China's rare earth gambit sends shockwaves through US tech industry

Dysprosium and Neodymium, which might be mistaken for names of medicines, are actually two elements classified as " Rare Earth" metals among the 17 in the periodic table. These elements are essential for various technologies, including missiles, wind turbines, and electric vehicles (EVs).

On Monday, these elements gained significant attention after China, which dominates the sector with a 90 percent market share, halted all exports, ToI's Chidanand Rajghatta reported.

This decision is one of the strategic moves by Beijing in the ongoing tariff conflict initiated by the United States, sending shockwaves throughout the American technology sector. This comes at a time when the White House has temporarily eased tariffs on certain electronic goods.

Despite a gradual decrease in the U.S. reliance on rare earth imports from China, which dropped from 80 percent in 2017 to approximately 70 percent today, the U.S. still depends on Chinese processing due to Beijing’s control over 90 percent of the global refining capabilities.

The recent disruption has highlighted collaborative efforts between the U.S. and India aimed at breaking the Chinese monopoly. Washington is actively exploring potential deposits and refining options worldwide, from Greenland to Ukraine.

Earlier this year, in a bipartisan initiative, the Biden administration lifted long-standing sanctions on Indian Rare Earths Ltd (IREL), with the incoming Trump administration announcing a "Strategic Mineral Recovery" partnership during Prime Minister Modi's visit to the U.S.

In a joint statement, both nations acknowledged the strategic significance of critical minerals for modern technologies and advanced manufacturing, and they committed to enhancing collaboration in research and development while promoting investment across the critical mineral value chain through the Mineral Security Partnership, of which both countries are members.

Industry specialists warn that while these efforts represent a positive step, they are far from sufficient to meet the pressing demands of both the U.S. and India, especially considering China’s head start in this arena. Notably, the Pentagon also depends on Chinese-processed rare earth elements for various components, including permanent magnets used in F-35 jets, missile guidance systems, and laser targeting technologies. This dependency has prompted the Trump administration to urgently seek alternative sourcing options.

Elon Musk, who requires rare earth materials for various technologies, including EVs and rockets, expressed his cautious response to China's export restrictions. He emphasized that rare earth materials are not as scarce as their name suggests and can be found globally, with India holding the fifth-largest reserves after China, Vietnam, Brazil, and Russia.

However, China maintains a significant advantage due to its near-total control over refining capacities. Musk pointed out the critical factor is not the availability of rare earth mineral deposits but rather the ability to refine these elements and produce magnets for electric motors. He clarified that while people often associate the term "rare earth" with scarcity, this perception is misleading, as these minerals are abundant worldwide.

Nonetheless, the refinement industry, which China dominates, remains the primary hurdle for other nations. Furthermore, even materials mined in the U.S. frequently get sent to China for processing.