanides include lanthanum (La), cerium (Ce), praseodymium (Pr), neodymium (Nd), promethium (Pm), samarium (Sm), europium (Eu), gadolinium (Gd), terbium (Tb), dysprosium (Dy), holmium (Ho), erbium (Er), thulium (Tm), ytterbium (Yb), and lutetium (Lu).

(Source: Pui-Kwan Tse, China’s Rare Earth Industry, U.S. Geological Survey, Open File Report 2011-1042, p.1.)

Despite their name, rare earth minerals are relatively abundant worldwide. However, their extraction and refinement are environmentally costly and technologically challenging. Until the 1980s, the U.S. was a leading producer, but production declined due to environmental regulations and high costs. China then stepped in, rapidly increasing output by lowering environmental standards and labor costs. By the 1990s, China accounted for 62% of global rare earth mining and nearly 85% of refining capacity, securing its dominant position in the market.

China’s Dominance in Rare Earth Supply

China is the world's leading supplier of REMs. In 2019, it produced 62% of the global raw materials, compared to 12.2% by the U.S. Additionally, China holds the majority of REM reserves, accounting for 36.7% of the world’s total, while U.S. reserves are only 1.1%. China’s refining capabilities far exceed those of the U.S. due to extensive domestic facilities. Between 2008 and 2018, China exported approximately 408,000 tons of refined REMs, representing 43.3% of global exports, whereas the U.S. accounted for only 9.3%. Furthermore, in 2018, 98% of processed REMs used in the U.S. were imported from China.

The Challenges of Diversifying REM Supply

Recognizing the risks of overdependence on China, numerous ventures have been launched worldwide to diversify the REM supply. However, these efforts have largely failed. Between 2010 and 2020, over 400 REM ventures outside China collapsed. There are two primary reasons for this:

1. Developing a complete REM supply chain—from mining to separation and refinement—requires substantial investment and advanced technology. Companies attempting to build such infrastructure from scratch have struggled due to high costs and technical barriers.

2. China controls global REM pricing. By increasing exports, China can drive down prices, making it difficult for foreign competitors to sustain profitability. This "predatory pricing" strategy eliminates competition and maintains China’s dominance. Additionally, China's lenient environmental regulations reduce production costs, giving it a further competitive edge.

REMs as a Geopolitical Tool

Given their critical role in high-tech and defense industries, China has leveraged its dominance over REMs as a geopolitical instrument. A notable example occurred in 2010 when China restricted exports to Japan following a diplomatic dispute. This move caused REM prices to spike, prompting other countries to seek alternative sources and reduce reliance on Chinese imports.

U.S. Policy Response

Recognizing the long-term vulnerabilities of overreliance on Chinese REMs, former President Donald Trump signed Executive Order 13817 to increase domestic mineral extraction, refining, and supply chain activities. In late 2020, his administration issued Executive Order 13953, declaring reliance on Chinese mineral exports a national emergency. The order prioritized expanding and securing domestic REM supply chains, including fast-tracking mining projects under the Defense Production Act.

The Biden administration has continued and expanded these efforts. Under its $2 trillion infrastructure plan, the administration pledged investments in rare earth separation processes. Following Executive Order 14017, which mandated a 100-day review of U.S. critical mineral supply chains, the administration formed a Supply Chain Disruption Task Force, led by the Secretaries of Commerce, Transportation, and Agriculture. This task force identified measures to strengthen U.S. REM supply chains and recommended collaboration with allies to develop domestic mining and refining projects.

Global Competition for REM Resources

The U.S. and China are now competing for REM resources in other mineral-rich regions. Chinese companies have expanded business relationships in South America, particularly in Brazil. For instance, China’s Ningbo Zhoushan Port signed a $650 million contract with Brazil’s Vale to export iron ore to China. While iron ore is not a critical mineral, the deal illustrates China's expanding business interests. Brazil holds an estimated 22 million tons of REMs, about 18.3% of the world's known supply. Given China’s history of leveraging commercial agreements, its investment in Brazil's rare earth trade could further solidify its dominance.

In Southeast Asia, China has strengthened trade ties with resource-rich nations such as Myanmar and Indonesia. In 2020, nearly half of China’s REM concentrates came from Myanmar. Despite political instability, Myanmar remains crucial to China’s REM supply chain.

Meanwhile, U.S.-China competition has reached Greenland, where the left-wing environmentalist party Inuit Ataqatigiit (IA) won a majority in a snap election, challenging mining projects over environmental concerns. IA campaigned against a China-Australia joint mining venture, citing ecological risks. Greenland has substantial REM reserves and could become a leading supplier in the Western Hemisphere. Given the push for supply chain diversification, the U.S. is likely to pursue mining expansion in Greenland.

The Future of REM Competition

To counter China’s dominance, the U.S. and its allies have pursued alternative REM sources. Australia, Canada, and African nations have attracted investment to develop new REM projects. Additionally, the U.S. has reopened and developed domestic mines to secure its supply chain.

Recognizing the strategic importance of REMs in defense technologies, the U.S. Department of Defense has funded domestic REM development projects. The Biden administration has continued Trump-era policies, invoking the Defense Production Act to boost domestic output and reduce reliance on China.

Conclusion

The competition over rare earth minerals reflects broader U.S.-China geopolitical tensions, as both nations recognize the strategic significance of these resources. While a direct conflict over REMs is unlikely, their role in global supply chains and technological advancement ensures that rare earth minerals will remain a focal point in U.S.-China relations.