From The Center for Strategic & International Studies, April 14:
On April 4, China’s Ministry of Commerce imposed export restrictions on seven rare earth elements (REEs) and magnets used in the defense, energy, and automotive sectors in response to U.S. President Donald Trump’s tariff increases on Chinese products. The new restrictions apply to 7 of 17 REEs—samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium—and requires companies to secure special export licenses to export the minerals and magnets.
Q1: To what extent will the most recent export restrictions on rare earths impact U.S. sourcing of these critical minerals for defense technologies?
A1: There are various types of export restrictions: non-automatic licensing, tariffs, quotas, and an outright ban. The new restrictions are not a ban; rather, they require firms to apply for a license to export rare earths. This development has three implications: first, there will likely be a pause in exports as the Chinese government establishes this licensing system. Second, there is also likely to be disruptions in supply to some U.S. firms given that the announcement also placed 16 U.S. entities on its export control list, limiting them from receiving dual-use goods. All but one of the firms on the list are in the defense and aerospace industries. It is unclear how China will implement the new licensing system. And third, the licensing system may be dynamic and could incentivize countries across the world to cooperate with China to prevent disruptions in their rare earths supply.
Q2: What is the significance of the focus on heavy rare earths given U.S. supply chain vulnerabilities?
A2: The restrictions apply to seven medium and heavy rare earths: samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium. The United States is particularly vulnerable for these supply chains. Until 2023, China accounted for 99 percent of global heavy REEs processing, with only minimal output from a refinery in Vietnam. However, that facility has been shut down for the past year due to a tax dispute, effectively giving China a monopoly over supply. China did not impose restrictions on light rare earths, for which a more diverse set of countries undertake processing.
Q3: Why are rare earths significant to U.S. national security?
A3: REEs are crucial for a range of defense technologies, including F-35 fighter jets, Virginia- and Columbia-class submarines, Tomahawk missiles, radar systems, Predator unmanned aerial vehicles, and the Joint Direct Attack Munition series of smart bombs. For example, the F-35 fighter jet contains over 900 pounds of REEs. An Arleigh Burke-class DDG-51 destroyer requires approximately 5,200 pounds, while a Virginia-class submarine uses around 9,200 pounds.
The United States is already on the back foot when it comes to manufacturing these defense technologies. China is rapidly expanding its munitions production and acquiring advanced weapons systems and equipment at a pace five to six times faster than the United States. While China is preparing with a wartime mindset, the United States continues to operate under peacetime conditions. Even before the latest restrictions, the U.S. defense industrial base struggled with limited capacity and lacked the ability to scale up production to meet defense technology demands. Further bans on critical minerals inputs will only widen the gap, enabling China to strengthen its military capabilities more quickly than the United States.
Q4: Is the U.S. rare earths industry ready to fill the gap in the event of a shortfall?....
....MUCH MORE
Although MP Materials is getting the attention in the U.S., Australia's Lynas has a better mix of the various rare earths.
If interested we have quite a few posts on both, in the case of MP back before the bankruptcy and reorg, when it was known as Molycorp, e.g. 2011's
Molycorp Beats; Raises; Decries Shortsellers as Spawn of Satan (MCP)
[a close reading of the press release reveals there is no use of the term 'Spawn of Satan' -ed]
Often introducing a post with a quote from one of the, if not the, best books on investing and life:
If interested use the 'search blog' box upper left: Molycorp and Lynas.
Always keeping in mind it's the refining capacity that is the rare bit.(not to be confused with the Welsh dish)
