The Geopolitical Impact on Rare Earths Has Two Fronts

By: Luisa Moreno of Defense Metals

Rare Earth Elements (REE) are used in a variety of modern industrial applications, including electronics, clean energy, technology, and defense. These elements are found worldwide, but China is the largest miner, processor and refiner of rare earths compounds and metals and the largest consumer. The rest of the world depends on the Chinese rare earths industry for this very strategic material and related technologies. With geopolitical tensions rising around the world, new approaches to raw materials security would have to be established.

The Role of Russia in the rare earth industry

Russia's mine production and exports of rare earths were estimated at 2,700 tonnes of TREO (Total Rare Earth Oxides) in 2021. According to the United States Geological Survey, these production levels have remained consistent for the past four years, and it is estimated that Russia is the third largest holder of rare earths reserves globally. However, the Russia-Ukraine conflict that has been raging for several months now is negatively affecting metals and energy supply chains and is impacting a vast array of industries from medical equipment to automotive to aerospace and more.

Located in Estonia, the Silmet rare earth separation plant is run by Canada-listed Neo Performance Materials and is Europe's main rare earth separation facility. Unfortunately, most of the rare earth feedstock it processes actually comes from Russia, and now with Western countries' sanctions in place, there is a risk that Solikamsk Magnesium Works, the Russian company that supplies rare earths to the European market, may be sanctioned. As a result, the EU is actively looking to other places to source their much-needed rare earths.

China Supply Chain Concerns

China is the world's largest producer of rare earth, with an estimated 140,000 tonnes in 2020 alone, accounting for almost 60% of global production. The problem is that with tensions between China and Taiwan rising, there is an increased risk of a Taiwan-China conflict. Essentially, China claims Taiwan, an island of 23 million people off its east coast, as its own territory and wants to work to bring it under one 'unified' governing China. However, the U.S. does not formally recognize Taiwan under this Chinese policy, and it seems to be prepared to supply military support to Taiwan to defend itself. Therefore, this situation has heightened tensions between the U.S. and China as the U.S. still heavily depends on China to supply critical rare earths for manufacturing, technology, and defense purposes.

In fact, the U.S. relies on China for 31 of 35 strategic metals identified by the government as imperative for the U.S. manufacturing sector and national defense – eight of which are rare earths. Plus, 14 of these specific elements are not mined in the U.S. at all, drawing even more attention to the fact that the U.S. and other countries that rely on China's production of rare earths will need to begin looking elsewhere for rare earths compounds, metals and technologies, if they are planning to be independent from China. In the meantime, Chinese companies have been blocked from funding strategic research at UK universities, and the U.S., EU, and the West, in general, have been limiting Chinese investments in sensitive technologies like computer chips and telecom equipment.

Alternative Sourcing Options

Between the Russia-Ukraine and China-Taiwan conflicts, many developed countries are actively looking for alternative rare earths sourcing. Both in the U.S. and Europe, the solution that dominates today's narrative is an increase in domestic supply. This would include digging new mines, constructing processing and manufacturing plants, and essentially building a supply chain by making the finished products from the ground up. However, experts are wary that these 'solutions' can be achieved in a timely manner to support the green transition, citing that construction times, acquiring permits, and approvals of environmental impact assessments of rare earths mining could further delay progress. Therefore, beyond bolstering the domestic production of rare earths, the other option for increasing rare earths supply is turning to new agreements with old alliances.

Instead of scrambling alone to invest in new rare earths mining operations and build supply chains that could take years or even decades to be fully realized, the U.S. and other Western nations are developing partnerships. For instance, the U.S. Inflation Reduction Action offers benefits to manufacturers that source materials in the U.S. or from nations that the U.S. has free trade agreements, and the UK is looking to partner with countries within its commonwealth nations. For example, Defense Metals, is an advanced mineral exploration and development company based in Canada with an Indicated Mineral Resource of 5 million tonnes averaging 2.95% TREO and 29 million tonnes of inferred resources at 1.83% TREO. The company's goal is "delivering the critical resources that ensure both our national security and development of green technologies for our future." While this vision statement should benefit Canada, Defense Metals, has the potential to be a significant rare earths producer and global supplier.

Final Thoughts

Industrialized regions like the U.S. and the EU are looking to speed up rare earths production and eliminate supply chain disruptions, and the solution is not as simple as increasing domestic production. Although constructing new rare earths mines is an important step, it does not address the immediate geopolitical issues that are affecting raw materials and technology supply chains.

Rather than focus solely on building domestic production, the major rare earths consuming nations also need to look at forging collaborations with other countries and offer incentives for their manufacturers to forge agreements with highly prospective international rare earths projects, such as the Wicheeda deposit owned by Defense Metals in Canada, to secure the necessary rare earths and build downstream supply chains. Ultimately, the need for rare earths is not going away any time soon; if anything, the demand is expected to increase, meaning it's high time for these countries to support new avenues to secure rare earths.