By Keith Johnson, Lara Seligman
The Virginia-class fast-attack submarine USS Hawaii prepared to moor at the historic submarine piers at Joint Base Pearl Harbor-Hickam on June 6. Each Virginia-class submarine uses nearly five tons of rare-earth materials. U.S. Navy photo by Chief Mass Communication Specialist Patrick Dille
President Donald Trump has often argued that China has much more to lose than the United States in a trade war, but critics say his administration has failed to address a major U.S. vulnerability: Beijing maintains powerful leverage over the warmaking capability of its main strategic rival through its control of critical materials.
Every advanced weapon in the U.S. arsenal—from Tomahawk missiles to the F-35 fighter jet to Aegis-equipped destroyers and cruisers and everything in between—is absolutely reliant on components made using rare-earth elements, including critical items such as permanent magnets and specialized alloys that are almost exclusively made in China. Perhaps more worrisome is that the long-term U.S. supply of smart bombs and guided munitions that would have to be replenished in a hurry in the event of U.S. conflict in Syria, Iran, or elsewhere are essentially reliant on China’s acquiescence in their continued production.
Chinese threats to cut off U.S. supplies of rare earths, first floated by Beijing in late May, haven’t abated. Over the weekend, Chinese state media suggested that high-end, finished products using rare earths that the U.S. defense industry requires could be included in China’s technology-export restrictions, themselves a response to U.S. pressure on the telecoms giant Huawei. “China is capable of impacting the US supply chain through certain technical controls,” said an editorial in China’s Global Timesthat pointedly referred to processed rare earths.
“China has effectively altered the way we manage war, and potentially the outcome,” said James Kennedy, the founder of ThREE Consulting, a rare-earths consultancy focused on security implications.
For all the hints of a new cold war with China, Kennedy said, U.S. warfighting capabilities are to a large extent in the hands of the one country that has come to be seen by U.S. national security officials as a peer competitor and a strategic rival.
“Rare earths are actually a hegemonic trigger. If the United States gets into a conflict, China is supplying the majority of the upscale weapons,” he said. “China can determine the outcome of the conflict, and that could result in a hegemonic shift.”
If rare-earth elements have become the key ingredient in all sorts of advanced civilian technology such as cell phones, electric cars, and renewable energy equipment, they’re doubly important for defense. Each Virginia-class attack submarine needs 9,200 pounds of rare-earth materials, while each F-35 needs 920 pounds, according to a 2013 Congressional Research Service report.
The defense industry, unlike most other sectors, doesn’t need low-end rare-earth materials that—contrary to their name—are actually commonly found in many places around the world. Rather, what the defense industry most needs are highly processed rare-earth products, especially permanent magnets, that are essentially made only in Japan and China. And while Japan, itself stung by a Chinese rare-earth embargo in 2010 and 2011, has made some progress emancipating itself from reliance on Chinese suppliers, its rare-earth value chain is still deeply enmeshed with China, leaving it with little ability to ramp up production volumes to bail out U.S. consumers while still meeting its own domestic needs.
The highest-end products are high-powered magnets, which are what make the guidance systems on smart bombs and cruise missiles work and what runs Aegis missile-tracking and secure communications.
But there are a host of other rare-earth products that the defense industry relies on, Kennedy said. Those include temperature-resistant coatings and alloys for jet engines and stealth coatings for fuselages, all advanced targeting systems, advanced radar and sonar, and even night-vision goggles.
The Pentagon has been grappling with the importance—and vulnerability—of rare earths in the defense industrial base for years. Successive administrations have sought to either revitalize the once-booming U.S. rare-earths industry, stockpile critical materials, or line up alternative suppliers—but with little success so far.
China often subsidizes its rare-earth firms and sells at or below cost, which makes it very difficult for private firms to make a go in the business. Alternative supplies of rare-earth ore abound, but China has a dominant position in the processed rare-earth products that the defense industry needs. The Department of Defense has no clear definition of just what critical materials are needed, and defense stockpiles of critical materials often are not in usable form.
“DOD has no comprehensive, department-wide approach to determine which rare earths are critical to national security, and how to deal with potential supply disruptions to ensure continued, reliable access,” concludedthe Government Accountability Office in 2016.
The Pentagon most clearly outlined its concerns in a 2018 review ordered by the White House, which accused China of deliberately leveraging its monopoly on these minerals to squeeze the U.S. defense industrial base. The report specifically warned that China is the sole source or primary supplier for a number of critical materials used in munitions and missiles. For example, the United States used to make neodymium ion boron permanent magnets, the gizmo that helps guide guided missiles to their targets; today, they are almost all made in China, and none are manufactured in the United States.
In many cases there is no alternative for this material, and in others the time and cost to test and qualify alternatives would be “prohibitive,” the report found.
“China represents a significant and growing risk to the supply of materials and technologies deemed strategic and critical to U.S. national security,” the report concluded. And it underscored the potential national security vulnerabilities as Washington’s trade war with Beijing heated up.
“China’s trade dominance and its willingness to use trade as a weapon of soft power increases the risks America’s manufacturing and defense industrial base faces in relying on a strategic competitor for critical goods, services, and commodities,” the report said.
Former defense officials stress that despite years of attention to the potential vulnerability, it’s not clear that the United States yet has a solution.
“Rare-earth elements are critical for defense applications, and there are no easy alternatives for their functionalities, so we absolutely need them,” said Andrew Hunter, the director of the Defense-Industrial Initiatives Group at the Center for Strategic and International Studies and a former senior Pentagon official. “It would be a major blow to the defense industrial base if we were cut off from rare earths.”
Having weathered one Chinese embargo on rare-earth exports nearly a decade ago, which led to price spikes but only temporary disruptions, many Pentagon officials put their faith in market solutions, Hunter said. “I sense that still holds, but I’m not sanguine that it will remain that way without more government intervention,” he said.
Still, it is far from clear that Beijing will make good on implicit threats to cut off U.S. access to certain critical minerals. Hu Xijin, the editor of the Global Times tabloid, which is owned by the Chinese Communist Party, said in late May that the government was considering the idea but cautioned that it may not act right away. Such a curtailment would be seen in Beijing and Washington as an extremely provocative step—especially after China has spent the last decade trying to rebuild its reputation as a reliable supplier of critical rare earths.
“I think Chinese government won’t do this immediately,” Hu wrote on Twitter, “but it’s seriously evaluating the need to do so.”
China has had a laser focus on rare earths and their importance to advanced technologies since the Deng Xiaoping years—the former Chinese leader reportedly likened the leverage it gave Beijing to the Middle East’s control of oil supplies.
And that industrial dominance has come to complement China’s breakneck race to match the U.S. military’s technological dominance, put on explosive display during the Gulf War, when smart bombs revolutionized modern warfare. That development convinced Chinese leaders they would have to catch up technologically to pose a credible threat to U.S. military might, and Beijing has spent the last 30 years doing just that, noted former U.S. Deputy Defense Secretary Robert Work and his former Pentagon colleague Greg Grant in a new study for the Center for a New American Security on China’s own “military-technical offset.”
It didn’t used to be this way. From the 1960s into the 1980s, the United States dominated both the mining and processing of rare earths. But that started to change, partly because of challenging economics in what is still a niche industry, and partly because China’s lax environmental standards give it an advantage in the dirty business of extracting the stuff, which is often mixed with radioactive material.
One important blow to the U.S. industry was a 1980 regulatory change regarding the handling of thorium, a radioactive element, that drove conventional miners of iron, zinc, and other raw materials—once the source of most rare-earth production—to dispose of rare-earth ores rather than use them. Combined with China’s state subsidies, lax standards, and desire to corner the market, it amounted to a wholesale shift in who controlled what would become one of the key building blocks of the modern economy—and modern militaries.
The shift of rare-earth dominance to China happened to coincide with a revolution in military affairs, where high-tech weapons using ever more difficult-to-acquire materials became the go-to arrows in the U.S. quiver. Tomahawk missiles, for example, are about the most ubiquitous and most used weapon in the U.S. arsenal, but they can’t read terrain and find their targets without the critical materials now controlled by China.
Next-generation weapons will likely be even more reliant on highly processed rare-earth materials, Kennedy said, including hypersonic missiles, directed-energy weapons, and even quantum computing.
The Pentagon does maintain a stockpile of lots of different critical materials and rare earths—but mostly in raw or intermediate form, not in the highly processed finished form that defense platforms actually require. Rare-earth oxides, for example, still must be further processed or refined into metals, alloys, and eventually the permanent magnets that run guidance systems for missiles or navigation systems for American Abrams battle tanks. The United States has very little rare-earth processing ability, and it would take years to rebuild it.
“The critical materials stockpile is a joke,” Kennedy said.
The Trump administration and many lawmakers are redoubling efforts to restart domestic rare-earth mining, and the Department of Commerce this month released a report calling for the United States to address its reliance on imported critical minerals.
The Defense Department recently asked Congress for federal funds to bolster domestic production of these minerals. The Mountain Pass mine in California is currently the only operating U.S. rare-earths facility. Notably, China’s Shenghe Resources Holding Co. is a minority investor, and MP Materials, the owner of Mountain Pass, ships the roughly 50,000 tons of concentrate it extracts from California each year to China to be processed, according to Reuters.
At least three U.S.-based companies are planning to open rare-earth processing plants, including one at Mountain Pass mine set to open next year that will reportedly produce about 5,000 tons of rare earths a year, Reuters reported.
But more mines and intermediate processing facilities likely won’t blunt China’s control of the whole production chain—from mine to magnet. Even highly touted announcements, such as Lynas Corp.’s decision to build a rare-earth separation plant in Texas, don’t solve the Pentagon’s problem, because the oxides must still be shipped overseas to be turned into alloys or permanent magnets.
One possible solution that has been rattling around Washington for years, which Kennedy advocates, is to allow technology firms to create a cooperative. That would be a way to provide soup-to-nuts rare-earth services: mining the stuff, separating it, processing it, and finally turning it into advanced metals, magnets, and more, without risking the serial bankruptcies that have plagued the sector for decades.
Some House Republicans have been urging the administration to take such a step, and the White House could issue an executive order essentially dictating the same measures.
But for now, the United States is still left without an answer to its rare-earth dilemma.
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