Great piece! I'll add the point I mentioned earlier with a comment here:
> ... while in the US, investors’ interests are separated from manufacturers’, leading to an obsessive focus on quarterly profits and maximum profit extraction that doesn’t lend itself to creating supply chain redundancy. Can we change this corporate culture?
It's not really just corporate culture. We literally don't have corporate entities in the right places to invest deeply in this. Maybe "all US corporates that need rare earths" together could be a block, but they don't coordinate in that way.
That goes a bit into industrial policy—I see a lot of interesting technologies from universities that COULD go towards the refining AND processing. I've seen one out of Berkeley that can do so on a really interesting modular/micro level. We didn't invest in them. They aren't economical vs. Chinese entities that have scale and don't need an "Easy Bake Oven" version of what they have. Now, the US has put money into companies like them (and them, I believe)—but it stops after R&D and moving into commercialization.
That might not have mattered as much in a globalized world, but it sure as hell matters now that the US really can't build anything. And, you know, tensions.
We literally have advanced US tech companies in our portfolio, say in advanced batteries... that are helping major Chinese companies become much more technologically advanced vs. US ones. But what's the alternative? You could have US IP/tech in Chinese companies... or you could have no US IP/tech, and the Chinese companies just do what they do, because that's their market in the current environment.
Thanks. I remember this issue from last time, and was wondering why it came up again - there are big deposits in Canada, after all. But the point about refining helps to clarify things a bit.
Rare earths has a bad name. Rare earths are called "rare" primarily due to the difficulty of extracting them from the earth and the fact that they are not typically found in large, concentrated deposits, not that they are hard to find.
This is a fantastic analogy — reframing rare earths as cinnamon really helps clarify the complexity behind the supply chain issues. Too often, the conversation gets stuck on raw materials and stockpiles, missing how critical the entire processing and manufacturing ecosystem is. Just like you can’t bake a cake with cinnamon bark alone, you can’t build high-tech products without the full value-added chain.
Is this another case where US government and businesses have neglected to think about the implications of relying on China, or any single country for that matter, as a source of supply of an strategic product?
My understanding is that most of the rare earths processing industry was in Japan (and then gradually moved to China) but no-one thought much about that until the 2009 export squeeze because any American company was so much further down the manufacturing chain.
Also I am not sure how important a lot of these materials were before the recent advances in high- tech products.
Thank you for this. It’s beyond confusing. At least for me. I hear much of the following:
Rare earths aren’t actually that rare at all. They’re found all over the world and on the sea floor. Then I hear, as above, they’re really only in China.
Then I hear, it’s really the concentrations and mix in different ores that matters most.
Then I hear it’s really the heavies that matter most for the things we think about and desperately need and that the best concentrations for heavies are actually in clays versus rock and the clays can be found in Brazil, Africa, Myanmar, etc.
Then I hear it’s not the raw material at all that is the chokepoint but rather it’s the refining and processing. That we used to do it in America and Japan and others still do it now. But only China really has the technical skills and capacity to do it.
Then I hear it will take ten years at least to build processing and recycling facilities.
My sense is the conversation itself is confused and undermined by trying to talk about 17 things as if it’s one thing (to say nothing of the derivatives from those 17). With time, I hope you and others can break it down into more manageable pieces. That will help policy debates without doubt.
Intuition tells me (and I may be wrong) that they aren’t all equally important or equally difficult problems to solve. Nor does it seem that the U.S. would need to solve each one on its own.
But given how high the stakes are vs the scale of the challenge, I can’t help but set this against others. For instance figuring out how to split the atom and turn it into a bomb (in the 1940s for goodness sake).
Or figuring out how to put humans on the moon in the 1960s. Or the development of stealth and the internet in the 90s. Or horizontal drilling in the 2000s. Or coming up with a novel vaccine for Covid in under a year (when it was supposed to take 10). Or a hundred other things that have gotten done by the public and private sectors over the years when resources and effort were assertively applied.
It may be terribly naive, but I think I am just reflexively allergic to the notion that America can’t do it. It’s too heavy a lift. Too complicated to solve. Too technical. Too messy. Too expensive. Beyond our reach.
Lacks the will? Sure. Hasn’t committed the resources? Yes. Isn’t focused enough? No question.
But with what we’re facing, the idea that the combined West can’t possibly sort out how to source, recycle and refine rare earths for at least 10 or 15 years just feels… unduly pessimistic. To this American’s policy ears, it just sounds a bit like giving up without having tried first.
Love your comments. This is the confusion I heard on NPR yesterday! When “it” is 17 different metals each with different properties… and yes, “they” are in lots of places it’s just whether they are commercially attractive lodes or not.
Yes, sure, we can do a lot when there’s a clear path and motivation. But in the case of rare earths I think the goals and processes not being clear doesn’t lend itself to a committed solution that makes sense given all the other policy goals and constraints that get mixed in.
That’s what I’m driving at. Talking about “rare earths” as if it is one large, complicated problem to solve I fear works against policymakers prioritizing and allocating the resources.
For instance, just taking it down to a level of permanent magnets is helpful, I suspect, for policymakers. What would it take to solve for a supply of permanent magnets? What about for catalysts? What about for industrial? Is it possible to break that bucket down further into more manageable (solvable) pieces?
Assuming we could get the ore we need and assuming X and Y are the two most critical or hard-to-solve problems, how much would it cost and how long would it take to construct processing facilities for X and Y?
Far smarter people than exist in Congress will have to sort all that out, but I think just in terms of the politics and the debate helping policymakers understand what questions they’re supposed to be asking and what the really need to focus on is a big step in the right direction.
I’m well beyond my technical capacity here already, but I think for the layperson like me, that’s where experts like you can really help open minds up to what’s possible, realistic, unrealistic etc.
Thank you for being so out in front on it. Mr. Sanderson too.
Thanks for this analogy. Quite helpful. I have a few thoughts for your consideration:
1. We cannot live without oil, but we can live without cinnamon. Similarly, there are enough possibilities to swap an abundant rare-earth for a scarce one, or reduce the amount of rare earths required per product. There are efficiency losses, but it doesn't mean good end-products can't be made without them, just like with Cinnamon. Given the small quantities in which they are required, even stockpiling is a real option, unlike in the case of oil, where reserves won't last beyond a few days.
2. The key variable is price. Prices didn't rise substantially because Chinese companies flooded the market with cheap rare earths and their applications. There was little incentive for other companies to change their approach. It will probably be different now, given that these controls aren't going away and are global in scale.
3. We don't need to plan for all parts of the supply chain ex ante. That's the insight of the "I, Pencil" essay, which was discussed in this thread. Once prices rise, companies will specialise and pass the baton to make complex things happen. That's exactly how every supply chain operates. No one designs all steps consciously. Neither do all these need to be at home. The Mineral Security Partnership is the way to go. So I'm more optimistic.
All good points, thanks for sharing. It doesn’t look like I can access the paper but the point in the abstract is interesting — that China’s restrictions have spurred innovation elsewhere (kind of like US chip restrictions spurring Chinese R&D I suppose)
He does get a bit too into the libertarian anti-government rhetoric. I more meant the “it takes a village” approach to make something seemingly simple.
This is a great analogy. As a Chemical Engineer I've this small note to add. Cinnamomum cassia (Chinese Cinnamomum) which is what mostly comes from Indonesia contains Coumarin, which is toxic to the liver. It and the cheaper, rougher, and even more toxic material Cinnamomum burmanni are favored by American Food Companies, to hell with the health implications. Good luck finding real Cinnamomum citriodorum, it's usually re-labeled Saigon cinnamon.
Refining rare earths an art, and there is already an issue with 2nd tier markets selling adulterated mixes which can create issues with long term stability, sensitivity to heat, electromagnetic pulses, etc., and how many of the consumers really understand what they are getting. When smuggling, re-shipping, etc. become your primary sources, whoops.
This is quite a scary article because a not unreasonable interpretation of this is that due to the centrality of rare earths to creating modern technology/weaponry, if China continues to withhold them from export the balance of power vis-a-vis China and the rest of the world will worsen overtime.
So from a military/geopolitical perspective if China shows an unwillingness to share this reigning technology/resource, then they are better confronted now and in force before the balance of power worsens in their favour.
The usage of rare earths in this way is extremely dangerous and destabilising by the CCP. Far more so than tariffs etc. This type of action led to numerous major wars in the past.
Thank you! This is super helpful and insightful! This is a minor point as I realise stockpiling is a very short term solution at best but I am wondering if there is a reason why the US can’t stockpile the refined product? Using the cinnamon analogy - it is impractical to stockpile the bark but could we stockpile the refined powder?
They absolutely could and that’s a much-discussed solution, it’s just that there’s typically a lot of stages of secondary processing (for all 17 varieties!) and value-added manufacture before it’s in the chemical or physical form that an end-manufacturer might want.
So for instance the EV auto assembler in Michigan doesn’t want a crumbly ingot of whichever variety of rare earth, they want the magnet that has that rare earth as one of its component ingredients, and they want it of the size and shape that fits their car design, so that they can screw that magnet into the car they are assembling. They want to be a carmaker, they don’t want to be a magnet-maker. Under that circumstance, if the DOD stockpiles, it would still have to travel thru processing plants and manufacturers not in the US to become the intermediate product that the US carmaker wants.
That’s why it’s an issue of many distinct supply chains and diverse end-users. As opposed to crude oil, a bulk commodity which can be injected into a nation’s strategic storage and then released to refiners without needing to pass thru intermediary steps. Also, it’s relatively easy for a government to read crude oil prices and decide it has reached a level where the stockpile should start releasing; but with rare earths you have 17 kinds whose prices don’t necessarily move together plus hundreds if not thousands of intermediary products.
it could be done it’s just not clear whether it should be done, or if it would simply be counter-productive for bureaucrats in DC to be micromanaging such complex markets.
Great piece! I'll add the point I mentioned earlier with a comment here:
> ... while in the US, investors’ interests are separated from manufacturers’, leading to an obsessive focus on quarterly profits and maximum profit extraction that doesn’t lend itself to creating supply chain redundancy. Can we change this corporate culture?
It's not really just corporate culture. We literally don't have corporate entities in the right places to invest deeply in this. Maybe "all US corporates that need rare earths" together could be a block, but they don't coordinate in that way.
That goes a bit into industrial policy—I see a lot of interesting technologies from universities that COULD go towards the refining AND processing. I've seen one out of Berkeley that can do so on a really interesting modular/micro level. We didn't invest in them. They aren't economical vs. Chinese entities that have scale and don't need an "Easy Bake Oven" version of what they have. Now, the US has put money into companies like them (and them, I believe)—but it stops after R&D and moving into commercialization.
That might not have mattered as much in a globalized world, but it sure as hell matters now that the US really can't build anything. And, you know, tensions.
We literally have advanced US tech companies in our portfolio, say in advanced batteries... that are helping major Chinese companies become much more technologically advanced vs. US ones. But what's the alternative? You could have US IP/tech in Chinese companies... or you could have no US IP/tech, and the Chinese companies just do what they do, because that's their market in the current environment.
That’s really interesting
What’s the one out of Berkeley you reference? Is it the bio inspired element selective molecule?
Thanks. I remember this issue from last time, and was wondering why it came up again - there are big deposits in Canada, after all. But the point about refining helps to clarify things a bit.
Rare earths has a bad name. Rare earths are called "rare" primarily due to the difficulty of extracting them from the earth and the fact that they are not typically found in large, concentrated deposits, not that they are hard to find.
This is a fantastic analogy — reframing rare earths as cinnamon really helps clarify the complexity behind the supply chain issues. Too often, the conversation gets stuck on raw materials and stockpiles, missing how critical the entire processing and manufacturing ecosystem is. Just like you can’t bake a cake with cinnamon bark alone, you can’t build high-tech products without the full value-added chain.
This is the most helpful extended analogy I've read in years. Thanks for parsing all that.
Great article, love the cinnamon analogy. Actually, that analogy helped me understand the issue. Thank you!
Is this another case where US government and businesses have neglected to think about the implications of relying on China, or any single country for that matter, as a source of supply of an strategic product?
My understanding is that most of the rare earths processing industry was in Japan (and then gradually moved to China) but no-one thought much about that until the 2009 export squeeze because any American company was so much further down the manufacturing chain.
Also I am not sure how important a lot of these materials were before the recent advances in high- tech products.
Great analogy! If only rare earths and the value chains would have been on the European agenda some decades ago...
Thank you for this. It’s beyond confusing. At least for me. I hear much of the following:
Rare earths aren’t actually that rare at all. They’re found all over the world and on the sea floor. Then I hear, as above, they’re really only in China.
Then I hear, it’s really the concentrations and mix in different ores that matters most.
Then I hear it’s really the heavies that matter most for the things we think about and desperately need and that the best concentrations for heavies are actually in clays versus rock and the clays can be found in Brazil, Africa, Myanmar, etc.
Then I hear it’s not the raw material at all that is the chokepoint but rather it’s the refining and processing. That we used to do it in America and Japan and others still do it now. But only China really has the technical skills and capacity to do it.
Then I hear it will take ten years at least to build processing and recycling facilities.
My sense is the conversation itself is confused and undermined by trying to talk about 17 things as if it’s one thing (to say nothing of the derivatives from those 17). With time, I hope you and others can break it down into more manageable pieces. That will help policy debates without doubt.
Intuition tells me (and I may be wrong) that they aren’t all equally important or equally difficult problems to solve. Nor does it seem that the U.S. would need to solve each one on its own.
But given how high the stakes are vs the scale of the challenge, I can’t help but set this against others. For instance figuring out how to split the atom and turn it into a bomb (in the 1940s for goodness sake).
Or figuring out how to put humans on the moon in the 1960s. Or the development of stealth and the internet in the 90s. Or horizontal drilling in the 2000s. Or coming up with a novel vaccine for Covid in under a year (when it was supposed to take 10). Or a hundred other things that have gotten done by the public and private sectors over the years when resources and effort were assertively applied.
It may be terribly naive, but I think I am just reflexively allergic to the notion that America can’t do it. It’s too heavy a lift. Too complicated to solve. Too technical. Too messy. Too expensive. Beyond our reach.
Lacks the will? Sure. Hasn’t committed the resources? Yes. Isn’t focused enough? No question.
But with what we’re facing, the idea that the combined West can’t possibly sort out how to source, recycle and refine rare earths for at least 10 or 15 years just feels… unduly pessimistic. To this American’s policy ears, it just sounds a bit like giving up without having tried first.
Again, perhaps naive.
Love your comments. This is the confusion I heard on NPR yesterday! When “it” is 17 different metals each with different properties… and yes, “they” are in lots of places it’s just whether they are commercially attractive lodes or not.
Yes, sure, we can do a lot when there’s a clear path and motivation. But in the case of rare earths I think the goals and processes not being clear doesn’t lend itself to a committed solution that makes sense given all the other policy goals and constraints that get mixed in.
That’s what I’m driving at. Talking about “rare earths” as if it is one large, complicated problem to solve I fear works against policymakers prioritizing and allocating the resources.
For instance, just taking it down to a level of permanent magnets is helpful, I suspect, for policymakers. What would it take to solve for a supply of permanent magnets? What about for catalysts? What about for industrial? Is it possible to break that bucket down further into more manageable (solvable) pieces?
Assuming we could get the ore we need and assuming X and Y are the two most critical or hard-to-solve problems, how much would it cost and how long would it take to construct processing facilities for X and Y?
Far smarter people than exist in Congress will have to sort all that out, but I think just in terms of the politics and the debate helping policymakers understand what questions they’re supposed to be asking and what the really need to focus on is a big step in the right direction.
I’m well beyond my technical capacity here already, but I think for the layperson like me, that’s where experts like you can really help open minds up to what’s possible, realistic, unrealistic etc.
Thank you for being so out in front on it. Mr. Sanderson too.
Thanks for this analogy. Quite helpful. I have a few thoughts for your consideration:
1. We cannot live without oil, but we can live without cinnamon. Similarly, there are enough possibilities to swap an abundant rare-earth for a scarce one, or reduce the amount of rare earths required per product. There are efficiency losses, but it doesn't mean good end-products can't be made without them, just like with Cinnamon. Given the small quantities in which they are required, even stockpiling is a real option, unlike in the case of oil, where reserves won't last beyond a few days.
2. The key variable is price. Prices didn't rise substantially because Chinese companies flooded the market with cheap rare earths and their applications. There was little incentive for other companies to change their approach. It will probably be different now, given that these controls aren't going away and are global in scale.
3. We don't need to plan for all parts of the supply chain ex ante. That's the insight of the "I, Pencil" essay, which was discussed in this thread. Once prices rise, companies will specialise and pass the baton to make complex things happen. That's exactly how every supply chain operates. No one designs all steps consciously. Neither do all these need to be at home. The Mineral Security Partnership is the way to go. So I'm more optimistic.
4. Do check this paper https://www.nber.org/papers/w33877
All good points, thanks for sharing. It doesn’t look like I can access the paper but the point in the abstract is interesting — that China’s restrictions have spurred innovation elsewhere (kind of like US chip restrictions spurring Chinese R&D I suppose)
Your analogy is great. It reminds me of the “I, Pencil” essay.
I just checked that out… it was very interesting! Including the unexpected turn into a denunciation of the US Postal Service.
He does get a bit too into the libertarian anti-government rhetoric. I more meant the “it takes a village” approach to make something seemingly simple.
This is a great analogy. As a Chemical Engineer I've this small note to add. Cinnamomum cassia (Chinese Cinnamomum) which is what mostly comes from Indonesia contains Coumarin, which is toxic to the liver. It and the cheaper, rougher, and even more toxic material Cinnamomum burmanni are favored by American Food Companies, to hell with the health implications. Good luck finding real Cinnamomum citriodorum, it's usually re-labeled Saigon cinnamon.
Refining rare earths an art, and there is already an issue with 2nd tier markets selling adulterated mixes which can create issues with long term stability, sensitivity to heat, electromagnetic pulses, etc., and how many of the consumers really understand what they are getting. When smuggling, re-shipping, etc. become your primary sources, whoops.
This is quite a scary article because a not unreasonable interpretation of this is that due to the centrality of rare earths to creating modern technology/weaponry, if China continues to withhold them from export the balance of power vis-a-vis China and the rest of the world will worsen overtime.
So from a military/geopolitical perspective if China shows an unwillingness to share this reigning technology/resource, then they are better confronted now and in force before the balance of power worsens in their favour.
The usage of rare earths in this way is extremely dangerous and destabilising by the CCP. Far more so than tariffs etc. This type of action led to numerous major wars in the past.
That’s the national security concern in a nutshell.
But I am not sure how the “confronting now and in force” scenario plays out, as a practical matter.
Thank you! This is super helpful and insightful! This is a minor point as I realise stockpiling is a very short term solution at best but I am wondering if there is a reason why the US can’t stockpile the refined product? Using the cinnamon analogy - it is impractical to stockpile the bark but could we stockpile the refined powder?
They absolutely could and that’s a much-discussed solution, it’s just that there’s typically a lot of stages of secondary processing (for all 17 varieties!) and value-added manufacture before it’s in the chemical or physical form that an end-manufacturer might want.
So for instance the EV auto assembler in Michigan doesn’t want a crumbly ingot of whichever variety of rare earth, they want the magnet that has that rare earth as one of its component ingredients, and they want it of the size and shape that fits their car design, so that they can screw that magnet into the car they are assembling. They want to be a carmaker, they don’t want to be a magnet-maker. Under that circumstance, if the DOD stockpiles, it would still have to travel thru processing plants and manufacturers not in the US to become the intermediate product that the US carmaker wants.
That’s why it’s an issue of many distinct supply chains and diverse end-users. As opposed to crude oil, a bulk commodity which can be injected into a nation’s strategic storage and then released to refiners without needing to pass thru intermediary steps. Also, it’s relatively easy for a government to read crude oil prices and decide it has reached a level where the stockpile should start releasing; but with rare earths you have 17 kinds whose prices don’t necessarily move together plus hundreds if not thousands of intermediary products.
it could be done it’s just not clear whether it should be done, or if it would simply be counter-productive for bureaucrats in DC to be micromanaging such complex markets.
Wow I see. Thank you so much for responding!