Missouri mine shines spotlight on global battle for rare-earth metals

US fighting back against China’s domination of these elements, used in everything from mobile phones to missiles

While some progress has been made in boosting U.S. efforts, China largely controls the rare-earth supply chain.
Jacob Kepler/Bloomberg/Getty Images

SULLIVAN, Mo. — An hour southwest of St. Louis, tucked away behind a tree line off Route EE, is the Pea Ridge Mine, once a place where workers pulled iron out of the ground. You could almost miss it driving by, but this seemingly unremarkable place has remarkable potential for the region and the country.

This dormant mine holds a deposit of something that lies at the heart of our increasingly high-tech world: rare-earth elements, used in everything from cellphones to missile systems to hybrid cars. The Missouri mine is one of the few places in the world where such an abundant deposit of rare earths has been found. But nothing about rare earths is simple.

Rare-earth metals are 15 elements with the atomic numbers 57 to 71 on the periodic table, as well as scandium and yttrium. The metals themselves amount to a meager $3 billion global industry, but they are essential in the production of $5 trillion worth of products.

Due to their scarcity and huge value, rare earths — and thus by extension the Pea Ridge Mine — lie at the heart of a complex geopolitical fight. It is a contest pitting China and the United States, and just about every other powerful nation on earth, into a new Great Game of diplomacy, business brinksmanship and a fight to dominate the market for these scarce elements. At the moment, China is winning. Over the past few decades, it has bought up nearly the entire supply chain of rare-earth metals and the products they’re used for, leaving other powers struggling to catch up.

In the U.S., however, some progress has been made in the development of domestic rare-earth supplies to regain some competitive edge against China. That’s the opportunity Jim Kennedy saw when he discovered the rare-earth deposit in what he thought was just an investment in an old mine.

“I bought an iron mine, and that ended up having an unbelievable rare-earth deposit,” he said.

But it will not be as easy as that. Getting American mines like Pea Ridge up and running won’t suddenly rescue the U.S. rare-earths industry.

Looking to cash in on his stroke of geological luck, Kennedy quickly discovered China’s monopoly in the market beyond simply mining the metals. In fact, nearly all the manufacturing based on the high-value “heavy” rare earths has moved to China over the past few decades.

‘China has rare earth’

China’s export restrictions and supply-chain acquisition have taken U.S.-based operations to that country to receive a reliable source of rare earths needed for modern manufacturing. It has been a process that has played out over the last 25 years or so. In 1992, the then-leader of the Communist Party of China, Deng Xiaoping, said: “The Middle East has oil and China has rare earth.” The country has since lived up to that promise.

Thirty years ago, U.S. production of rare earths was nearly three times that of China, just under 30,000 tons. However, U.S. production shut down in the early 21st century after being outdone by Chinese production, which had grown to approximately 70,000 tons and has continued to increase ever since.

The most notable single example of China taking on the U.S. was in 1995, when Chinese companies acquired Magnequench, a GM subsidiary built in conjunction with the Department of Defense that developed high-tech magnets using the rare earth neodymium. By 2002, Magnequench’s facilities had been duplicated in China, and all U.S. operations were shut down.

China’s actions have hardly gone unnoticed. Last year, the Bangalore, India–based National Institute of Advanced Studies released an independent report describing Chinese dominance of the rare-earths industry. The report suggested that China’s upper hand, including the acquisition of Magnequench, was the “result of a well-thought out carefully crafted dynamic long term strategy.”

These days China’s rare-earth production is almost equal to global rare earth consumption, around 135,000 tons. That gives China power, especially as the world economy moves ever more high tech. “If the advanced countries such as U.S.A. and some of the European countries want to build an economy which moves towards the Green Energy systems, then China being a major supplier of (rare earths) could hold these countries ransom,” said Lalitha Sundaresan, one of the authors of the study, in an email from India.

China’s leverage also exists when it comes to military technology based on rare earths, used in radar systems, missiles and satellites, to name a few things. That gives China powerful influence in global diplomacy. In September 2010, reports emerged alleging that China had suspended exports of rare earths to Japan over an incident surrounding disputed islands in the South China Sea. Chinese officials continue to deny this claim, but rare-earth consumers nonetheless have been scrambling to find an alternative supply ever since. 

Searching for alternatives

Does that alternative to Chinese production dominance lie in Missouri’s Pea Ridge Mine or other places like it scattered across the U.S.?

In 2010 Colorado-based Molycorp reopened the Mountain Pass Mine in California, which had been the last operating rare-earths mine until it was shut down in 2002 after an environmental accident. The move was hailed by some as a step toward American rare-earth independence, and Molycorp began to plan and build infrastructure to process the rare earths it was pulling from the ground.

Molycorp has since been described as a solution to the United States’ “rare-earth problem,” including in recent reports from both the Congressional Research Service and the Pentagon.

But some are crying foul, including Kennedy in St. Louis, who has become an outspoken critic of Molycorp. He says the reports overlook crucial points of the supply chain, and that the U.S. — including Molycorp — is still dependent on Chinese rare-earth infrastructure in vital areas.

Molycorp is indeed a domestic producer of rare earths. But when it comes to which metals are coming out of the mine, critics like Kennedy wonder how the company can be a plausible solution to the country’s rare-earth problem. U.S. Geological Survey (USGS) data on Molycorp’s Mountain Pass Mine shows that the mineral makeup of the mine is 98 percent light rare earths, mostly cerium and lanthanum. Those two elements have a low market value; prices for them fell more than 80 percent from 2011 to 2012 alone, suggesting an oversupply.

“What they don’t have is any of the real heavy (rare earths),” said Jim Hendrick, a retired USGS geologist who has been involved in rare earths for more than three decades. “They’re there, because when you have a rare-earth deposit you usually have all the rare earths, because they’re so chemically similar they’ll occur (together). But at Mountain Pass, they actually have less heavy rare earths than normal.”

So how can the country’s only operating rare-earth mine provide a viable alternative to China’s monopoly, given what’s coming out of the ground there?

Some say it can’t. But Jim Sims, a spokesperson for Molycorp, says it has to do with the size of the market for heavy rare earths. Any step toward production of domestic heavy rare earths, even if small in quantity, Sims said, could make an impact in the global market and is a step toward rare-earth independence — a quest that mirrors the far better-known desire for energy independence from Middle Eastern oil supplies.

“What’s often overlooked in the discussion of heavy rare earths is that the global consumption of those heavy rare earths is very small,” he said. “It doesn't take a lot of production of some of these rare earths to meet global market demand. That’s one thing to keep in mind.”

Molycorp began a $500 million modernization and expansion project in 2010.
Jacob Kepler/Bloomberg/Getty Images

But it is not just mining the rare earths that matters. It is what you can — or cannot — do with them once they are aboveground that matters too. A domestic supply of raw materials means nothing without the manufacturing capacity to turn them into high-value products. And when it comes to those, some in the industry say China still has the upper hand.

Even if American mines like Mountain Pass and Pea Ridge started pumping out mass quantities of heavy rare earths, there would still be no infrastructure to manufacture them into the modern technological products that have made them so important.

For example, take the neodymium magnet, also known as “neo magnet.” When companies like Magnequench moved to China, they also took that piece of the supply chain with them. Neo magnets are used in dozens of weapon systems, including the Patriot missile, the F-22 Raptor and the joint air-to-ground missile. Those magnets are still coming from China or are dependent on parts of the supply chain in which that country has a monopoly.

“We don’t really have the ability to not depend on China,” said Ed Richardson of the U.S. Magnet Manufacturers Association. “We don’t have all the technology operational here in the U.S. to be able to go from a mine to a magnet. That’s a fundamental problem.”

Molycorp also sends its heavy rare earths to its Chinese facilities for this processing and value-adding, including to the Magnequench facility it now owns via its acquisition of the company Neo Material Technologies. China held a 62 percent stake in Neo Material Technologies at the time of Molycorp’s acquisition in 2012. Despite the reacquisition of Magnequench facilities by a U.S.-based company, the National Institute of Advanced Studies report called the arrangement “even more advantageous to China.”

“The U.S. is completely dependent on China for rare-earth-magnet materials, and now the export of U.S. rare-earth assets into China will only intensify this dependence, at least for some more years,” the report said.

Not only is the country’s only functioning rare-earth mine dependent on Chinese infrastructure, but so is the only facility manufacturing neo magnets in the U.S. That facility, a plant in North Carolina owned by Hitachi, can only partially make the magnets. It still relies on Chinese facilities for other parts of the process.

Richardson summed up the current struggle for the world’s rare earths and a situation that many believe looks unlikely to change in the immediate future. “The world is really dependent on China for this,” he said.

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