The U.S. supply of rare-earth elements, necessary for the production of many manufactured goods, is dwindling. How will American firms overcome their reliance on China to compensate for the shortage?

The planet has a limited supply of certain important elements, particularly the 17 “rare earth” elements. Several of these rare elements are crucial for advanced manufacturing, including the production of electronics, energy technologies and a range of defense goods. Concerns are on the rise that the United States’ diminishing supply of these critical elements may cripple some industries or increase the reliance on China, the world’s largest supplier of rare-earth elements.

Although rare-earth elements may be less recognizable than other resources, they play an integral role in modern life. For example, tantalum is found in cell phone capacitors; neodymium is used for powerful lightweight magnets found in hard drives, automobiles, communications systems and countless miniaturization applications; europium is used in both color televisions and computer screens; and lithium is crucial for electronic batteries and hybrid car engines.

“Increasingly important to technology, they’re also playing a larger role in geopolitical maneuvering. Today, more than 95 percent of all rare-earth elements come from China, while the United States produces at most 2 percent,” Popular Mechanics reports. “That disparity makes some experts twitch. After all, what happens when Chinese industry needs so much of the rare-earth elements mined in that country that there’s nothing left to export?”

According to a report from the U.S. Geological Survey, the U.S. did not mine any rare-earth elements in 2008 and 2009, but imported quantities worth $186 million and $84 million, respectively. U.S. reserves of these elements currently stand at 13 million tons. By comparison, China mined 120,000 tons of rare earth elements in both 2008 and 2009, while its reserves are at 36 million tons. Ninety-one percent of U.S. rare-earth elements imports came from China between 2005 and 2008.

An analysis released in July from the Congressional Research Service found that global demand for rare-earth elements is roughly 134,000 tons per year, while production is at 124,000 tons per year. Although stockpiles currently make up for the difference, demand is expected to rise to 180,000 tons annually by 2012 and 200,000 by 2014, “while it is unlikely that new mine output will close the gap in the short term.”

At the current rates of production and consumption, a worldwide shortfall seems inevitable. Apart from the economic repercussions, such a shortage could also pose a risk to U.S. defense capabilities, as the military relies on rare-earth elements for a broad range of devices, such as missile-guidance systems, lasers and aircraft electronics.

According to the Government Accountability Office (GAO), “Government and industry officials have identified a wide variety of defense systems and components that are dependent on rare-earth materials for functionality and are provided by lower-tier subcontractors in the supply chain. Defense systems will likely continue to depend on rare-earth materials, based on their life cycles and lack of effective substitutes.”

China’s dominance of the rare-earth elements market may pose serious problems for countries that depend on its exports, as Chinese consumption of rare-earth metals increases and availability is curtailed. Last month, a political dispute led China to block all shipments of rare-earth materials to Japan, forcing Japanese manufacturers to introduce recycling and reclamation to meet basic production needs.

“Concern over China’s hoarding of rare earths has also been spreading to the United States,” the New York Times reports. “Although China has not specifically blocked shipments to any place but Japan, it had already tightened its overall export quotas of the minerals, announcing in July that it would reduce them by 72 percent for the rest of the year.”

Japan and other countries, such as South Korea, are instituting government initiatives to secure more stable rare-earth supplies and research possible alternatives. The U.S. is also evaluating new rare-earth elements policies, with Congress considering a bill known as the Rare Earths and Critical Materials Revitalization Act of 2010, which would establish a $70 million program to conduct research and development to increase access to these elements.

U.S. industry groups support the measure.

“Manufacturers remain concerned that China will continue to make further reductions in exports. A number of experts are predicting that, at the current rate of growth, China may consume 100 percent of the rare earths that it produces in 2012,” according to the National Association of Manufacturers (NAM). “We cannot afford to put more good-paying manufacturing jobs in jeopardy due to a shortage of these critical materials.”

Resources

4 Rare Earth Elements That Will Only Get More Important
by Maggie Koerth-Baker
Popular Mechanics, May 21, 2010

Mineral Commodity Summaries: Rare Earths
U.S. Geological Survey, January 2010

Rare Earth Elements: The Global Supply Chain
by Marc Humphries
Congressional Research Service, July 28, 2010

Rare Earth Materials in the Defense Supply Chain
U.S. Government Accountability Office, April 14, 2010

Japan Recycles Minerals from Used Electronics
by Hiroko Tabuchi
The New York Times, Oct. 4, 2010

NAM: Rare Earths and Critical Materials Revitalization Act
by Keith McCoy
National Association of Manufacturers, Sept. 22, 2010