Washington deploys billions and builds Asian
partnerships, but refining remains key hurdle
·
The administration
of Donald Trump has launched a major initiative to reduce reliance on China for
critical minerals.
·
Announced
$12 billion stockpiling plan
(Project Vault).
·
Over $30 billion in investments and loan commitments
to private sector mineral projects.
·
Hosted
the first Critical Minerals Ministerial with 50+ partner countries.
·
Agreements
signed with countries including South Korea, Japan, and India.
·
U.S.-backed
fund acquired a 40% stake in
Glencore’s Congo copper-cobalt operations to counter Chinese dominance
in Africa.
·
Aim: Build
a supply chain that excludes or reduces dependence on China.
·
Under Xi
Jinping, China has tightened export controls on rare earths.
·
Controls:
o 60% of global heavy rare earth mining
o 90% of refining capacity
o 94% of permanent magnet production
·
Rare earths
are vital for EVs, defense systems, and clean energy technologies.
·
Mining
projects take an average of 16
years to become operational.
·
Environmental
regulations and financing hurdles delay projects.
·
Even mined
ore often requires processing
in China, where refining capacity dominates.
·
Limited
short-term supply reduces stockpiling effectiveness.
·
Project
Vault may cover only 45 days
of demand if minerals are proportionately stocked.
·
Public
budget announcements may increase supplier bargaining power and procurement costs.
·
Japan reduced
dependence on China from 90%
to around 60% over more than a decade.
·
Indicates
diversification is possible but slow and incomplete.
·
Investment
in:
o Advanced mineral processing
o Recycling technologies
o Rare-earth-free magnet development
·
Early-stage
startups need sustained funding to scale.
·
Experts
agree the issue cannot be solved within one presidential term.
·
Estimated
timeline: 10+ years
to meaningfully reduce dependence.
·
Requires
consistent policy, allied cooperation, refining capacity buildout, and technological
innovation.
While the U.S. has moved
aggressively to counter China’s dominance in rare earths, structural bottlenecks—especially
in refining—mean meaningful supply chain independence will likely take a decade
or more.
The
administration of U.S. President Donald Trump has launched an aggressive policy
offensive to break China's stranglehold on the global critical minerals market,
from a $12 billion stockpiling of metals to a first-of-its-kind club of nations
to a trading mechanism that does not involve China.
Washington
hosted more than 50 countries, including South Korea, Japan and India, for the inaugural
Critical Minerals Ministerial earlier this month, where bilateral agreements were
signed with an eye to ensuring a supply chain that is less dependent on China. In
the past six months, the White House has also announced more than $30 billion of
investment and loan commitments to private companies in the sector.
Beijing
has repeatedly shown its willingness to leverage its control of rare earths for
political ends. In October last year, China tightened export controls on certain
minerals and high-performance magnets used in electric vehicle batteries and defense applications. Last month Nikkei reported that China
had expanded its curbs on exports of rare earths-related projects to Japan.
While
a temporary trade truce between Chinese leader Xi Jinping and Trump has eased some
immediate concerns over rare earths, policymakers in Washington have still made
it a priority to address their country's critical minerals vulnerability.
Experts,
however, say the latest moves are insufficient to tackle the risk of near-term supply
shocks. Even with significant government support and investment into a variety of
projects, they argue, the U.S. is unlikely to quickly replace Chinese suppliers
anytime soon.
"Investing
in mining projects and processing plants are just very challenging to do in the
very short term," said Beia Spiller, director of the transport program at Resources
for the Future. "Things don't move very quickly."
On
Feb. 2, the White House announced Project Vault, a critical minerals reserve backed
by a loan of $10 billion from the Export-Import Bank of the United States and $2
billion from American businesses to store rare earths and other elements on the
U.S. Geological Survey's list of minerals deemed vital to national security.
Some
analysts and mining executives have praised the administration's effort to secure
a stable supply chain that will provide certainty to businesses and C-suite executives.
Australia earlier announced a similar move with its own stockpile initially focusing
on antimony, gallium and rare earth elements. But in both cases, even those who
support the move have cautioned that tangible benefits from these reserves will
not materialize overnight because much of the processing of rare earths is still
done in China.
Asia's
largest economy accounts for 60% of the world's mining of heavy rare earths -- neodymium,
praseodymium, dysprosium and terbium -- and refines 90% of their global supply.
It is also the world's single largest supplier of permanent magnets made with heavy
rare-earth elements, accounting for 94% of global production.
Project
Vault will be a commercial stockpile that private companies such as General Motors,
GE Vernova and Corning can draw from. In theory, the reserve
would alleviate the risk of material shortages for commercial production, but many
of the targeted critical minerals are already scarce.
Cory
Combs of Beijing-based research group Trivium China said it could take years for
there to be enough supply of rare earths to stockpile and by the time there is a
reserve, the Chinese government will have less incentive to maintain strict export
controls on the materials.
"We
really do see the export controls on rare earths as a [tool] for like the next five
years," Combs said. "China will be much more secure on the technology
front and have fewer existential threats posed by the U.S., in which case it has
much less incentive to actually maintain strict export controls on rare earths."
Official
details remain scarce, but critics are wary of how the stockpile could be rolled
out.
Project
Vault would cover 45 days of demand if 44 critical minerals were stockpiled proportionately,
according to an analysis by Wood Mackenzie, a natural resources and energy research
group. But the U.S has weakened its purchasing power by publicly announcing its
budget.
"The
government has effectively shown its hand," said James Willoughby, principal
research analyst for energy transition and battery raw materials at Wood Mackenzie.
"Suppliers now have greater leverage, which could push procurement costs higher."
The
reserve is only one part of a broader effort that also includes a "preferential
trade zone" that would use tariffs to set price floors on critical minerals.
Guaranteeing minimum prices for minerals, the thinking goes, will attract private
capital into under-invested critical minerals projects.
While
details of the American stockpile and the trading bloc remain unclear, the U.S.
government has also made a number of commitments to the private sector.
In
recent months, the Trump administration has taken stakes in several U.S. mining
and mineral companies and is also setting its sights overseas. On Feb.3, a U.S.-backed
fund led by private equity fund Orion Resource Partners and the U.S. International
Development Finance Corp. agreed to buy a 40% stake in Glencore's copper and cobalt
operations in the Democratic Republic of Congo, where Chinese companies account
for more than half of the cobalt output.
At
home, the government has taken stakes in MP Materials, which owns a rare earths mine and a factory to make magnets, and Lithium Americas,
which is developing one of the world's largest lithium mines in Nevada.
But
it takes an average of about 16 years for a mine to go from discovery to operation.
Not only is raising money to finance a new mine challenging, long permitting processes
and stringent environmental regulations can also delay progress. High operating
costs and the volatile prices of certain minerals can also dissuade investors from
backing such projects.
And
then there is the elephant in the room: Even if the U.S. can mine the ore, most
of the rocks will need to be sent overseas -- most likely to China -- to be processed.
The only major non-Chinese heavy rare earths processor
at the moment is Australia's Lynas.
According
to an analysis by the Carnegie Endowment think tank, U.S. domestic production in
2035 will be able to meet projected demand only for zinc and molybdenum, and the
country will still need to rely on imported graphite, lithium and nickel.
The
White House's latest focus on critical minerals has sparked interest from Wall Street,
with JPMorgan Chase announcing a $1.5 trillion, 10-year initiative to finance industries
critical to economic security.
But
government attention is not new, and earlier efforts only underscore how difficult
progress on this front has proved to be. Under the administration of previous President
Joe Biden, millions of dollars were invested to lower the cost of onshoring production
of rare earths and critical minerals.
"Those
were meaningful commitments from the federal government that still didn't always
translate into projects checking all the boxes to get into construction and deliver
successful projects," said Nathaniel Horadam, who led the critical minerals
portfolio at the Department of Energy's Loan Programs Office. "I think it's
going to be a necessity for the Trump administration as they go down this path to
have some redundancy just in case certain deals don't pan out."
An
alternative solution that could bring about quicker results is to invest in new
technologies that could strengthen the country's ability to refine and process minerals.
Innovative extraction methods and recycling have also shown promising results. Programs
such as The AMES Critical Minerals Innovation Hub, funded by the Department of Energy,
in Iowa researches new technology to process and recycle critical minerals. It has
also spun out commercial startups that produce rare-earth free magnets.
But
early-stage startups often struggle to survive and expand on grants and private
capital alone, meaning further investment will be needed to scale up operations.
Japan
is taking a similar multipronged approach to reducing reliance on China and has
been working on the issue for over a decade since a spat in 2010 led Beijing to
curb exports of critical minerals to the country. But even after years of intense
effort, Japan has managed to bring its dependency down from 90% to around 60%.
"We're
not going to solve this issue during the Trump administration," said Chris
Berry, an independent critical minerals analyst. "This isn't something that's
going to be solved in five years. This is going to take a decade-plus to build something
again."