As competition with China heats up, U.S. races to bolster supplies of critical materialsBreaking China’s dominance of raw materials that America needs for everything from defense to electric vehicles As if the pandemic, millions of lost jobs, and scores of other problems aren’t top of mind with President Joe Biden, here’s something else on his plate:
Batteries. “Imagine historic investments in research and development to sharpen America’s innovative edge in markets where global leadership is up for grabs,” he said last month.
“Markets like the battery technology, artificial intelligence, biotechnology, clean energy.”The United States is in a frantic competition with China to dominate these and other areas, which will help determine economic and thus national security for decades to come.Unfortunately in one area—lithium-ion batteries (among others)
, America appears to be trailing. Nearly two-thirds of the world’s lithium-ion batteries are produced in China, a matter of great concern to everyone from generals in the Pentagon to Tesla’s Elon Musk and other electric-vehicle manufacturers. “It’s a significant issue, not only for the Department of Defense, but also commerce in general,” says Ellen Lord, who served until January as undersecretary of defense for acquisition and sustainment—in other words, the Pentagon official responsible for making sure the military gets what it needs to wage war.
“It’s essential to have secure and resilient supply chains, so yes, when China makes two-thirds of something that we need, it’s a concern.”
In 2018, the Trump administration used the
Defense Production Act (DPA), “to identify future projects that create, maintain, protect, expand, or restore capabilities essential for national defense.” Lithium batteries, used in everything from drones to hypersonic missiles to radiation-hardened electronics, are one such item.
Some manufacturers didn’t wait for the Feds. Electric vehicle maker Tesla for example, has a 1.9 million square-foot facility in Nevada, which began producing battery packs in 2016. Tesla also uses Chinese-made batteries, but the Palo Alto, Calif.-based company has said it hopes to begin building its own battery cells in 2022 at a volume that would be roughly triple what it has produced at the Nevada plant. Other U.S. auto makers and defense contractors are looking to even leapfrog lithium battery technology, though significant breakthroughs aren’t expected soon.
Access to raw materialsMeantime, manufacturing is only one problem.
Access to raw materials used in batteries—like cobalt and lithium—is another. The U.S. produces little of either. Most cobalt—which helps protect batteries from corrosion, which can spark a fire—is mined in the Democratic Republic of the Congo in central Africa.
But it’s shipped to China for processing before being distributed to battery makers.
That’s a long supply chain, and one over which the United States has no control.
Sourcing lithium is also problematic.View attachment 2905148The EV industry is taking off, but the U.S. only mines about 1.2% of global supply, according to the U.S. Geological Survey. These shortages help explain why President Donald Trump issued
an executive order last fall, aimed at boosting domestic production of these so-called “rare earth” minerals.
The order warned that “undue reliance on critical minerals, in processed or unprocessed form, from foreign adversaries constitutes an unusual and extraordinary threat, which has its source in substantial part outside the United States, to the national security, foreign policy, and economy of the United States.”
By “undue reliance” here’s a stat for you: China
accounts for 70% of global production of rare earths.
If that’s not a national security problem, for the United States, I don’t know what is.
Trump’s order was a boost to the world’s only major rare earths producer outside of China—Australia’s Lynas Corp. — which got $30.4 million to build a commercial light rare earths separation plant in Texas.
“It’s essential that we boost both the domestic capacity and throughput of rare earth processing,” says Lord, the former Pentagon official.
A more reliable source of critical minerals is obviously in the best interest of U.S. defense contractors from giants such as Lockheed Martin Corp., Boeing Co., and General Dynamics Corp., down to small suppliers.
But it’s also likely to prove a boon for manufacturers of civilian products, notably EVs.Every major auto maker is ramping up here, including General Motors Co. which says it hopes to phase out the gasoline internal combustion engine by 2035. Battery and materials companies will likely benefit as well.www.marketwatch.comView attachment 2905150*To Remind,
Uses of Rare Earth ElementsRare earth metals and alloys that contain them are used in many devices that people use every day such as computer memory, DVDs, rechargeable batteries, cell phones, catalytic converters, magnets, fluorescent lighting and much more.
During the past twenty years, there has been an explosion in demand for many items that require rare earth metals.
Twenty years ago very few people owned a mobile phone, but today over 5 billion people own a mobile device.
The use of rare earth elements in computers has grown almost as fast as cell phones.
Many rechargeable batteries are made with rare earth compounds.
Demand for the batteries is being driven by demand for portable electronic devices such as cell phones, readers, portable computers, and cameras.
Several pounds of rare earth compounds are in batteries that power every electric vehicle and hybrid-electric vehicle.
As concerns for energy independence, climate change, and other issues drive the sale of electric and hybrid vehicles, the demand for batteries made with rare earth compounds will climb even faster.China Enters the MarketChina began producing notable amounts of rare earth oxides in the early 1980s and became the world's leading producer in the early 1990s.
Through the 1990s and early 2000s, China steadily strengthened its hold on the world's rare earth oxide market.
They were selling rare earths at such low prices that the Mountain Pass Mine and many others throughout the world were unable to compete and stopped operation.
Defense and Consumer Electronics DemandAt the same time, world demand was skyrocketing as rare earth metals were designed into a wide variety of defense, aviation, industrial, and consumer electronics products.
China capitalized on its dominant position and began restricting exports and allowing rare earth oxide prices to rise to historic levels.
China as the Largest Rare Earth ConsumerIn addition to being the world's largest producer of rare earth materials, China is also the dominant consumer.
They use rare earths mainly in manufacturing electronics products for domestic and export markets.
Japan and the United States are the second and third largest consumers of rare earth materials.
It is possible that China's reluctance to sell rare earths is a defense of their value-added manufacturing sector.
China's Apex of Production Dominance?The Chinese dominance may have peaked in 2010 when they controlled about 95% of the world's rare earth production, and prices for many rare earth oxides had risen over 500% in just a few years.
That was an awakening for rare earth consumers and miners throughout the world.
Mining companies in the United States,
Australia,
Canada, and other countries began to reevaluate old rare earth prospects and explore for new ones.
Dangers of a Dominant World ProducerSupply and demand normally determine the market price of a commodity.
As supplies shrink, prices go up.
As prices go higher, those who control the supply are tempted to sell.
Mining companies see high prices as an opportunity and attempt to develop new sources of supply.
With rare earth elements, the time between a mining company's decision to acquire a property and the start of production can be several years or longer.
There is no fast way to open a new mining property.
If a single country controls almost all of the production and makes a firm decision not to export, then the entire supply of a commodity can be quickly cut off.
That is a dangerous situation when new sources of supply take so long to develop.
In 2010 China significantly restricted their rare earth exports.
That was done to ensure a supply of rare earths for domestic manufacturing and for environmental reasons.
This shift by China triggered panic buying, and some rare earth prices shot up exponentially.
In addition, Japan, the United States, and the European Union complained to the World Trade Organization about China's restrictive rare earth trade policies.
Rare Earth Element OutlookThe global demand for automobiles, consumer electronics, energy-efficient lighting, and catalysts is expected to rise rapidly over the next decade.
Rare earth magnet demand is expected to increase, as is the demand for rechargeable batteries.New developments in medical technology are expected to increase the use of surgical lasers, magnetic resonance imaging, and positron emission tomography scintillation detectors.
Rare earth elements are heavily used in all of these industries, so the demand for them should remain high.
https://geology.com/articles/rare-earth-elements/Lithium and its compounds have several industrial applications, including heat-resistant glass and ceramics, lithium grease lubricants, flux additives for iron, steel and aluminium production, lithium batteries, and lithium-ion batteries.
These uses consume more than three-quarters of lithium production.Rare Earths; an industry in transition from fossil fuels to the green economyThe transition to a ‘green’ economy has seen many commodity markets change focus, such as the impact of the rechargeable batteries on the lithium or cobalt markets, though the transition experienced by rare earths has been more complex.
The rare earths market is not only tackling fundamental changes in the dominant end-use markets, transitioning to one dominated by magnet applications, but also adapting to the changing elemental requirements with greater focus being placed on rare earth magnet elements.China remains the major supply centre of rare earths at both the mined and refined stages of the supply chain, though Chinese dominance has been eroded in recent years.
China accounted for 55% of mined supply and 85% of refined supply in 2020, though this has fallen from more than 95% in both categories during 2013.
Major producers in Australia, the USA and Myanmar have increased the proportion of non-Chinese mine supply in recent years, though much of this material continues to ultimately flow into the Chinese domestic market.
The reliance on China has caused concern in major markets, principally the USA, EU and Japan, who are dependent upon Chinese supply, which is increasingly integrated downstream. The development of regional supply chains in these major regions has seen direct investment in developing rare earth mines and facilities, though the development of downstream demand remains a critical step in constructing a self-sustaining market, made increasingly difficult by Chinese dominance of rare earth demand and pricing. www.globenewswire.com/news-release/2021/02/10/2173311/0/en/Roskill-Rare-Earths-an-industry-in-transition-from-fossil-fuels-to-the-green-economy.htmlView attachment 2905153Food for thought
Frank
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