The Importance of Building a Domestic Rare Earth Supply Chain
The Importance of Building a Domestic Rare Earth Supply Chain
May, 2023
Over the past several decades, China has determinedly built its rare earth element (REE) mining and processing industrial base. Notably, between 1978 and 1995, China’s annual REE production increased by an average of 40 percent. During this rapid ramp-up period, China was able to effectively monopolize the global supply chain for REEs and REE applications by subsidizing the industry to discourage competition, by leveraging a lack of environmental and labor laws, and by restricting foreign investment in the sector.
Today, China maintains its monopoly position over the world’s REE market, controlling greater than 90% of the supply chain for raw rare earth materials and greater than 85% of rare earth magnet manufacturing. As society electrifies and nations across the globe pledge to wean their dependence on fossil fuels in favor of renewable energy sources reliant upon an electric motor – and thus the rare earth magnets that power them – the economic and geopolitical consequences of China’s dominance over this crucial sector have become all the more palpable.
Recently, Jamie Dimon, Chairman and Chief Executive Officer of JP Morgan Chase, touched on the importance of evaluating the economic and geopolitical risks of the current global rare earth supply chain in his 2022 annual letter to shareholders. Dimon writes, “there is no question that supply chains need to be restructured,” but he also acknowledges that it is not something that will happen overnight. Building out a strong domestic rare earth supply chain will be a long term project, but Dimon cites three reasons for why it must be done:
#1. National Security
First and foremost, relying almost exclusively on China for such a critical resource poses legitimate risks to U.S national security, especially as U.S.-China relations continue to sour. According to Dimon, “For any products or materials that are essential for national security (think rare earths, 5G and semiconductors), the U.S. supply chain must be domestic or only open to completely friendly allies or partners.”
The United States’ near total REE reliance on China, a nation that is far from being considered a friendly ally, comes with serious national security risks that cannot be ignored. To begin with, permanent rare earth magnets are critical to the functioning of countless modern-day aerospace and defense technologies, enabling the military to replace outdated mechanical systems with finely tuned, highly responsive electrical systems, resulting in improved mobility, survivability and automation.
Moreover, the risk of environmental armageddon as a result of climate change poses an additional national security threat that will rely on rare earth magnets to mitigate. Permanent rare earth magnets are critical building blocks of virtually all renewable energy sources including wind turbines, solar panels, and hydroelectric power stations. Thus, if China were to ever restrict or eliminate REE and permanent magnet exports, it would be devastating to our clean energy goals and other efforts to reduce emissions by transitioning to low-carbon, electric technologies.
#2. Critical Industry Applications
According to Dimon, the second reason the U.S. must build a domestic rare earth supply chain is the vital role of permanent rare earth magnets within numerous critical industries, such as Electric Vehicles (EV), AI, and semiconductor chips. Without a secure domestic supply chain of our own, it will become increasingly difficult for the U.S to remain competitive in strategically important sectors that rely on permanent rare earth magnets.
#3. Supply Chain Diversification
Dimon’s third and final argument for weaning the world’s dependence on China for REEs, and in turn permanent rare earth magnets, is that doing so will allow companies to diversify their supply chains to become more resilient in the face of market volatility. Highly centralized supply chains render companies more vulnerable to market and price fluctuations, thereby creating risks for the health of the overall U.S. economy. It is therefore incredibly important that the U.S. prioritize building a domestic rare earth magnet industry that can offer viable alternatives to companies who are currently sourcing critical REE products from overseas.
With China’s strong grip on the global REE market, building a robust domestic rare earth magnet industry that can meet the demands of an electric future will be no simple task. It will require considerable time and investment to establish a supply chain that can manufacture these critical components at a great enough scale to both meet rising demand and challenge China’s monopoly status - but still, it can and must be done.
Noveon Magnetics is one of only a few companies at the forefront of America’s burgeoning rare earth magnet industry and is currently the only U.S.-based manufacturer of sintered NdFeB magnets. Sintered NdFeB magnets are the most powerful commercially available permanent magnets on the market, and the only type of magnet with strength and thermal resistance required to power large-scale applications such as renewable energy, electric propulsion systems, military defense technology, and more.
This year, Noveon Magnetics plans to begin mass production of “EcoFlux,” a high-performance sintered NdFeB magnet that can not only meet requirements across the entire performance range, but can also be produced using 100% recycled rare earth magnetic material. This marks a big first step in America’s efforts to build a secure domestic supply chain that can usher in an electric future, sustainably.