Photograph by Paul Sancya, Associated Press

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China is the source of nearly all the rare-earth minerals used in the motors and batteries of hybrid and electric cars, raising fears that the new energy economy will mean the same old foreign dependence.

Photograph by Paul Sancya, Associated Press

Replacing Oil Addiction With Metals Dependence?

China’s rare-earth minerals monopoly gives it key clean energy supply role

This story is part of a special series that explores energy issues. For more, visit The Great Energy Challenge.

Words better suited to a high school chemistry class than a high-level policy debate—terms such as praseodymium and dysprosium—have raised alarms around the world about the future of the alternative energy economy.

Seventeen metals on the periodic table of elements have caused the commotion from Tokyo to Washington, D.C. They are known as rare-earth metals, important ingredients in making the motors and batteries of hybrid and electric cars, high-efficiency LED lights, solar panels and wind turbines. The vast majority of the world’s supply of these metals comes from one source—China—raising the issue of whether foreign dependence will bedevil the new energy economy just as it has been a standing feature of the economy powered by fossil fuel.

“This issue isn’t just about mining. It’s about the entire supply chain, from mining, refining, incorporation of metals, and then into final products that go to consumers,” said David Sandalow, assistant secretary for policy and international affairs at the U.S. Department of Energy, at a Senate hearing in Washington, D.C. on Thursday. “We’re paying a lot of attention to the clean energy supply chain. Our role in this is critical going forward. We’re looking at strategic review and not just at policy.”

‘A One-Nation OPEC’

Rare-earth metals, also called rare-earth minerals, include element number 21, scandium; number 39, yttrium; and the 15 lanthanides, numbers 57-71, on the periodic table. However, the name is a misnomer. Rare-earth metals are often found in a cluster, but are not actually rare. Rather, they are valuable because it is difficult to find the minerals concentrated in great enough amounts so that mining the deposit makes economic sense.

The United States, second only to China in energy consumption, is not devoid of rare-earth metals. But the only U.S. mine, near the Mojave National Preserve in Mountain Pass, California (map), became inactive in 2002 after 50 years of production, largely because of economic and environmental issues. The mine, for a time owned by Chevron, was taken over in 2008 by Molycorp Minerals LLC, which has spent more than $400,000 since that time lobbying Congress on rare-earth minerals, according to its Senate disclosure records. On its website, Molycorp says it has plans to modernize and expand the mine and bring it back into full production “with appropriate federal assistance for research, development and capital costs.”

Legislation already has been proposed in the U.S. Congress to extend subsidies and funding to reopen domestic mines, and the focus on the issue intensified after a dispute erupted between Japan and China over rare-earth minerals last week. Japanese industry sources accused China of withholding crucial supplies, an accusation that Beijing denied, but the Japanese government vowed to take action. Foreign Minister Seiji Maehara of Japan said Friday that Tokyo aims to secure more mining development rights overseas to diversify its sources of rare-earth minerals. “Relying on one country is not good,” Maehara said at a news conference.

The discussion this week was much the same in Washington, D.C. Last year, 90 percent of the U.S. imports for rare-earth metals were from China, according to data from the U.S. Geological Survey. But this year, according to USGS, the figure is 97 percent.

“Just as we’ve seen with our reliance on foreign oil, the United States’ total reliance on foreign sources of rare earths puts us in a perilous situation,” said Republican Senator Lisa Murkowski of Alaska, in a prepared statement accompanying legislation she introduced to create a U.S. strategic stockpile of rare-earth minerals and to provide federal loan guarantees to assist the domestic mining industry. “Some have compared China to a one-nation OPEC for rare earths— and China’s recent actions signal that they are well aware of their immense power over the supply of this sought-after commodity.”

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Even though demand for rare-earth minerals presumably would rise as electric cars and more alternative energy and efficiency applications came to market, consumption of those products has actually decreased dramatically during the economic downturn, according to a USGS report. In 2009, the estimated value of these products imported by the United States was $84 million, a 55 percent decrease from $186 million imported in 2008.

Some academics aren’t too concerned that the United States would be held hostage by China over rare-earth minerals.

“The fact is that the more the Chinese and American economics are interrelated, the less likely conflict might be,” said Jerry Taylor, senior fellow at the Cato Institute, a libertarian public policy think tank in Washington, who has written extensively on energy issues. “What would it [China] gain at the end of the day? They would risk a trade war with a country where a huge volume of its liquid capital assets are invested.”

At the hearing Thursday, one of the witnesses, Roderick Eggert, a professor and director of the division of economics and business at the Colorado School of Mines, confirmed that mineral resources were still abundant, and that China’s supply and low prices are currently sufficient to meet the world’s needs.

“Markets provide incentives for investments that reinvigorate supply and reduce supply risk, Eggert said. “The Chinese mineral deposits are quite large and rich . . . and will satisfy [world demand] and have been meeting demand in the last few years.”

Critical to National Defense?

But there’s an important backstory: national defense.

Besides green energy, rare-earth minerals are essential in creating weapons. “Smart bombs” that use neodymium-iron-boron magnets to control the direction when dropped from an aircraft, lasers that employ neodymium, yttrium-aluminum-garnet used to determine the range of enemy targets at distances over 22 miles, and neodymium-iron-boron permanent magnets used for sound system components used in psychological warfare are among the many, according to a 2004 USGS paper.

The U.S. Department of Defense is currently in the early stages of evaluating its dependency on these minerals, as well as the potential national security risks, according to a study by the U.S. Government Accountability Office.

The jury is still out on alternative energy. With the advancement of new technology, certain products, such as high-efficiency solar cells, do not even need rare-earth metals. Other renewable energy products, such as wind turbines, can be created without rare-earth minerals, but their use is highly advantageous and makes for a much more efficient process.

“Are they critical to the [alternative energy] sector? It’s hard to say that they have the choke hold on the industry,” said Mark Brownstein, deputy director of the energy program at the Environmental Defense Fund. “These are valuable materials in that they have facilitated a tremendous innovation in some of the basic building blocks of renewable energy and energy efficiency technologies. The continued access isn’t only important to existing renewable energy, but also for future advances.”

Catherine Ngai is a reporter for Medill News Service in Washington, D.C.