Rare Earths Pose Threat to American Energy Independence

According to this article yesterday by Keith Bradsher of the New York Times, “rare earth prices are reaching rarified heights.” These rare earths are metallic elements, largely unknown to all but those in specialized manufacturing, that are used to make some of the world’s most high-tech gadgets and technology. In other words, they are crucial to the future.

Bradsher states that “world prices [for rare earths] have doubled in the last four months” after increasing as much as 400% just last year. A year ago, neodymium, which is used to make hybrid electric cars, sold for $19 a pound. Today, that element sells for $129 a pound. And while most items that use neodymium employ only tiny quantities, cars like my Toyota Prius use 2.2 pounds of the stuff.

But the most pressing problem with rare earths is not the price (although that is troubling); it is the availability. PACE has warned for the past two years that China’s control of the rare earth market is a threat to America’s energy independence. Today, China controls 95% of the world’s rare earths. The United States? Our only rare earth mine (in Mountain Pass, California) re-opened just last year after being closed for nearly a decade. We import virtually all of the rare earths we use in our nation’s manufacturing sector.

With China cutting off exports and raising taxes on rare earths within its borders, all the while thumbing its nose at the World Trade Organization, Americans should be very concerned about the competitive disadvantage we face with respect to China and rare earths. In fact, we might reach a day soon when China refuses to export any rare earth materials at all, choosing instead to use them for domestic production.

And it’s not just the manufacturing of cars and cell phones that should concern us. According to one analysis, today’s most efficient wind turbines require about one ton of neodymium for every megawatt of installed wind power capacity. Do the math and it is easy to see why China’s stranglehold of rare earths is bad news for electricity consumers who rely more and more on wind power. Controlling the supply of rare earths means controlling the price of wind production in the long term. And with thousands of megawatts of wind planned for installation, consumers, like always, will ultimately pay the price.

If America is to continue being a place that makes things, especially high-tech things, U.S. policymakers need to get serious about making the U.S. more competitive in the rare earths market. It’s good for the marketplace, good for manufacturing, and good for consumers.