Rare Earth: Where national interests and the global supply chain collide
If you live in Manhattan, rare earth is what you call any patch where something green is growing.
If you’re old enough, you may remember the band Rare Earth, who had a big hit, “Get Ready,” a song that was massacred by bands at just about every high school dance in America.
To industry, rare earth means something completely different. Rare earth metals are a critical input to many manufacturing processes. From golf clubs to electronics to fighter aircraft, rare earth elements are virtually irreplaceable inputs.
According to the Rare Earth Technology Alliance, an industry association, rare earths “are a series of chemical elements found in the Earth’s crust that are vital to many modern technologies, including consumer electronics, computers and networks, communications, clean energy, advanced transportation, health care, environmental mitigation, national defense, and many others.”
According to Namibia Rare Earths, Inc., a mining company, rare earths are used in high-intensity street lamps, lenses, battery electrodes, catalytic converters, colored glass, steel production, super-strong magnets, welding goggles, lasers, microphones, hybrid automobile motors, nuclear-reactor control rods, color TV screens, fuel cells, sonar systems, hard-disk devices, transducers, signal amplification for fiber-optic cables, metallurgical uses, high-temperature superconductors, LED light bulbs, and integrated circuit manufacturing.
It isn’t really a stretch to say that you’ve probably made use of rare earth today.
There are some very particular uses of rare earth elements in defense applications. In the defense, rare earths are used in precision-guided weapons, laser range-finders, guidance systems, fiber-optic data-transmission equipment, and stealth aircraft. Rare earth is also used in permanent magnets that are stable at high temperatures—use your imagination to figure out where that matters.
As the market for rare earth metals boomed over the course of the last 20 years, free markets went to work. The most competitive producers took over the market, and there was blood on the streets. Once upon a time, U.S. producers dominated the market. Today, more than 90% of world production comes from China.
The expansion of global logistics capability, led by U.S. firms, has made the shift to Chinese sources of supply possible. If you are in the logistics business and involved in rare earth, times are good. Minerals are moving, equipment is moving, and money is being made.
Free markets work. Except when they don’t.
Consider one vulnerability: There are more than 900 pounds of rare earth metals in the Joint Strike Fighter. Apparently, the rare earth metals are vital to the stealthy characteristics of the aircraft. Those metals come from China.
Things are a little tense these days between the U.S. and China in the South China Sea. Economics and national interest have collided. What if China decides to restrict the supply of rare earth metals?
Commercial firms want rare earth metals. Defense imperatives demand rare earth metals. China controls the supply of rare earth metals. What national security risks are we willing to take to embrace free markets in the private sector?
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