The Time to Prevent Shortfalls in Critical Materials Is Now

The U.S. has since moved to loosen its dependence on China. The Pentagon recently increased its stockpiles of rare earths, lithium, and other critical materials. The federal government announced last year that it would invest billions of dollars in bolstering the U.S. battery industry and tens of millions more in building up capacity to separate and process rare earths.

But, for now, nearly all of the rare earth ore that comes out of the ground in the United States still ends up in China for processing into usable powders and metals. China also processes a majority of the world’s lithium-ion battery materials. It builds and sells 92 percent of the rare earth magnets that are needed for electric vehicles, wind turbines, and fighter jets.

RAND’s research team mapped out two paths the U.S. can take to blunt the leverage that kind of market dominance gives China.

It can try to break China’s grip on the market outright. That would mean investing in finding, mining, and refining new deposits of rare earths and other critical materials, at home and abroad. Around 120 million tons of rare earth reserves are thought to exist around the world—and most of them are not in China. Just this year, Sweden announced that it had found a deposit of potentially 1 million tons in its far north. It described the discovery as the beginning of the end of China’s market dominance, illustrating how important it will be to rely on allies, partners, and other countries.

At the same time, though, the U.S. should also brace for the possibility of a supply disruption—from a diplomatic break with China, perhaps, but also from an unexpected shock like COVID-19. That would mean increasing how long companies can survive without Chinese inputs—through stockpiles, for example—and reducing how long it takes them to get back up and running afterward.

None of those options are cheap or easy. Starting up a new mine and processing facility can cost up to $1 billion and take more than a decade. Scientists have developed more environmentally friendly ways to separate and process rare earths, but there will still be impacts that need to be addressed. And while China has entire labs devoted to rare earth mining and processing, the U.S. now has only a handful of scientists who truly focus on rare earths.

“These materials have become essential to our everyday lives,” said Jonathan Brosmer, an associate physical scientist at RAND. “U.S. policymakers really need to find ways to incentivize either domestic or partner nation capabilities to meet our future demand.”

Processing rare earths and other critical materials—not just digging them out of the ground—is the real bottleneck. If every proposed processing plant outside of China were to somehow come online by 2025, researchers found, they could produce around 134,000 tons of usable rare earth material every year. Projected demand by 2025, outside of China: 140,000 tons and growing fast.

Given that shortfall, some more-creative solutions are starting to get a closer look. The Defense Department, for example, has invested in efforts to recycle critical materials from old electronics. For now, though, that remains a difficult and expensive option. Some scientists have also started looking at the ocean floor for a possible solution. Rocky concretions about the size of a potato are thought to contain cobalt, manganese, and other critical materials.

But time is an enemy here. Policymakers need to make investments today that might not yield results for another decade or more. That only underscores the urgency of prioritizing options and investing early in those with the longest lag time.

“If history has taught us anything,” the researchers wrote, “it has taught us that, in a quickly evolving technological world, timing is critical, and the time to act is now.”

Doug Irving is a communications analyst at RAND. This article is published courtesy of RAND.