China to use rare-earth metals to extort America?

There are certain minerals that make the world go round. Cut off supplies of these elements, and whole swaths of industry simply could not function. With the advent of the Industrial Revolution, these strategic commodities grew to include coal, iron and oil. But since the computer, high-tech revolution a new group of minerals—called rare-earth elements—have become essential to the world economy.

Without rare-earths like yttrium, europium, lithium, dysprosium and others, you don’t have lasers, super-efficient light bulbs, iPods, flat-screen tvs, hybrid cars, wind turbines, radar systems, precision-guided missiles, or a host of other military technologies.

Why does all this matter?

Because one nation controls 95 percent of the world’s rare-earth minerals supply. And that nation is not a friend of America.

The danger may soon be made painfully apparent. According to the Times, the Chinese Ministry of Industry and Information Technology just released a white paper proposing an export ban on rare-earth metals.

Already, some countries are gearing up for a trade war as “Beijing considers plans to strangle global supplies,” the Times reported August 28. It is no accident that China dominates this strategic industry. According to the Times, “The country’s dominance of the market is the result of a deliberate, 20-year bid by Beijing to cast itself as the ‘opec of rare-earth metals.’”

China is aggressively cornering the market on rare-earths. Back in 2006, when the China National Offshore Oil Company (cnooc) tried and failed to purchase U.S. oil company unocal, some analysts felt the real reason behind the bid was to gain control of the only major rare-earth mine in America. That mine is not in operation today.

More recently, China’s apparent plans to tighten the leash on world rare-earth supplies comes on the eve of a landmark decision by the Australian government on whether China will be allowed to purchase one of the few independent rare-earth operations left in the world—Australia’s Lynas. China Non-Ferrous Metal Mining wants to buy a 51 percent stake.

Coming on the eve of Australia’s political maneuvering to block China’s purchase of giant mining conglomerate Rio Tinto, trade tensions may be about to heat up.

A senior member of Japan’s Rare Earth Metal Association observed that in a world before everyone had a mobile phone and wanted to drive fuel-efficient cars, China’s rare-earth monopoly was less meaningful—now it has created a dominance of globally strategic importance.Others, particularly those within the Japanese automotive sector, believe that the rare-earth metals will become the centerpiece of numerous international trade wars.

America may be about to pay the price for letting itself become so dependent upon China for such strategic minerals.

Beijing has cut export quotas by about 6 percent annually over the past decade. China’s rare-earth monopoly arises from a combination of aggressive empire building by Beijing and long complacency on the part of the big consumers.The metals occur naturally in China, but Australia, the United States and South Africa all used to produce rare-earth metals ….

Already, Japanese industry is being forced to rely on smuggled rare-earths. It is not known how much industry in America relies on the same.

During the War of Independence, America learned the painful lesson of reliance on foreign nations. The newborn United States had to rely on France and the Netherlands to supply everything from iron and gunpowder to blankets and clothing, and Britain routinely cut America’s supply lines. Seeing this weakness, America’s founders implemented a national strategy promoting industrial and military self-sufficiency in order to establish the nation’s security.

It seems America has forgotten that lesson. America’s leaders have allowed the nation’s once formidable mining industry to erode. Many minerals—including some that are strategically important for the military—are no longer produced in the United States at all. Due to lack of investment, radical environmental activism, and low-cost foreign competition, many of America’s former mining giants have turned off the drills, closed the refineries and sent the workers home, or have chosen to develop new production outside the U.S. Read our article “Minerals: Crumbling Bedrock of U.S. Security” to understand the implications of being resource-dependent on unfriendly foreign nations, especially at a time of intensifying anti-Americanism, global instability and resource competition.