President Donald Trump met with an executive from an American advanced materials manufacturer who urged the president to prevent China from cornering the market in rare earth materials by nationalizing the only rare earth mine in the United States.
[John Carney | August 30, 2017 | Breitbart]
An investor group that allegedly has ties to the Chinese government in June purchased the rare earth mine in Mountain Pass, California that was one of the final remaining assets of the now bankrupt Molycorp Inc. The mine is one of the very few not already controlled by China, which accounts for 97 percent of the global rare-earth mineral production.
“By buying up Mountain Pass, the Chinese have locked up the only operating rare earth mining operation outside of China,” said Michael Silver, chief executive of American Elements Corp., in an interview with Breitbart News about his White House meetings.
China’s control of rare earth mining has implications for the U.S. military. According to a 2016 Government Accountability Office study, certain rare earth materials are “essential to the production, sustainment, and operation of U.S. military equipment.” Critical military uses include rare earths employed in antimissile defense systems, precision-guided weapons, lasers, communications systems, night vision equipment, satelites and military aircraft.
“Reliable access to the necessary material…is a bedrock requirement for the [Department of Defense],” the GAO wrote.
The GAO found that the Defense Department lacked any comprehensive plan for how to deal with “potential supply disruptions.”
The Decline and Fall of America’s Rare Earth Capacity
The U.S. was once the world’s largest producer of such metals but in recent decades has lost out to China, where the rare earth minerals are plentiful and companies are not burdened by environmental and labor regulation. By 1999, more than 90 percent of the rare earth materials used by U.S. industry came from deposits in China. Today, China produces 97 percent of rare earth elements used globally.
Last year, there were no rare earth materials mined in the U.S., according to the Department of the Interior’s U.S. Geological Survey. The U.S. imports between $120 million and $160 million worth of rare earths a year, around 9 percent of total global demand for the minerals.
The 2015 bankruptcy of Molycorp, which owned the Mountain Pass rare earth mine, was responsible for shutting down U.S. production. That followed from a sharp decline in prices of rare earth as China kept up its massive production, flooding the market. This global excess supply pushed the price of some rare earths below their cost of production, making the mining and processing uneconomical outside of China.
A buyout group led by U.S. investors and backed by China’s Shenghe Resources Holding Co. won approval in June by a bankruptcy court to buy the mine. Rival bidder Tom Clarke has called for the U.S. government to review the acquisition with an eye to Shenghe’s alleged ties to the Chinese government.
Silver met with Trump twice in July to discuss nationalizing the Mollycorp mine. He also held meetings with Trump’s senior staff, including then chief strategist Stephen Bannon and then deputy assistant Sebastian Gorka. He urged the Trump administration to use the power of eminent domain to acquire the mine for use as a new national laboratory dedicated to preserving America’s rare-earth mining capacity.
Rare-earth minerals were first used commercially to produce color televisions. Today they are used in the manufacture of high-tech items that are central to the modern economy, including laptop computers, iPhones, wind turbines, camera lenses, aircraft engines and hybrid electric cars. According to a report from the U.S. Geological Survey, rare earth elements are “vital to modern technologies and lifestyles.”
China’s ramped up production was a reversal of a 2010 that had capped its rare earth exports. The U.S. viewed this cap as an attempt to force manufacturers to locate in China and put pressure on China to reverse its stance. That happened in 2015 following a ruling by the World Trade Organization that China’s practices were unfair. The lifting of the caps sent rare earth prices crashing.
Silver, the American Elements executive, says this was the result of China dumping the minerals on the market at rock-bottom prices in an effort to drive out competitors. Any attempt to make the Molycorp mine commercially viable will fail, according to silver, because China can hold prices lower for longer than any competitor can stay solvent.
Now China is using its control of the market to cajole companies to manufacture in China, according to Silver. That puts any efforts to restore manufacturing in America at risk, he said.
A Plan to Prevent China’s Sole Control
“We need to assure high-tech manufacturers that it is safe to locate plants in the U.S. At this point, the only place you can site a plant is China because of their control over the minerals,” Silver said.
Under Silver’s plan, the mine would become one of the U.S. government’s national labs. The best-known of these research facilities run by the Department of Energy is the famous Los Alamos National Laboratory. Nationalizing the mine would guarantee that manufacturers wouldn’t lose access to the rare-earth minerals if China decided to restrict their import.
“One you guarantee access to the minerals, where’s the best place to site your plant? The U.S. because of quality labor, our academics, our know how,” Silver said.
Nationalizing the mine would not stop China’s ability to set price globally. But government ownership would allow the mine to continue operating even if it were unprofitable. That, in turn, would allow the U.S. to continue to employ rare earth scientists domestically and develop new rare earth technologies. Under the U.S. Constitution, the government is allowed to take ownership of the property through the power of eminent domain so long as property owners receive appropriate compensation.
American Elements is a Los Angeles-based manufacturer of metals and chemicals with a catalog of more than 15,000 products, according to Silver. He was one of the first Americans to set up a distribution supply chain from China to North America, he said in an interview.
“I probably stand to lose money by arguing for nationalizing the mine. But I feel like this is my duty as a patriot,” Silver said.