China's New Rare Earth and Magnet Restrictions Threaten Us Defense Supply Chains

The vulnerability is the opportunity.

There are four steps:

- Mining.

- Beneficiation - raw dirt goes in, most of the uninteresting dirt is removed, low grade ore comes out. Mostly a mechanical process. Done at the mining site. Biggest problem is getting rid of the waste. Mountain Pass pipes it to Nevada. Really.

- Separation - low-grade ore goes in, and the various elements are separated out. Usually separate from the mine site. Currently China has over 80% of the capacity for this step. US capability in this area is weak. MP Minerals has a pilot plant. So does a startup, Ucore.[1] They claim to be scaling up. Total investment in Ucore seems to be about $55 million, which is small for the importance of this business.

- Smelting and magnet making - MP Minerals has a modest plant in an industrial park in Texas.

The US military demand for rare earths probably isn't that high compared to consumer demand.

Nobody wants to overspend, because the last two times rare earth producers overspent, the price crashed and many players went bust. The problem with this industry is price volatility vs large fixed capital expenditures. Now pricing, subsidies, and export controls are so political that volatility is worse.

[1] https://www.metaltechnews.com/story/2024/09/18/mining-tech/t...

I don't blame it on one political party, I'm setting the blame record straight. The current admin blames the Democrats for everything including outsourcing, when in fact only some Democrats tried to prevent it from going too far.

> Ross Perot and his "giant sucking sound"

The guy damaged the independent candidate idea more than anyone because he was politically illiterate - a common occurrence among big ego business owners.

> Until Trump, neither party was willing to commit political capital towards questioning the free trade orthodoxy.

On the contrary, The GOP and the Trump admin are trying to make political capital by hyping ridiculously implemented tariffs which fuel inflation, kill the dollar and put a lot of small businesses in danger. Trump doesn't even rise to the level of Perot, rumors are already floating around about who's actually running the show.

"Questioning the free trade orthodoxy" isn't the same as doing the right thing at the right time and place. We get tariffs at arbitrary levels, on a haywire timetable and that cannot be good for anything besides speculation, which the people pay for via inflation.

[1] https://www.bbc.com/news/articles/ce808gvp56mo

PS: Sorry guys, you fucked up. Hard. And by extension fucked everyone else, so expect no sympathies. We will be busy with the new boss, while trying to keep our democracies not going to crap too. New boss, worse boss than old boss.

When China starts throwing its weight around in the Pacific you’ll pretty quickly see those “allies” cozy back up.

NATO - Trump and republicans are intentionally trying to dismantle it. Democrats dont.

Russia - Republicans admire what Russia stands for. Democrats dont.

And the claim that parties are the same on immigration is beyond absurd too. Yes they are fully easily distinguishable. It does not mean that Democrats are like the caricature conservatives make with "anything goes" policies. Just because they are not in complete extreme does not mean they are the same. And they were definitely not creating the "you can arrest people on their skin color alone" philosophy conservatives use.

Not an issue if China blockades sales. There are strategic and security issues so governments should also mandate production.

Think about much bigger chunks of semiconductor industry where TSMC represents 100% of world's capacity for certain most advanced production nodes.

That's BS. If the US considered the shortage important enough and really wanted to then it could do so in a flash.

If you doubt this just look at how the US turned its manufacturing around in WWII. The speed of the production ramp-up was truly amazing.

The USA no longer has that role for hardware, although it does for software.

A well-known example of this were regulations that require super-low arsenic levels in water. The thresholds were set extremely low, far below natural levels in most mining districts. The proposed limits were so low that ironically it would put some populations at risk of arsenic deficiency — arsenic is an essential micronutrient in animal biology, much of which comes from water. The people pushing to set levels so absurdly low were anti-mining activists.

If you operate a mine, that benchmark for water quality is now your problem, even if the natural levels are much higher. This puts the mining operation in the somewhat intractable position of remediating the arsenic levels of ambient nature as a pre-condition of mining. You can’t just ensure the arsenic is at the level it was when you found it, you have to reduce to some idealized standard that can be intractably expensive to meet and has no scientific basis. It is exploitive and ugly by people that don’t care about the long-term implications as long as it serves their short-term ideological purpose. Civilization requires mining, it does little to help the environment by exporting it to other countries.

I’m a major nature lover and conservationist, grew up in remote rural areas, and spend more time in the deep wilderness than most, but I am also a relevant scientist by training. The amount of scientific malpractice that happens under the pretext of “saving the environment” in the US is pretty damn gross. There are good people inside the Department of the Interior that try to mitigate the worst excesses but the onslaught is unrelenting.

On the specific point of rare earth mining, the chemistry of rare earth ores are naturally unpleasant, much like gold and silver ores. For historical reasons, the massive deposits of gold and silver in the US were developed before any real regulations. Some of those made quite a mess (see: silver mines of Idaho). Modern versions run quite clean but the hurdles to opening new mines are so prohibitively expensive that the US mostly only still operates the grandfathered pre-regulation mines.

REE mining has none of these advantages. The demand for REE is almost entirely modern, so none of it was grandfathered in. I’m sure the US could operate them at a level that is adequately clean but there is a huge contingent of activists that are against all mining and refining on principle and use the myriad levers created by policy over the last several decades to make sure that never happens in the US.

That said, a few months ago the US government announced a strategic investment in the largest REE deposit in the world, which happens to be in the US but has spent most of its time in bankruptcy. I have to imagine that the intention is to streamline production under some kind of exemption.

In this context, because the environmental activists don't want an end to their lifestyle products or especially the pillars of modern civilization (plastic, concrete, fertilizer, steel), they just want the costs to be borne by poorer countries, which in turn have less responsible resource extraction regulations than the developed world, which is WORSE for the environment on net.

The environmental activists aren't arguing for responsible resource extraction at home, they effectuate the ban of resource extraction at home, and only at home.

The global appetite for energy and resources doesn't recede because you choose not to mine, the mining is just done elsewhere. In China, in the Congo, etc.

True concern for the environment would mean that each consumer (at least the largest ones) should be stewarding their own extraction requirements. The endless lawsuits, protests, and rhetoric often make onshoring impossible.

Just like EUV block, it's really matter of how much buying such things (in quantities required) gets disrupted, i.e. enough to degrade supply chain enough that force US to make expensive / different choices, waste 100s of billions and decades to retool MIC away PRC HREE. PRC has less highend compute for training than it would otherwise have without EUV block, and US can likely have less high-end hulls, airframes, less performent munitions and sensors etc... amount of access ripples across strategic landscape.

All current US+co HREE for some strategic elements touch PRC supply chains. And TBH PRC can probably execute export controls much more effectively than US, but these are PRC's first legislated, structured global export controls from PRC. So hard to say how effective it will be, but they may very well be able to stop US+co more than US+co can stop NK or RU.

PRC can go full nuclear, functionally 100% some strategic HREE components to be produced in PRC. Like how US wants 50% highend semi produced in CONUS, but with semi, US is only one key chokehold supplier and has to negotiate with multiple parties, PRC can solely control HREE that's concentrated in PRC for short/medium term. Again that translates to US not able to build up platforms&stockpiles in sufficient #s, or spend $100Bs and critically, more time to design around shortage. Next thing you know, short/medium term procurement changes enough entire force / deterence balance breaks.

>It isn't winning these fights.

It absolutely is, right now, in Ukraine. The US has been able to use the Ukraine war as a massive real-time R&D laboratory for our weapons systems. The result is that Russia can no longer project naval power, their strategic air force is completely neutered, and they have tipped their hand for much of their signals and EW systems. The war is stalemated ... without the direct involvement of NATO (the wisdom of direct involvement is not relevant here).

This is to say that I disagree, there is a military solution to this problem.