The Geopolitical Consequences of Depending on Russian and China for Rare Earths

Rare Earth Elements (REE) are used in a variety of modern industrial applications, including electronics, clean energy, technology, and defense. These elements are found worldwide, but China is the largest miner, processor and refiner of rare earths compounds and metals and the largest consumer. The rest of the world depends on the Chinese for this very strategic material and related technologies. With geopolitical tensions rising around the world, new approaches to raw materials security will have to be established.

Russia supplies the EU rare earth industry

Russian mine production and exports of rare earths are estimated at 2,700 tonnes of TREO (Total Rare Earth Oxides), as of 2021. According to the U.S. Geological Survey, these production levels have remained consistent for the past four years. Russia is estimated to have the third largest holder of rare earths reserves globally. However, the Russia-Ukraine conflict that has been raging since February 2022 is negatively affecting metals and energy supply chains. A vast array of industries, from automotive and aerospace to medical equipment and many others, are impacted.

Europe’s main rare earth separation facility is the Silmet separation plant in Estonia, which is run by Canada-listed Neo Performance Materials. Unfortunately, most of the feedstock it processes comes from Russia. The EU and US sanctions placed on Russia for its invasion of Ukraine might be applied to the Solikamsk Magnesium Works, the Russian company that supplies rare earths to the European market. The EU is already looking for other sources.

China Supply Chain Concerns

China is the world’s largest producer of rare earth, with an estimated 140,000 tonnes in 2020 alone, accounting for almost 60% of global production. The problem is that with tensions between China and Taiwan rising, there is an increased risk of a Taiwan-China conflict. Essentially, China claims Taiwan, an island of 23 million people off its east coast, as its own territory and wants to bring it under one ‘unified’ governing China. However, the U.S. does not have diplomatic relations with Taiwan under this Chinese policy, but it supplies military support to Taiwan to defend itself. This has heightened tensions between the U.S. and China. However, the U.S. depends heavily on China to supply critical rare earths for manufacturing, technology, and defense purposes.

In fact, the U.S. relies on China for 31 of 35 strategic metals, including eight rare earths, identified by the government as imperative for the U.S. manufacturing sector and national defense. Plus, 14 of these elements are not mined in the U.S. The U.S. and other countries that rely on China’s production of rare earths need to begin looking elsewhere for rare earths compounds, metals and technologies, if they are planning to be independent from China.

In the meantime, Chinese companies have been blocked from funding strategic research at UK universities. The U.S., EU, and the West in general have limited Chinese investments in sensitive technologies including computer chips and telecom equipment.

Alternative Sourcing Options

Between the Russia-Ukraine and China-Taiwan conflicts, many developed countries are actively looking for alternative rare earths sourcing. The solution that dominates today’s narrative, both in the U.S. and Europe, is increasing domestic supply. This would include digging new mines, constructing processing and manufacturing plants, and essentially building a supply chain by making the finished products from the ground up. Experts, citing construction times, permitting, and environmental impact assessments, doubt these ‘solutions’ can be achieved in a timely manner to support the green transition.

Another option for increasing rare earths supply is turning to new agreements with old alliances. The U.S. and other Western nations, instead of scrambling alone to develop new rare earths mines and build supply chains, a process that will take years or even decades to be fully realized, are developing partnerships. For instance, the U.S. Inflation Reduction Action offers benefits to manufacturers that source materials in the U.S. or from nations that the U.S. has free trade agreements. The UK is looking to partner with countries within its Commonwealth nations, such as my company, Defense Metals, an advanced mineral exploration and development company based in Canada with an Indicated Mineral Resource of 5 million tons averaging 2.95% TREO and 29 million tons of inferred resources at 1.83% TREO. The company goal is “delivering the critical resources that ensure both our national security and development of green technologies for our future.” While this vision statement should benefit Canada, Defense Metals has the potential to be a significant rare earths producer and global supplier.

The U.S. the EU, and other industrialized regions, are looking to speed up rare earths production and eliminate supply chain disruptions. The solution is not as simple as increasing domestic production. Although constructing new rare earths mines is an important step, it does not address the immediate geopolitical issues that are affecting raw materials and technology supply chains.

The major rare earths consuming nations need to forge collaborations with other countries. Their manufacturers should be incentivized to participate with highly prospective international rare earths projects, such as our Wicheeda deposit in Canada, to secure the necessary rare earths for downstream supply chains.

The need for rare earths is not going away any time soon. If anything, the demand is expected to increase, meaning it’s high time for these countries to support new avenues to secure rare earths.