At a piece republished at RealClearWorld Phillip Orchard makes a rather disquieting observation:
If Beijing is ever going to make good on its threats of a full embargo, it may be better off doing so sooner rather than later. Supply chain diversification efforts by outside powers have been picking up steam, putting Chinese leverage on a long-term downward trend. There are a half dozen or so processing projects in the works in the U.S. alone, including a Pentagon-backed heavy rare earths separation facility in Texas involving Lynas that received final approval in January. There’s also been a flood of money into recycling and stockpiling projects, as well as into research on more environmentally friendly refining processes. Japan has already proved that such efforts can be successful; its cooperation with Australia has reduced its dependence on China by more than a third. Whereas in the past China has often been able to shut down these kinds of diversification efforts by flooding the market, soaring global demand for rare earths and rising strategic impetus to subsidize non-Chinese supply chains are likely to make operations outside China more financially viable going forward.
Today China has vertical control of rare earths production. It doesn’t just mine the ores, it produces the equipment for refining them, it refines them, and distributes the rare earth metals. But that’s changing rapidly.
35 years ago the U. S. was the major source of rare earths. What happened? A combination of Chinese subsidies and misplaced American environmental controls resulted in our becoming dependent on a strategic rival for materials vital to our defense posture. If the Chinese choose to exploit their control over rare earths, it will be disruptive to say the least.