Pruning the sully of rare earth to the United States is China’s only weapon against the United States in the ongoing U.S.-China trade war.
In a significant development that marks a strategic shift in the sourcing of rate earth minerals, the U.S. Department of Defense (DoD) has held talks with Malawi’s Mkango Resources Ltd and other rare earth miners across the globe as part of a plan to diversify sourcing of the minerals from sources outside of China, said an official from the DoD.
The development comes in the wake of China threatening to limit exports of the rare earth to the United States as part of its trade measure in the U.S.-China trade war.
The rare earths, a group of 17 minerals are used widely in a plethora of military equipment and high-tech consumer electronics.
The development is significant since it marks the end of China’s near global monopoly of the rare earths. Although China contains only a third of the world’s rare earth reserves, it accounts for 80% of U.S. imports of the minerals since it controls nearly all of the facilities to process the material.
“We are looking for any source of supply outside China. We want diversity. We don’t want a single-source producer,” said Jason Nie, a material engineer with the Pentagon’s Defense Logistics Agency, on the sidelines of the Argus U.S. Specialty Metals conference in Chicago.
According to Nie, the DLA, which buys, stores and ships much of the Pentagon’s supplies, has held talks with Burundi’s Rainbow Rare Earths Ltd about future supply; it has also offered to introduce several U.S. rare earth projects under development with potential financiers.
“We can make connections,” said Nie.
Of note, although the DLA routinely holds talks with potential suppliers as part of its due diligence, they do not necessarily translate to purchase agreements. Nevertheless, the development shows that the Pentagon is increasing its focus on diversifying supplies of these critical minerals.
“If you put yourself in China’s shoes, this is their main weapon in the trade war,” said Mark Seddon, an analysts with Argus metals.
Mkango Resources is developing a rare earths mine and processing facility in Malawi that is still several years from coming online.
Rainbow Rare Earths began operating in Burundi in 2017 and has an offtake agreement with ThyssenKrupp AG.
Apart from China, Australia’s Lynas Corp is the only non-Chinese company with any significant capacity for processing rare earths.
“It is not a good idea to be reliant on a single major source of any material,” said Amanda Lacaze, chief executive of Lynas.
Last month, Lynas signed a memorandum of understanding (MOU) to build a rare-earth processing plant in Texas with privately held Blue Line Corp.
On Tuesday, the U.S. Commerce Department recommended urgent steps to boost the domestic production of rare earths.