The Geopolitics of Rare Earth Elements
Supply chain security for the minerals and materials needed in clean energy technologies has become a strategic issue, not only because it could affect the pace of clean energy technology deployment around the world but also because clean energy technology has become the latest frontier for the geoeconomics rivalries sparked by China’s competitive manufacturing sector. No longer a simple mineral producer or component assembler, China is emerging as a higher-value manufacturer that requires a growing volume of the minerals and metals that are considered key to clean energy technology manufacturing. This development has increased the pressure for other major economies dependent on mineral imports to secure their critical minerals supply chains
An equally important factor is that China appears to recognize the strength of its critical minerals supply chains as geopolitical leverage. For example, during one of the heightened phases of the U.S.-China trade war in 2019, President Xi Jinping of China and his top trade negotiator toured a rare-earth processing facility in Jiangxi Province, which is known for its rare-earth wealth. The visit was widely interpreted as a reminder to the United States that China has leverage over the rare-earth supply chains, bringing back the memory of China’s embargo on rare-earth exports to Japan, which occurred over a territorial dispute in the fall of 2010. Additionally, Xi Jinping’s call in April 2020 for the need to enhance global supply chains’ dependence on China and “develop powerful retaliation and deterrence capabilities against supply cut-offs by foreign parties” has only fueled concern among Western policymakers that heavy economic dependence on China for something as critical as rare earth minerals may translate into a vulnerability that can be exploited by China in the event of a clash between China and the West.(4)
Furthermore, the Covid-19 pandemic has exposed fragility in the global supply chains for not only pharmaceuticals and crucial medical supplies but also some critical minerals. For instance, the transport of cobalt produced in the Democratic Republic of the Congo was delayed in South Africa for months following the South African government’s imposition of a strict lockdown in the second quarter of 2020.(5)
A confluence of these developments has elevated the strategic importance of securing critical minerals supply chains, especially to a group of economies that are home to innovators and manufacturers. Some governments have modernized or expanded existing strategies to address the challenge, while others have outlined action plans or articulated their perspectives on only specific portions of the supply chains. The author identified a select set of economies whose approach to the security of critical minerals supply chains is likely to be consequential in terms of geopolitics. Through a literature survey and interviews, the author reviewed the statuses of these economies’ critical minerals supply chains as well as their strategies to address the supply security concern. This report illuminates the key economic, security, and geopolitical factors behind the recent evolution of these economies’ strategies and their approaches to the security of critical minerals supply chains.
Key observations include:
▪ The security of critical minerals supply chains is a strategic issue, in light of the expected exponential demand growth led by clean energy technology deployment around the world.
▪ Sustained political commitment to technological innovation is essential to managing the growing competition over resources and clean energy manufacturing value chains.
▪ China’s development of midstream and downstream capacities has turned it from a supplier of raw minerals and materials to a key consumer of them. China’s commanding position along critical minerals supply chains is a key factor that shapes other economies’ strategic responses.
▪ Different economies are motivated by different concerns reflecting the heterogeneity in their resource endowment profiles and industrial structures. The United States appears most concerned about import dependence that can be exploited geopolitically, while the European Union and Japan appear primarily concerned with the effects of supply disruptions on their industrial competitiveness.
▪ Recent efforts to strengthen critical minerals supply chains include the United States’ development of midstream capacities, the European Union’s orchestrated support for its battery sector, and Japan’s stockpile modernization and resource development abroad.
▪ Competition over critical minerals supplies is also rising between import-dependent economies. Such competition could hinder effective international partnerships that might otherwise mitigate existing risks to supply chains.
1.Kirsten Hund, Daniele La Porta, Thao P. Fabregas, Tim Laing, and John Drexhage, Minerals for Climate Action:
The Mineral Intensity of the Clean Energy Transition (Washington, DC: World Bank, 2020), 11, http://pubdocs.
worldbank.org/en/961711588875536384/Minerals-for-Climate-Action-The-Mineral-Intensity-of-the-CleanEnergy-Transition.pdf.
2. Rare earths are a group of 17 elements composed of scandium, yttrium, and the lanthanides. They are difficult
and costly to extract and process, although they are relatively abundant across the world.
3. Tsisilile Igogo, Debra Sandor, Ahmad Mayyas, and Jill Engel-Cox, Supply Chain of Raw Materials Used in the
Manufacturing of Light-Duty Vehicle Lithium-Ion Batteries (Golden, CO: National Renewable Energy Laboratory,
August 2019), vi, https://www.nrel.gov/docs/fy19osti/73374.pdf.
4. Tetsushi Takahashi, “A future in which China no longer needs the world but the world cannot spin without it,”
Financial Times, December 15, 2020, https://www.ft.com/content/ad93c3ba-3fd4-4005-97ba-ffe8bbd3c964.
5. Jacqueline Holman and Jia Hui Tan, “Cobalt hydroxide shipments from South Africa ongoing; concerns lift
price sentiment,” S&P Global Platts, January 12, 2021, https://www.spglobal.com/platts/en/market-insights/
latest-news/electric-power/011221-cobalt-hydroxide-shipments-from-s-africa-ongoing-concerns-lift-pricesentiment-sources.
