Intelligent Energy

Obama administration digs into China's 'rare earth' monopoly

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The Obama administration and Congress are seeking to diversify the global supply chains of rare earth ores used in the development of clean energy technology. China currently dominates the world's supply.

China's monopoly over the world's supply of the rare earth metals has prompted the United States Department of Energy to devise a plan to globalize supply chains. The metals are vital the the development of clean energy technologies.

Yesterday, Energy Department officials testified before a U.S. Congressional hearing to examine the concentration of production in China and what steps should be taken to manage supply risk. The Obama administration plans to encourage more rare earth extraction among U.S. trading partners.

The 17 elements are used to manufacture many staples of the modern world ranging from electronics, hybrid cars, solar panels and wind turbines to guided missiles.

David Sandalow, U.S. Assistant Energy Secretary for Policy and International Affairs, told Congress that "diversified sources of supply are important for any valuable material," and suggested that there be a roadmap for "multiple, distributed sources of clean energy materials."

Domestically, Congress is also crafting legislation to ramp up domestic production by offering federal loan guarantees to mining companies. The House of Representatives passed the Rare Earths and Critical Materials Revitalization Act of 2010 on Wednesday.

"We need to act now to begin the process of creating our own supply of rare earth materials so the United States is never dependent on China–or on any other country–for crucial components for our national security," Pennsylvania Democrat Kathy Dahlkemper said in a prepared statement.

China holds 37 percent of the world's known reserves of the metals within its territory, and its capacity to process rare earths outpaces any other nation. China currently produces 95 percent of rare earth metals sold worldwide, Reuters noted in a report.

In comparison, the United States holds 13 percent of reserves; however, a recent report by the U.S. Geological Survey suggests that the country sits upon a largely untapped stockpile of rare earths. The remaining concentrations of the elements are scattered across the globe.

The exportation of rare earths was used as a blunt instrument in a recent territorial tussle between China and Japan. China froze exports of rare earth minerals to Japan in retaliation for Japan's detention a fishing trawler captain who was fishing in disputed waters (and incidentally collided with several Japanese coast guard vessels).

The Japanese government may be establishing a fund to develop alternate supply sources at the behest of Japanese corporations who do not want to be reliant on China to source their products, the Wall Street Journal reports. Given the aforementioned remarks, I'd imagine that the United States government is of kindred mind on the issue.

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David Worthington

Contributing Editor

David Worthington has written for BetaNews, eWeek, PC World, Technologizer and ZDNet. Formerly, he was a senior editor at SD Times. He holds a business degree from Temple University. He is based in New York. Follow him on Twitter. Disclosure