New US Senate Bill Seeks to Boost Domestic Rare Earth Production, Wean Off Chinese Imports

US Senator Marco Rubio at Capitol Hill in Washington on July 20, 2017. (Tasos Katopodis/Getty Images for Kelly Craft)

U.S. Senator Maro Rubio (R-Fla.) recently introduced a bill that aims to break off the country’s reliance on importing rare earth minerals from China.

Rare-earth elements, such as cobalt and lithium, are needed to produce critical components within many key technologies such as electric vehicles, smartphones, wind turbines, satellites, missiles, and semiconductor chips. This is also why amid trade war tensions, Beijing has threatened to cut off rare earth exports to the United States.

The bill, titled “‘Rare Earth Cooperative 21st Century Manufacturing Act’’ (S.2093), would establish a privately-funded and operated U.S. cooperative that handles every part of the supply chain, from the mining of materials to the processing into rare earth products.

The U.S. Secretary of Commerce would secure a charter for the cooperative, which would be exempt from antitrust laws.

“We must shift our policies to restore the competitiveness of critical American industries for the 21st century,” Rubio stated in a July 11 press release, noting that the Chinese Communist Party has “aggressively subsidized its own economy.”

China holds most of the world’s rare-earth processing capacity. From 2014 to 2017, it supplied 80 percent of the rare earths imported by the United States. It produced 120,000 metric tons, or 70 percent of the world’s total rare earths, in 2018, according to data from the United States Geological Survey.

Meanwhile, about 35 percent of the world’s rare earth deposits are in China.

China’s rare-earth dominance is in part the result of cheap labor and lax environmental regulations. The extraction of rare earths from ores, which involves a separation and refinement process often requiring toxic chemicals, could result in serious environmental pollution. But many Chinese companies do not spend money to treat toxic waste.

“Beijing’s mercantilist tactics have contributed to a market failure for the development of rare earth resources, both in the United States and around the world,” Rubio said.

Currently, the California-based Mountain Pass mine is the only U.S. mine producing rare earths. However, MP Materials, the owner of Mountain Pass, ships its rare earth extracts—about 50,000 tons annually—to China for processing, as there are no processing facilities in the United States.

China has recently raised tariffs to 25 percent on U.S. rare earths imports, as a retaliatory move after the U.S. administration raised tariffs on $200 billion worth of Chinese imports in May.

Under the bill, the U.S. cooperative would produce rare-earths-based products—at cost—based on the needs of its members, while profits would be split among them. Any excess rare earths are then allowed to be sold on the open market. That could shield investors and end-users of rare earths from price volatility.

The cooperative can receive funding from international investors, such as foreign governments or state-sponsored entities, but only after approval from the Committee on Foreign Investment in the United States (CFIUS), a U.S. government panel that screens foreign investments for potential national security risks.

The cooperative can also apply for relevant business loans and grants from different U.S. government agencies, including the Department of Energy and the Pentagon.

“The Act is a crucial ingredient for the resurgence of America’s advanced manufacturing sector by allowing domestic industries to regain competitiveness and break China’s control over the global rare earth value chain,” Rubio stated.

U.S. dependence on Chinese rare earths has been a focal point in the administration. In early June, the U.S. Department of Commerce released a 50-page report, where it made 61 recommendations for the United States to minimize its reliance. The suggestions included stockpiling, exploring deposits sources, constructing new mines, and increasing trade and collaborations with allies that have rare earth deposits, such as Japan and Australia.

Rubio stated: “We can’t beat China by playing their game, which is why this bill harnesses the American cooperative model as a time-tested way to correct for failed markets without relying on heavy-handed federal intervention.”

Other lawmakers have also introduced U.S. bills addressing the same issue.

In April, three U.S. senators introduced a bill named “Rare Earth Element Advanced Coal Technologies Act” (S.1052), which seeks to provide federal funding for developing U.S. technology that can extract rare earths from coal and coal byproducts produced at U.S. mines.