June 12, 2012

CNAS: U.S. Reliance on Rare Earths Carries Risks

Thinking about national security risks, one’s mind does not often turn to such esoteric materials as neodymium, samarium and dysprosium. Yet researchers say U.S. military dependence on these “rare earth” minerals may put the nation in peril.

Analysts at The Center for a New American Security, a nonpartisan national security and defense policy think tank, say China’s dominance as a supplier of rare earth minerals to the U.S. represents a strategic vulnerability.

These materials form core components in jet engines, precision-guided missiles, lasers and catalytic converters for hybrid-electric engines, said Will Rogers, a CNAS research associate. Their high heat capacity and powerful magnetic properties make them ideal for such high-endurance uses.

Ninety percent of these materials come from China today, and that nation has shown a willingness to use rare earth minerals to gain political advantage. In a 2010 territorial dispute with Japan, China held up exports of these minerals, a move aimed directly at Japanese electronics production.

“It was the first real sign that China might be willing to use its leverage with rare earths,” Rogers said. That could have significant ramifications. “The challenge with rare earths is that there are very few if any substitutes for their applications, so you would really be giving up critical functions among military uses if supply ran short.”

Government leaders have taken some steps to safeguard the military against a potential shortfall. That includes a March 2012 executive order from the White House giving contracting officers de facto authority to favor suppliers who are willing to disclose their sources of minerals, something vendors have generally been reluctant to do, for competitive reasons. “Given the importance of contractors and subcontractor in the acquisition process, this really puts the Department of Defense in a better position to understand a broad range of supply chain management questions,” Rogers said.

“The Department of Defense needs to get a better handle on where the choke points are, where the supply chain issues could arise,” he said.

Military planners have other options to ensure a steady supply without dependence on China, including looking to other nations where rare earth minerals can be found. Malaysia and Australia have plentiful supplies, for example, and small quantities can be found in Africa, especially in the Democratic Republic of Congo. The deep-sea continental shelf also could be mined, Rogers said.

“Even though China is producing 90 percent of the global supply, they only have 50 percent of global reserves,” Rogers said.

The U.S. has held off on pursuing those options because they are expensive and under the current economics of the situation, producers likely couldn’t generate sufficient review to justify the expense.

Domestic production also is a possibility, although environmental regulations have stymied production. Those regulations could be reexamined, with an eye toward enhanced production in the future, or rising prices could make it profitable for mining companies to exploit domestic sources even under the existing regulations.