China's Mineral Monopoly
Source: DefenseNews (9/21/09)
"Fearing that it could be unable to acquire critical technologies, the U.S. Defense Department has started assessing the implications of China's stance. . ."
Not satisfied with its own abundant stocks of rare earth oxides, China is moving to corner the world market by buying up mines worldwide, including recent acquisitions in Australia.
China today controls 98% of the world market at the very time these rare earths are in soaring demand. Neodymium, terbium and dysprosium are vital for high-power magnets; yttrium is critical for lasers; lanthanum for hybrid car batteries.
Now armed with its monopoly, China is jacking up prices by cutting production and exports and pressuring high-tech manufacturers to set up shop in China, where supplies are more plentiful.
The combination of rising costs and tighter control on exports, however, is alarming companies worldwide, including U.S. weapons makers and Pentagon officials.
Fearing that it could be unable to acquire critical technologies, the U.S. Defense Department has started assessing the implications of China's stance and is preparing to study, literally from the ground up, the origin of the raw materials and components that go into U.S. weapons and which nations touch them along the way.
Every nation on earth faces the same significant challenge. While some shuttered mines will be reopened, it is unclear if that, plus new mines and deposits still to be found, might weaken China's monopoly position.
The question is whether China will continue to exploit its position, and what impact its policies will have on commercial markets and military systems.
The Pentagon must determine exactly how dependent it is on a nation that is increasingly recognized as a strategic global competitor and even as a potential future foe.
For now, China and the U.S. remain close trading partners. Should relations sour, it's not guaranteed vital trade would collapse. During the Cold War, the U.S. and Soviet Union mutually benefited from trade ranging from agriculture to strategic materials.
But it is critical the U.S. and its allies assess their options now—while such relationships are healthy, and before China's prices become economically and militarily unbearable.