Valerie Bailey Grasso
Specialist in Defense Acquisition
Some Members of Congress have expressed concern over U.S. acquisition of rare earth elements used in various components of defense weapon systems. Rare earths consist of 17 elements on the periodic table, including 15 elements beginning with atomic number 57 (lanthanum) and extending through number 71 (lutetium), as well as two other elements having similar properties (yttrium and scandium). These are referred to as “rare” because although relatively abundant in total quantity, they appear in low concentrations in the earth’s crust and extraction and processing is both difficult and costly.
From the 1960s to the 1980s, the United States was the leader in global rare earth production. Since then, production has shifted almost entirely to China, in part due to lower labor costs and lower environmental standards. China now produces about 97% of rare earth oxides, is the only exporter of commercial quantities of rare earth refined metals, and is the majority producer of the world’s two strongest magnets (samarium cobalt (SmCo) and neodymium iron boron (NeFeB) permanent rare earth magnets). However, Molycorp, Inc., a U.S. company with mining operations in Mountain Pass, CA, recently announced that it will restart mining in 2012 and has secured the final permits needed to build a rare earth manufacturing facility, now scheduled to open in 2012. Molycorp produces rare earth oxides and recently announced a cooperative research and development agreement with the U.S. Department of Energy’s Ames Laboratory. The Molycorp- Ames effort will focus on developing new methods to create commercial-grade, rare earth permanent magnets.
Recently, a series of events and press reports have highlighted what some refer to as the rare earth “crisis.” Policymakers are concerned with the nearly total U.S. dependence on China for rare earth elements, including oxides, phosphors, metals, alloys, and magnets, and its implications for U.S. national security. The rare earth element supply chain cuts across the manufacturing, defense, and science and technology sectors of the global economy. Because some Members of Congress see a reliable domestic supply chain as critical to maintaining existing and acquiring new defense weapons systems, they support development of a domestic source for rare earth elements. Other policymakers see alternative rare earth sources (outside of China) as a way to mitigate the lack of domestic mining and manufacturing.
The “crisis” for many policymakers is not that China has cut its rare earth exports and appears to be restricting the world’s access to rare earths, but that the United States has lost its domestic capacity to produce strategic and critical materials. The Department of Defense (DOD) is examining whether there is a supply chain vulnerability issue. No one knows what percentage of rare earths are used for DOD purposes; it has been estimated that DOD uses less than 10% of domestic rare earth consumption. However, no firm estimates are currently available. Congress has mandated that the Secretary of Defense, pursuant to the Ike Skelton National Defense Authorization Act for FY2011 (P.L. 111-383), conduct an assessment of the rare earth supply chain issues and develop a plan to address any vulnerabilities.
Congress may use its oversight role to seek more complete answers to the following important questions:
· Is there a rare earth material vulnerability that will affect national security?
· Does dependence on foreign sources alone for rare earths pose a national security problem?
· What are the factors to consider when determining the extent to which import dependence for rare earths may pose a threat to economic or national security?
· Are there substitutes for rare earths that are economic, efficient, and available?
· What short- and long-term options might DOD consider in response to a lack of domestic production and China’s continued dominance in this area?
In addition to requiring DOD to assess rare earth supply chain vulnerability, Congress may want to consider alternatives including · development of a domestic rare earths stockpile;
· government investment in rare earths production, including aspects of the supply chain; and
· partnering with foreign allies to diversify rare earth sources and decrease dependence on China.
Congress may encourage DOD to develop a collaborative, long-term, well-thought-out strategy designed to identify any material weaknesses and vulnerabilities associated with rare earths and to protect long-term U.S. national security interests.Date of Report: August 5, 2011
Number of Pages: 28
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