The gap between mining share (71%) and refining share (91%) is the real story here, and it's the same pattern chips followed — raw material access matters far less than who controls the specific industrial capability to turn it into something usable. The US and Japan actually invented rare earth magnet production last century and let the capability migrate to China anyway, because building it was expensive and unprofitable in the short term. That's a strategic choice with a decades-long bill attached, not bad luck. Leverage built this way is durable precisely because it was never really about the raw resource, it was about who kept investing in the unglamorous, low-margin refining infrastructure everyone else abandoned.
I think it's an interesting dynamic, and we'll be covering it more in coming weeks. I think part of it has to do with the waste generated from solvent extraction in refining, and the West not wanting to touch that either. Mining often has worse margins (or at least more volatility) than refining, so I don't think that's the whole story. I am optimistic that industry as a whole has started taking economic security more seriously, so more American and ex-China firms can pop up with explicitly worse prices than China but guaranteed supply that won't be threatened by geopolitical instability.
That’s a good point. The rare earths processing chain migrated from Japan to China in pieces from ~2004-~2014 thanks to smart application of targeted tariffs from BJ plus the cost advantages of a consolidated supply chain.
Hopefully we are getting away from the media-generated hype re., the US vs China for the number one spot in the RE sector. China isn't going to budge. However, there's certainly competition this decade for the US in terms of building out within-border (and friendly) RE chains that are responsive to the offtake needs of N. American endline manufacture. Nor have we heard publicly of new niche RE chains (e.g., MP, Energy Fuels, USARE, REalloys and Lynas) complaining of growth restriction due to lack of workforce access. Lynas, yes recently in terms of equipment cost and we saw legal action between the likes of MP, Ramaco and USARE over employee moves, but severe shortage not apparently for these RE prime movers. This issue may become more impactful for those few RE wannabees that might still emerge the next decade but those will be very few, IOHO. GLTA Rare Earths Investor (REI). Thanks for the article.
I have often wondered why there was no “X” prize for some technical (and commercially implemented) new achievement in this area, paid for by the billionaires at Apple and Google. The US capitalists would rather invest in Twitter ($ 44 billion) or Twinkies ($5 Billon). News flash. Both investments failed.
Your article inspired me. I can't agree with you any more. Our supply chains are too deeply integrated and US companies have spent decades and hundreds of billions of dollars building them. Do you think the US could ever decouple from China? What challenges and costs will they face if the US decouples from China? I'm expected to read another article about this from you. Your perspective would add meaningful depth to this discussion.
Amazing read. Just one question: was SASAC actively involved in the creation of the Southern Rare Earth company and how? For instance, that 31% ownership stake, where did it come from? Thanks!
The gap between mining share (71%) and refining share (91%) is the real story here, and it's the same pattern chips followed — raw material access matters far less than who controls the specific industrial capability to turn it into something usable. The US and Japan actually invented rare earth magnet production last century and let the capability migrate to China anyway, because building it was expensive and unprofitable in the short term. That's a strategic choice with a decades-long bill attached, not bad luck. Leverage built this way is durable precisely because it was never really about the raw resource, it was about who kept investing in the unglamorous, low-margin refining infrastructure everyone else abandoned.
I think it's an interesting dynamic, and we'll be covering it more in coming weeks. I think part of it has to do with the waste generated from solvent extraction in refining, and the West not wanting to touch that either. Mining often has worse margins (or at least more volatility) than refining, so I don't think that's the whole story. I am optimistic that industry as a whole has started taking economic security more seriously, so more American and ex-China firms can pop up with explicitly worse prices than China but guaranteed supply that won't be threatened by geopolitical instability.
That’s a good point. The rare earths processing chain migrated from Japan to China in pieces from ~2004-~2014 thanks to smart application of targeted tariffs from BJ plus the cost advantages of a consolidated supply chain.
Hopefully we are getting away from the media-generated hype re., the US vs China for the number one spot in the RE sector. China isn't going to budge. However, there's certainly competition this decade for the US in terms of building out within-border (and friendly) RE chains that are responsive to the offtake needs of N. American endline manufacture. Nor have we heard publicly of new niche RE chains (e.g., MP, Energy Fuels, USARE, REalloys and Lynas) complaining of growth restriction due to lack of workforce access. Lynas, yes recently in terms of equipment cost and we saw legal action between the likes of MP, Ramaco and USARE over employee moves, but severe shortage not apparently for these RE prime movers. This issue may become more impactful for those few RE wannabees that might still emerge the next decade but those will be very few, IOHO. GLTA Rare Earths Investor (REI). Thanks for the article.
I have often wondered why there was no “X” prize for some technical (and commercially implemented) new achievement in this area, paid for by the billionaires at Apple and Google. The US capitalists would rather invest in Twitter ($ 44 billion) or Twinkies ($5 Billon). News flash. Both investments failed.
Two SOEs and a refining queue isn't a commodity story. It's a chokepoint invoice. Same math as copper: the bottleneck is the route, not the ticker.
Your article inspired me. I can't agree with you any more. Our supply chains are too deeply integrated and US companies have spent decades and hundreds of billions of dollars building them. Do you think the US could ever decouple from China? What challenges and costs will they face if the US decouples from China? I'm expected to read another article about this from you. Your perspective would add meaningful depth to this discussion.
Amazing read. Just one question: was SASAC actively involved in the creation of the Southern Rare Earth company and how? For instance, that 31% ownership stake, where did it come from? Thanks!
Please correct your map, Taiwan is not part of China.