Report Points to U.S. Vulnerability to China’s Rare-Earth Supplies

The U.S. Department of Energy (DOE) will release a report today pointing to the risk of disruption in the supply of materials critical to making hybrid-car batteries, energy-efficient lightbulbs, and lightweight wind turbines. China supplies 97 percent of these materials, a group of elements called rare-earth metals.

The report will be unveiled today at a conference at the Center for Strategic and International Studies in Washington, D.C. According to the New York Times, the Obama administration is expected to raise the issue with Chinese officials in trade talks today. China imposes export taxes on these materials, and this fall temporarily blocked their export to Japan, one of the biggest consumers, altogether. While research groups at Hitachi, GE, and academic labs work on alternative materials, mining companies outside of China are planning to ramp up production. But people in the mining industry are concerned about the repercussions of the movement, which occurred over a decade ago, of R&D, engineering expertise, and intellectual property out of the United States. The DOE report also points to these concerns about infrastructure, and indicates a political resolve to begin to remedy it.

Until the late 1990s, California’s Mountain Pass mine was the world’s major supplier of these materials, but a combination of environmental problems and the emergence of less expensive supplies from China pushed mining company Molycorp to halt production; the company let its mining permits expire in 2002. Still, the mine has remained the number two supplier of rare-earths outside of China, processing accumulated ore and selling about 3,000 tons this year. Reserves at Mountain Pass, California are the highest in the world outside of China.

Molycorp claims to have developed environmentally friendly processes and will restart active mining at a rate of 20,000 tons per year in 18 months, with the possibility to scale up to 40,000 tons under current permits. According to the company, 2010 U.S .demand is projected to be 20,000 tons. However, Molycorp will not sell all its product in the United States but will also focus on Japanese and European markets. The company last week announced a $130 million funding deal with Japanese company Sumitomo that promises the financier “substantial quantities of rare-earth products.”

Lynas Corporation of Australia will begin active mining at the second largest reserve of rare earths outside of China, at Mt. Weld outside Perth, at the end of next year.