China’s Monopoly on Rare Earth Elements—and Why We Should Care

Author
June Teufel Dreyer
Content Type
Commentary and Analysis
Institution
Foreign Policy Research Institute
Abstract
According to geologists, rare earths are not rare, but they are precious. The answer to what appears to be a riddle lies in accessibility. Comprising 17 elements that are used extensively in both consumer electronics and national defense equipment, rare earth elements (REEs) were first discovered and put into use in the United States. However, production gradually shifted to China, where lower labor costs, less concern for environmental impacts, and generous state subsidies enabled the People’s Republic of China (PRC) to account for 97 percent of global production. In 1997, Magniquench, then-America’s leading rare earths company, was sold to an investment consortium headed by Archibald Cox, Jr., son of the same-named Watergate prosecutor, with two Chinese state-owned metals firms, San Huan New Materials and China National Nonferrous Metals Import and Export Company. The chairman of San Huan, son-in-law of paramount leader Deng Xiaoping, became chairman of the company. Magniquench was shut down in the United States, moved to China, and reopened in 2003, where it fit in well with Deng’s Super 863 Program to acquire cutting-edge technologies for military applications, including “exotic materials.” This left Molycorp as the last remaining major rare earths producer in the United States until its collapse in 2015.
Topic
International Trade and Finance, Natural Resources, Exports, Supply Chains
Political Geography
China, Asia