US faces struggle for rare earths independence, echoing shale oil’s rise

For decades, the dream of energy independence was a distant fantasy in the United States, until new oil production technologies like fracking and horizontal drilling changed the game in the early 2000s. These innovations enabled the US to surpass Russia and Saudi Arabia, becoming the world’s top oil producer and reducing its reliance on foreign partners.

Today, the US is aiming to replicate this success with rare earth elements, the critical metals essential to modern technologies: from smartphones to fighter jets. However, unlike shale oil, overcoming the country’s reliance on China for rare earths is proving a much harder challenge, according to Bloomberg.

Rare earths are a group of 17 metallic elements, including neodymium and dysprosium, crucial for manufacturing high-tech products. China currently controls 70% of the global supply and processes nearly 90%, giving it significant leverage over the US and other nations.

Historically, the US outsourced the supply chain to China, as mining and processing these metals is expensive and environmentally risky. But with China now wielding these metals as a geopolitical tool, the US is determined to shift its dependence.

Earlier this year, Beijing imposed new export restrictions on critical materials, creating panic in the US and other importing nations. While a temporary trade truce between President Xi Jinping and Donald Trump in October eased some tensions, details of the deal remain unclear, particularly regarding how export licenses will function.

“The world market we all aspired to build over the past decades is falling apart right now, and we’re headed back into a regional economic model,” said Mark Smith, CEO of NioCorp Developments, which is pursuing plans to build a rare-earth mine in Nebraska. While NioCorp is in talks with the Trump administration for funding, Smith did not provide a timeline for when production might begin.

High costs and lengthy permitting processes are major barriers to domestic production. On average, it takes 29 years from discovery to production in the US—one of the longest timelines globally. Even if efforts to fast-track projects succeed, many of the heavier rare earths needed for high-tech applications are not abundant in US deposits.

“God just didn’t give us those deposits, so we’re very reliant on other countries,” said Gracelin Baskaran, director of the Critical Minerals Security Program at the Center for Strategic & International Studies (CSIS).

The US has only one rare-earth mine currently in operation, located in California’s Mojave Desert. MP Materials Corp. reopened the mine in 2017, and in July, the Department of Defense made an unprecedented $400 million equity investment to help expand its operations. However, MP’s output is minuscule compared to China’s. The mine is expected to produce just 1,000 metric tons of neodymium-iron-boron magnets by the end of the year, which represents less than 1% of China’s production in 2018.

Other companies are exploring alternative ways to reduce dependency on China. Phoenix Tailings, for example, is extracting rare earths from mine waste at a new plant in New Hampshire. However, the amounts produced are still small compared to global demand.

Meanwhile, General Motors and Stellantis have invested in Niron Magnetics, which aims to commercialize iron-nitride magnets as a substitute for rare earths. However, such substitutes are still years from being viable on a large scale.

To strengthen its position, the US is increasingly seeking international partnerships. In November, the Pentagon announced plans to help fund a rare-earth processing site in Saudi Arabia. Additionally, the US has committed $1 billion in joint funding with Australia to boost mining and processing projects over the next six months.

As Baskaran puts it, “The only way to do this is by leaning on our allies.” For now, it seems the US cannot go it alone in the quest for rare earth independence.

By Sabina Mammadli