Noam Chomsky believes China’s strategic power could be growing in a very dangerous way.
The American linguist, philosopher, historian, political dissident and social critic, who is sometimes called “the father of modern linguistics,” says China could be amassing most of the world’s rare earth elements (REEs) and could eventually pressure other countries with a near monopoly.
“If China gains a near-monopoly over rare earths, they will be in a powerful position to influence choices and policies of other states, if they choose to,” the 92-year-old told Entrepreneur online.
“From China’s point of view, it certainly makes sense to try to gain as much control as they can of rare strategic minerals, enhancing their near monopoly over rare earths.”
According to the US Geological Survey, REE-related components in high technology devices include smart phones, digital cameras, computer hard disks, fluorescent and light-emitting-diode (LED) lights, flat screen televisions, computer monitors and electronic displays.
More importantly, large quantities of some REEs are used in defense technologies, such as fighter jets and laser parts.
They are also used in magnets, electric car batteries and special steel alloys.
These magnets are used in a variety of conventional automotive subsystems, such as power steering, electric windows, power seats and audio speakers.
According to the US Geological survey, China currently accounts for 80% of rare earth imports — a fact that is rather frightening to rival nations.
In 2020, the Department of Defense provided a US$9.6 million grant to MP Materials, a Las Vegas-based mining company partially owned by Shenghe Resources, a Chinese state-controlled entity whole largest shareholder is a research institute within the country’s ministry of natural resources, Entrepreneur reported.
That funding came after then-president Donald Trump issued an executive order (EO) to “reduce the nation’s vulnerability to disruptions in the supply of critical minerals.”
Trump cited dependency on China in the EO, declaring it a “national emergency.”
Pini Althaus, CEO of USA Rare Earth called the EO “an important step” in ensuring the US is free from price manipulation and other aggressive economic maneuvers, particularly those perpetrated by China.
“It also addresses supply chain vulnerabilities based on our ability to source the critical materials we need for defense and manufacturing,” says Althaus.
But some critics are saying it’s too little too late, even though it is driving production in faraway places such as Australia and Canada.
For example, according to Reuters, Lynas Rare Earths Ltd. said last week it got a AUS$14.8 million (US$10.9 million) grant from Australia to commercialize a new mineral refining process that produces high-purity rare-earth carbonate.
In Canada, the Nechalacho REE project being developed by Avalon Rare Metals in Thor Lake, Northwest Territories, is one of the world’s most advanced and large heavy rare earth development projects.
Chomsky described private American businesses like MP Materials courting China-influenced companies as “normal capitalist logic,” adding that Trump “apparently didn’t care about the Department of Defense’s support for China.”
“US government support for Chinese efforts is slight in scale and indirect, though support for US businesses in which the major Chinese rare earth producer has a share,” Chomsky told Entrepreneur.
“The fact that it takes place indicates that US planners seem not to have accorded high priority to these issues.”
Rare earth metals are actually more abundant than their name suggests but extracting, processing and refining are tricky for a myriad of technical and environmental reasons.
These 17 elements — which are subdivided into the light rare earths and heavy rare earths subsets based on their atomic weights — exist in natural deposits globally.
The US has no domestic production for 14 of the critical minerals and is completely dependent on imports to supply its demand of those items.
While China is dominant now, in the decades before the 1980s it was the US that held a majority stake in this metals market, CNBC reported.
That changed as production growth abroad and mounting environmental pressures at home shifted production overseas and also offered cheaper labor costs.
According to a 2018 report from the Department of Defense (DOD), China “strategically flooded the global market” with rare earths at cheaper prices to drive out and deter current and future competitors.
As the US seeks to reduce its dependence, China is shoring up its dominance by more closely regulating its domestic resources, while at the same time expanding ties with businesses and projects worldwide. At the center of that global strategy is Shenghe Resources Holding Co.
According to SmallCaps.com, Shenghe, listed on the Shanghai Stock Exchange, has a market capitalization of $US4.6 billion (AUS$6.05 billion).
The company also holds 8% of New York-listed MP Materials Corporation, which operates the Mountain Pass REE mine in California, and which is the only significant producer of REEs in the US.
All of Mountain Pass’s concentrates are now shipped to Shenghe’s operations in China — a situation that doesn’t sit well with the DOD.
The Chinese company also owns 9.7% of Australian REE hopeful Greenland Minerals with its project in the eponymous Danish autonomous territory.
Sources: Entrepreneur, US Geological Survey, Reuters, CNBC, Department of Defense, Mining Technology, Forbes Magazine, SmallCaps.com