Its quite long at 71 pages, but is a great take on China's advantages in the RE space.
The paper is titled:
CHINA’S RARE EARTH SUBSIDIES AND STRUCTURAL ADVANTAGES May 2023 and written by multiple PhD's.
It was prepared for- U.S. House Caucus on Critical Materials U.S. House and Senate Natural Resource Committees U.S. House and Senate Armed Services Committees The White House National Security and Economic Council U.S. Department of Energy U.S. Department of Defense U.S. Allied Partner GovernmentsU.S. and Allied Financial Institutions
There are some fascinating revelations in this study.
China is estimated to have over 300,000 full time employees working in the commercial REEsector. By comparison the U.S. has less than 405164 full-time (or full-time equivalent)“commercial” workers in the mining, refining, metallics space.165 Note that 216 of the 405 full-time workers, those currently working at MP (the only U.S. producer of REEs), produce REEconcentrates for China. China is estimated to have over 12,000 full-time REE researchers working in its four nationallaboratories, hundreds of supporting research facilities and at least 39 university settings thatspecialize in REEs. The U.S. is estimated to have as few as 100 full-time researchers working on REEs, on a full-timeequivalent basis, across its National Lab system. Based on a recent survey of America’s topmining universities, the U.S. may have as few as 200 full-time equivalent REE researchersworking in its universities.
The U.S. does not have a single university with a dedicated focus on REEs, whileChina has at least 39 universities.120 The only non-Chinese university that has adedicated REE magnetics practice is the University of Birmingham in the UnitedKingdom.
Although Japan dominates downstream NdFeB magnet IP, China uses its controlover access to Tb and Dy to assimilate these technologies within its borders.
Detailed analysis and evidence of China’s ability todisproportionately manipulate REE markets (China REE production capacity was historically maintainedat 2 X global demand, China maintained massive REE reserves that could be used to alter market priceand has the market-power to set price [above and beyond labor and environmental cost advantages] –all classic Monopoly strategies).
Detailed the practice of withholding REE supply guarantees to U.S.and Allied technology companies (including firsthand accounts from desperate U.S. technologycompanies) as a means for forcing the relocating of Allied manufacturing inside China: thus, capturing IP.
Details on how no amount of new miningprojects would solve this problem (for the first 10 years of this policy debate, nearly all Pentagon andlegislative strategies were limited to opening new mines).
Bad investments by the government and Federal agencies, like DoD, can bemeasured by the two decades of lost corrective-policy action and other misdirectedinvestments based on misleading disclosures. The Pentagon, for example, has a long-standing history of accepting and evendisseminating deceptive data. This practice dates to 2009, when Molycorpwas the first supported project which involved the practice of misclassifyinglight and heavy REEs.159, 13 The Pentagon has continued this practice andcontinues to fund projects that appear to solve the Defense Industrial BaseREE mineral supply. The Pentagon’s replication of this practice is evident inother official reports160 – ultimately distorting U.S. policy, harming investors,the economy and national security. The harm associated with this history and practice of misclassification andinsufficient due diligence caused can be measured by the $7 billion ininvestor losses associated with the Molycorp bankruptcy and othermisdirected investments based on false disclosures
Legislative efforts intended to promote REE capabilities outside of China primarilyfail because conflicted resource producers have no incentive to provide policymakers information that honestly reflects the ‘competitive environment’, theircapabilities, limitations, financial entanglements or profit strategies. Detailed the equally critical downstreamprocesses and how China’s monopoly structure is designed to undermine the economic viability ofwould-be competitors on many levels.
H.R. 2894 apparently assumes Lynas (or other potential allied REEproducers137) will be able to produce meaningful quantities of Tb and Dy.However, the facts demonstrate that Lynas will not be able to fill this void.138The potential for other developing projects to fill this gap is unlikely, as theunresolved “thorium problem” ensures that U.S. / Allied producers willcontinue to avoid heavy rare earth deposits that are commonly rich inthorium
Promoted the development of a multi-national collaborativeplatform for rare earths and other critical material to counter China nearly a decade ago (detailed in thelegislation below), now being considered by this Administration.
China’s many structural advantages make competition in the production of post-REEconcentrates or other downstream products unlikely. 152 a. Because of China’s many hard, soft, and structural subsidies it is not realisticfor any company outside of China to be competitive in the downstreamproduction of REEs without significant U.S. policy intervention like thosedetailed in the 117th Congressional version of H.R. 5033, the “Rare EarthMagnet Manufacturing Production Tax Credit Act”, which was introduced inthe House in 2021 and the Senate in 2022 (S. 4680).
Allied producers collectively can only meet .008% of the Tb and Dy demand based on mining projections.
All of this was ignored by the Pentagon. Members of Congress did introduce a bill (in the 16th Congress: S.2093 and H.R. 4410, and in the 113th Congress: S. 2006 and H.R. 4883) that would create a viableoperating environment for U.S. companies to develop a U.S. REE magnet value chain. This bill wasopposed by Molycorp, MP, Lynas, other would-be REE producers, contracted “industry experts” and / ortheir agents, the financial backers of these projects and the Pentagon (based on feedback fromCongressional staffers). These proposed bills would have allowed significant quantities of HREEbyproduct production, widely available in the U.S., to feed domestic value chains while the problematicthorium would be managed separately. Existing producers of LREE feared increased supply and lowerprofits. Note that MP (Lynas and others) lobbied hard against this solution because it would greatly reduce thescarcity of REEs and consequently reduce price and profits (confirmation of this can be arranged underspecial circumstances.
Well too bad Lynas..... The Chinese crashed the prices anyway.... To accomplish this, the U.S.government (and Allied governments) must focus on supporting and/or financing fullyintegrated REE projects (non-integrated projects are subject to Chinese price and supplymanipulation199).
Recycling being a perfect fit for the US.
Interestingly, the recommendations were oppossed by Mp Materilas and Lynas and contracted “industry experts” and / ortheir agents, the financial backers of these projects and the Pentagon.
Conclusion Many of the DoD- or DoE-sponsored projects have not considered the structural advantagesdescribed above at a functional level. This is also true for many/all privately-funded U.S.projects. The government’s ongoing “wait-and-see approach,” or its improper funding ofinadequate U.S. projects has amounted to a two-decade license of undisputed Chinesedominance. From the information provided in this Document, it should be clear that all futureU.S. and Allied policy measures can be easily offset by China’s structural advantages.196 In manycases they are contributing to China’s monopoly and geopolitical goals (directly or indirectly). Achange in overall U.S. strategy is seriously overdue.
With the Chinese state taking control of REE's and nationalising all facets of its production on October the 1st, there really is no better time to take the initiative and invest the capital into a new ex China supply and recycling chain.
In my view, there simply is no other choice...
IXR Price at posting:
1.1¢ Sentiment: Buy Disclosure: Held
(20min delay)