You state that absent Chinese development of this industry, advanced capitalist democracies would have settled on a qualitatively different approach to the rare earths industry and the technologies it enables. Could you develop this point please? Thank you.
Rare earth elements comprise 17 metallic elements with extremely similar chemical properties. Isolating them to high purity requires hundreds of chemical steps, including extraction, washing, and precipitation.
After decades of technological research and development by 500,000 geologists and 32,000 patents, China has established a global leadership position in extraction research and process design. Chinese companies have accumulated extensive experience in the comprehensive utilization of associated and low-grade ores, too. Through process optimization they have achieved both high efficiency and low costs.
Chinese companies can consistently achieve 6N (99.9999%) high-purity extraction, while other countries still struggle with 2N-3N, so there is a big difference between the rare earth magnets that China can produce vs others.
As a result I seriously doubt US could overcome these technological obstacles in the short to medium term. they still can do this but it will takes them not a decade but DECADES minimum. They have to start from scratch.
All good but like most commentators on this issue, you have forgotten the two most important things. Personnel and IP. China has 100X more engineers dedicated just to the entire rare earths and magnets supply chain, from mine to magnets. China has 40 university programs cranking out thousands more per year. The US, zero programs and less than 1000 personnel. This needs to be tackled head on. On IP, same, 5-10 year lead depending on which of many supply chains you are talking about. Government can't mandate innovate. Conclusion: The interim plan needs to be carefully crafted to maintain access to Chinese REEs, magnets, and the machines that make them. Otherwise the timelines get pushed out pretty far.....And trust me, I know the sector having dealt with clients on these issues for months, and talking to the top people in the REE industry here who know the global realities. So three things 1) maintain access to China, 2) figure out personnel, and 3) figure out IP.... this is not/not a problem that capital markets can solve....
The author fails to address the structural issues of rare earths: human capital, manufacturing industry, market, and R&D. What the author addressed is basically a military supply chain where the government subsidizes the limited supply of rare earths. China is the largest user of rare earths making it more economical for the Chinese. They can invest in the human capital and R&D to maintain the edge in rare earths. In addition, they have the manufacturing capacity to support any advances in rare earth processing and mining. With this cost advantage, they can under cut the prices of any product using our rare earths.
The comment about government involvement being to paraphrase "a necessary evil" set the tone for the whole article. It was Chinese government involvement, and the lack of US government involvement that created this scenario. Faith that that mythical beast "the market" will cure this quickly seems rather fantastic.
The price floor mechansm for MP Materials is smart policy but I agree that equity stakes create weird incentives. What really stood out to me is the vertical integration necesity you mention. Traditional commodities businesses avoid that for good reasons but rare earths might be the exception. I'm curious if the technology innovations you mentioned around AI for materials discovery could actualy change the economics enough to make this viable without government backstops long term. The hyperspectral imaging stuff for finding new deposits is fascinating, hadn't seen that before.
The Chines have export controls on items that Western countries should have had tariffs on chins export on long time. It the one actually valid reason to restrict imports (although only from a potentially monopsonist source
You state that absent Chinese development of this industry, advanced capitalist democracies would have settled on a qualitatively different approach to the rare earths industry and the technologies it enables. Could you develop this point please? Thank you.
Rare earth elements comprise 17 metallic elements with extremely similar chemical properties. Isolating them to high purity requires hundreds of chemical steps, including extraction, washing, and precipitation.
After decades of technological research and development by 500,000 geologists and 32,000 patents, China has established a global leadership position in extraction research and process design. Chinese companies have accumulated extensive experience in the comprehensive utilization of associated and low-grade ores, too. Through process optimization they have achieved both high efficiency and low costs.
Chinese companies can consistently achieve 6N (99.9999%) high-purity extraction, while other countries still struggle with 2N-3N, so there is a big difference between the rare earth magnets that China can produce vs others.
As a result I seriously doubt US could overcome these technological obstacles in the short to medium term. they still can do this but it will takes them not a decade but DECADES minimum. They have to start from scratch.
All good but like most commentators on this issue, you have forgotten the two most important things. Personnel and IP. China has 100X more engineers dedicated just to the entire rare earths and magnets supply chain, from mine to magnets. China has 40 university programs cranking out thousands more per year. The US, zero programs and less than 1000 personnel. This needs to be tackled head on. On IP, same, 5-10 year lead depending on which of many supply chains you are talking about. Government can't mandate innovate. Conclusion: The interim plan needs to be carefully crafted to maintain access to Chinese REEs, magnets, and the machines that make them. Otherwise the timelines get pushed out pretty far.....And trust me, I know the sector having dealt with clients on these issues for months, and talking to the top people in the REE industry here who know the global realities. So three things 1) maintain access to China, 2) figure out personnel, and 3) figure out IP.... this is not/not a problem that capital markets can solve....
The author fails to address the structural issues of rare earths: human capital, manufacturing industry, market, and R&D. What the author addressed is basically a military supply chain where the government subsidizes the limited supply of rare earths. China is the largest user of rare earths making it more economical for the Chinese. They can invest in the human capital and R&D to maintain the edge in rare earths. In addition, they have the manufacturing capacity to support any advances in rare earth processing and mining. With this cost advantage, they can under cut the prices of any product using our rare earths.
The comment about government involvement being to paraphrase "a necessary evil" set the tone for the whole article. It was Chinese government involvement, and the lack of US government involvement that created this scenario. Faith that that mythical beast "the market" will cure this quickly seems rather fantastic.
Outstanding essay
The price floor mechansm for MP Materials is smart policy but I agree that equity stakes create weird incentives. What really stood out to me is the vertical integration necesity you mention. Traditional commodities businesses avoid that for good reasons but rare earths might be the exception. I'm curious if the technology innovations you mentioned around AI for materials discovery could actualy change the economics enough to make this viable without government backstops long term. The hyperspectral imaging stuff for finding new deposits is fascinating, hadn't seen that before.
The Chines have export controls on items that Western countries should have had tariffs on chins export on long time. It the one actually valid reason to restrict imports (although only from a potentially monopsonist source