China Restricts Exports of Key Minerals Used in Making Ammo, Semiconductors

This is not new behavior from China.

Last year, China put export controls on graphite in order to satisfy its dominant EV battery manufacturers at home.  Not only is China the top producer of graphite, providing 67% of global supplies of the mineral, they also run graphite processing with 90% of that market, according to the U.S. Geological Survey. 

Also last year, China used national security as a reason to restrict exports of two metals used in semiconductor and solar cell manufacturing – this time germanium and gallium.  It is unclear if these restrictions are still in place.

Where China is not sourcing its minerals at home, it is importing those rocks from other countries and processing them for domestic and global markets. 

China famously dominates the global processing of rare earth elements, handling about 85% of the world’s refined rare earths, according to various estimates. These elements are crucial for various high-tech and clean energy applications. They process nearly 65% of the world’s cobalt, dug out of the ground in Congo. Cobalt is a critical component for rechargeable batteries and electronics. They are also responsible for about 95% of the processing of manganese, essential for steel production.

Mining is a dirty business. Crushing those rocks into powders to turn it into the chemicals and metals used in manufacturing is even dirtier. The U.S. can do it cleaner, owing to stricter environmental regulations, but that makes it more costly, more time consuming to get a mine approved, and therefore easier for the supply chain to turn to China. China has gladly accepted this role as the global miner and processing operator.

Writing in an op-ed in The Hill on Aug. 19, Gregory Wischer, a non-resident fellow at the Payne Institute for Public Policy at the Colorado School of Mines, said tariffs could make the U.S. a mining nation once more.

Of the 50 minerals on the U.S. critical minerals list, imports in 2023 met 100% of U.S. consumption for 12 of the minerals, and imports met over 50% of U.S. consumption for 29 other minerals, Wischer wrote.

“Such imports not only make the U.S. dependent on foreign mineral production — and adversaries like China — but also undermine U.S. mineral production,” he said. 

In 1918, U.S. metal production was valued at nearly $44 billion in 2023 inflation-adjusted dollars; despite the U.S. population more than tripling and U.S. metal consumption per capita remaining approximately the same, U.S. metal production had declined to approximately $35 billion by 2023, Wischer said, adding that to decrease foreign mineral imports and increase domestic mineral production, the U.S. government should increase its tariffs on minerals with U.S. reserves. If the costs of imported minerals exceed the costs of U.S.-produced minerals, mineral consumers in the U.S. should more greatly demand domestically produced minerals, incentivizing increased U.S. mineral production, he said, without mentioning the regulatory hurdles.

“The US needs a more systematic approach to critical supply chains, and that includes everything from getting the minerals out of the ground to refining them to building the metals into vital components like batteries, and then the sub-assemblies and then the final assembled products,” said CPA chief economist Jeff Ferry. “Today Washington focuses too much on the ‘sexy’ parts of the supply chain or those parts that have strong lobbying power. But the bottlenecks can occur anywhere.”

In June, a report by S&P Global titled “Mine Development Times: The U.S. In Perspective” said it took an average of 29 years to bring a mine online in the United States – longer than most countries. Since 2002, the period covered by the report, only three mines have come online in the U.S. – and none are on federal lands, where most of the U.S. minerals resources are located.

Following the publishing of that report, the National Miners Association (NMA) said in a press release in July that the U.S. Senate should pass the bipartisan Mining Clarity Act of 2024 to reaffirm decades of mining law and precedent and provide certainty for America’s mineral producers. That bill passed the House in May. It is now waiting to pass the Senate Committee on Energy and Natural Resources before it can make it to a floor vote.

Among other items, the NMA also advocates for clearer tax rules under section 45X of the Inflation Reduction Act to fully incentivize mining operations and to revisit and revise the nation’s “critical minerals” list to better recognize the minerals needed for the U.S. industrial base and for energy security.