U.S. President Donald Trump recently spoke with Chinese President Xi Jinping, and the background of the U.S. initiating a second high-level negotiation with China lies in the rare earth export controls imposed by China. In retaliation for the mutual tariff imposition by the U.S., China implemented export restrictions on seven types of rare earths and related magnet products on April 4. The controls on rare earths, which are essential to key industries and referred to as 'the vitamins of industry,' have impacted the U.S. automotive, energy, and defense industries, making it appear as if President Trump is conceding.
Rare earths collectively refer to 17 elements including the 15 lanthanide elements on the periodic table (La~Lu) and scandium (Sc) and yttrium (Y). The elements included in rare earths are lanthanum (La), cerium (Ce), praseodymium (Pr), neodymium (Nd), promethium (Pm), samarium (Sm), europium (Eu), gadolinium (Gd), terbium (Tb), dysprosium (Dy), holmium (Ho), erbium (Er), thulium (Tm), ytterbium (Yb), lutetium (Lu), scandium (Sc), and yttrium (Y), totaling 17 kinds.
Contrary to what the English name 'Rare Earth Elements' suggests, rare earths are relatively abundant in the world. Rare earths are also found buried in Korea. However, unlike other metals such as gold, silver, and iron, they are not concentrated in a specific form, making it difficult to mine and refine them economically. Breaking the chemical bonds that bind rare earths in nature requires over 100 processing steps and large amounts of strong acids. Hence, it was given the meaning of 'rare.'
Rare earths are divided into light rare earth elements, such as lanthanum and cerium, and heavy rare earth elements, such as dysprosium and terbium. According to the Korea International Trade Association, the proportion of light rare earths in global production reaches 90.9%, while heavy rare earths account for only 9.1%, almost all of which are produced in southern China.
◇ Used in electric vehicle motors, semiconductor wafers, and mobile phone camera lenses
The rare earths that China targeted for export controls in April are seven types of heavy rare earths: samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium. Most of these are mined only in China and Myanmar and are the most chemically challenging materials to separate among rare earths. Therefore, although the proportion of rare earths in China's exports to the U.S. is small, it could significantly impact the supply chain.
Samarium is used in cobalt magnets, gadolinium is used as a contrast agent, and terbium is used as a raw material for phosphors. Dysprosium is added to motors or neodymium permanent magnets for electric vehicles to increase magnetic retention, and lutetium is used in radiation therapy. Scandium is utilized in aluminum alloys for aircraft parts, while thulium is used in solid laser manufacturing.
Although neodymium and dysprosium are not included in China's export control rare earths, they are essential for manufacturing the strongest permanent magnets developed to date. Permanent magnets have up to 15 times the magnetic force of iron magnets of the same weight. They are used in electric vehicle motors, wind turbine generators, robots, and drones. Permanent magnet motors that use rare earths are smaller and perform about 15% better than motors that do not.
Cerium oxide is used as a polishing agent for semiconductor wafers, display panels, and glass for optical and electronic products. Polishing agents made from cerium are relatively inexpensive and are among the most widely used polishing agents. Cerium, lanthanum, and erbium, among others, are used as coloring agents, bleaching agents, and radiation protectants for display panels and glass. Lanthanum increases the refractive index of glass, making it suitable for microscopes, telescopes, and mobile phone camera lenses.
In addition, rare earths are required for manufacturing precision-guided weapons, high-performance laser systems, combat aircraft engines, and motors for combat vehicles. According to a report by the U.S. Congressional Research Service, approximately 417 kg of rare earths are used in the F-35 stealth fighter, 2,358 kg in AEGIS ships, and 4,172 kg in Virginia-class submarines.
◇ Background of China's government policy and low environmental awareness in dominating rare earth supply
China has gained a monopolistic position in rare earth production due to a combination of abundant reserves, government resource policies, and low environmental awareness. Since the 1980s, China has designated rare earths as a national strategic resource and embarked on the development of technologies related to rare earth resource development. Deng Xiaoping formalized in 1992 that 'if there is oil in the Middle East, then there are rare earths in China,' recognizing rare earths as China's strategic resource.
Western countries, including the U.S., have closed rare earth production facilities for environmental reasons. The extraction and separation processes used after rare earth mining generate byproducts such as 63 million liters of toxic gases containing sulfuric acid, 200,000 liters of acidic wastewater, and 1 ton of wastewater containing radioactive substances for every ton (t) of rare earth extracted. In 2002, the U.S. closed the 'Mountain Pass' mine, which was the world's second-largest rare earth mine.
A rare earth refinery owned by a Japanese corporation in Malaysia closed in 1992. A rare earth refinery in France also closed in 1994. Initially, these refineries were temporarily closed for equipment improvement after environmental activists raised concerns about pollution, but they ultimately closed permanently unable to withstand China's low price offensive.
China mines 70% of the world's rare earths. The remainder is sourced from Myanmar, Australia, and the U.S. Additionally, China accounts for 90% of rare earth refining and processing. China refines and processes all rare earths mined domestically as well as nearly half of the rare earths mined in Myanmar and the U.S.
In a situation where dependence on Chinese rare earths has increased, China's export controls on rare earths have immediately impacted the U.S. industry. Ford closed its sports utility vehicle (SUV) plant in Chicago for a week at the end of May due to a shortage of permanent magnets. The Wall Street Journal reported that some automakers are considering transferring the production of parts containing rare earths to China. The defense industry, including the F-35 fighter manufactured by Lockheed Martin, is also said to have suffered production setbacks due to the lack of rare earths.
◇ U.S. Institute for Strategic and International Studies: 'It's hard to reverse China's rare earth monopoly'
According to the U.S. Geological Survey, from 2020 to 2023, 70% of the rare earth compounds and rare earths imported by the U.S. were from China. Approximately 90% of the permanent magnets distributed globally at an annual scale of 200,000 tons are produced by China.
President Trump is planning to accelerate the pace of securing rare earths by invoking emergency powers to bypass U.S. Congressional approval, thus initiating 'rare earth self-sufficiency.' The U.S. Department of Defense has set a goal in its '2024 National Defense Industrial Strategy' to develop mines capable of supplying the necessary rare earths for the U.S. defense industry by 2027. The Department of Defense has invested over $439 million since 2020 to build a rare earth supply chain within the U.S.
However, it is virtually impossible to overturn China's rare earth monopoly in the short term. Currently, the U.S. accounts for only 1.7% of the production of neodymium and praseodymium, which have impacted automobile production. The Center for Strategic and International Studies (CSIS) stated, 'MP Materials, which produces rare earths in the U.S., produced 1,300 tons of neodymium oxide last year, but China produced about 300,000 tons in the same year' and pointed out that 'even with recent investments, the U.S. has a long way to go to establish a rare earth supply chain independent of China.'