U.S. Defense Edge at Stake as China Dominates "Rare Earths" MiningOctober 07, 2010
 Deng Xiaoping, the Chinese leader who launched the country's market reforms, was prescient when he said “the Middle East has oil, and China has rare earths.” By focusing on the mining and processing of elements known as rare earths, China now dominates the market — producing 120,000 tons, or 97% of the world supply. The impact of this dominance is rising because rare earths are the building blocks of modern guidance systems, battery technologies, consumer electronics and weapons systems, according to a far ranging Bloomberg News report. China recently leveraged its control of the elements by banning exports to Japan after Japan arrested a Chinese fishing boat captain in disputed waters. Japan backed down when it realized the impact of losing its access to the metals needed to manufacture liquid crystal displays and laptop computers, the article noted. The Pentagon is now rushing to assess how its suppliers and contractors use the elements, which turned up in some unsuspected places, like Boeing's application in silencing the “whoosh" sounds of its helicopters, according to Bloomberg. “The Pentagon has been incredibly negligent,” Peter Leitner, a former senior strategic trade advisor for the Defense Department, told Bloomberg News. “There are plenty of early warning signs that China will use its leverage over these materials as a weapon.” In July, China cut its rare earth export quotas by 72% for the rest of the year, which sent prices skyrocketing six-fold for some elements. There are now two rare earth mining projects to increase production by the end of 2012, the article noted. One is owned by Molycorp Inc. in California and the other by Lynas Corp. in Australia. The problem, according to the Government Accountability Office, is that it will take about 15 years to build up the necessary supply chain to process and refine the elements once they have been mined. Rare earth elements are actually not that rare, but they are usually not found in profitable concentrations according to the Bloomberg article. China has 36% of these elements — the largest share in the world. The United States is second with just 13%, according to the U.S. Geological Survey. “It's amazing how this issue seems to have caught the country off guard,” U.S. Representative Mike Coffman, a Colorado Republican, told Bloomberg. He added that back in 2001, the U.S. Army canceled plans to buy Chinese-made berets because of pressure from Congress. It was about that time that China expanded its rare earth capabilities. “How ironic is it that we were concerned about berets?”
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