Analysis: China's Rare Earth Export Curbs Expose U.S. Industries to Risk

TaiwanPlus News

Gracelin Baskaran, director of the Critical Minerals Security Program at CSIS, tells TaiwanPlus about the immediate risks that China's export curbs and "absolute advantage" in the industry pose to the U.S. defense, medical and other sectors.

Transcript

00:00To start off with, could you provide a quick introduction to these heavy rare earth materials?

00:06Rare earth minerals are actually a group of 17 minerals, and they're a bit of a misnomer

00:10because they're not actually rare, they're everywhere. They're often found in small

00:15quantities and they can be difficult to extract. Now, the restrictions from China this week are

00:20actually on heavy rare earths, and there's a reason that we are particularly vulnerable for

00:27those. And that is that China holds almost pretty much 100% separation capacity of heavy

00:35rare earths. Because when I take rare earths out of the ground, before I can use them, they have to

00:40undergo separation and processing. The reality is that for light rare earths, there's some capacity

00:45outside of the US with some facilities, small facilities in Malaysia and Estonia. But with

00:52heavy rare earths, China was previously processing and separating about 99.5% of heavy rare earths.

00:58And there was a small facility in Vietnam. However, that's gone offline for tax reasons. So China now

01:05holds this dominance, not a comparative advantage, but an absolute advantage. And this is a really big

01:11problem for us because with these rare earth export restrictions means that we can't actually get access

01:16to them until China figures out a licensing system. In the incidents of open conflict,

01:24it seems like the US defense industry would not have a resilient supply chain to continue

01:29building more tanks, more fighters, more naval vessels, as there is attrition in the battlefield.

01:36Do they have a backup plan to provide for this supply chain resiliency?

01:41The US defense industrial base is already on the back foot. CSIS put out a report, my colleague,

01:48Seth Jones, who's the president of our defense and security department last year, where he noted that

01:53China is acquiring and manufacturing weapons at a rate of five to six times what the US is right now.

02:03China, he notes, is operating at a wartime posture and the US at a peacetime posture. Now,

02:09you know, the US defense industrial base is not at a place where it has the surge capabilities

02:15to shore up these capabilities rapidly in the instance of active conflict. Now you add in the

02:23fact that a lot of the strategic materials that I need for conflict, right, rare earth, antimony,

02:31which was banned last year, tungsten, which was banned earlier this year, are things that China is

02:38actively stockpiling. And that prevents us from being able to get the materials we need to respond

02:45and shore up our capabilities.

02:48So aside from the defense industry, what other industries are we looking at that could

02:52be impacted by these export curbs?

02:56A whole range of civilian sectors are at risk. So automotive manufacturing, automotive executives

03:03have already expressed their concern because we, you know, we're building a very relatively less

03:08profitable compared to China electric vehicle sector. And we need rare earths for those permanent

03:15magnets and those motors, right? So easy example, where supply chain disruption, when you have a limited

03:20supply of a material that is both needed for defense and civilian use, defense and uses will

03:26generally take priority, especially if there's potential conflict. Then we think about things

03:30like medical technology, semiconductors. Semiconductors are crucial for both their dual use, right,

03:36for military and civil use. Another example of where restrictions will be consequential.

03:42So we do see it to be in a range of strategic technology industries.

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