Download Center for Security Studies Critical Minerals: Growing Demands

Center for Security Studies
Critical Minerals: Growing Demands,
Rising Tensions
3 Jan 2011
By Christine Parthemore for ISN
Looking back at the major headlines of 2010, one story stands out as truly unexpected:
The sudden concern with a little-known class of minerals – rare earth elements – that had
previously served a key but quiet role in the global economy. These minerals serve as a
foundation for modern technologies – from television screens to missile guidance systems –
making this newfound interest warranted.
It seems an historical abberation that concern over mineral supplies critical to weapons
systems and energy production did not deeply permeate industrial policies, trade and
geopolitical planning in the past two decades.
Throughout history, battles have been fought over control of natural resources. During
World War II, the US, its European allies, Germany and Japan all relied on imported
supplies of many raw materials critical to their war efforts, including steel and petroleum
and the minerals used to process those materials. Both sides also developed extensive
operations to cut off their opponents' supply lines.
After World War II and during the Cold War, the Soviet Union's expanding sphere of
influence included many of the world's most important minerals suppliers. Economists
and defense planners in all industrial countries sounded alarms that import dependence
on minerals from Southern Africa and Eastern Europe created intolerable strategic
vulnerabilities. This concern extended to common imports such as steel and petroleum,
but also to lesser-known minerals, such as cobalt and minerals of tailored use in strategic
weapons, such as uranium required for stockpiling nuclear weapons. As the Cold War drew
to a close, however, worries about minerals supplies waned.
The modern challenges of minerals
Today, the resurgence in concern over minerals is no longer characterized by great power
competition, but by globalized markets and booming economic growth in the world's most
populous developing countries. Demand for many minerals is growing at a scale that few
would have predicted a decade ago.
Though India, Brazil and other countries are rapidly becoming modern industrial powers and
driving a surge in demand for minerals, China is at the heart of these concerns. China has
a distinct strategy for its economic development that makes certain minerals central to its
growth, including rare earth elements such as neodymium and europium. In addition to its
ongoing space exploration and extensive military expansion, economic growth plans include
" advanced manufacturing, new energy, new material and new-energy automobiles"
- all areas of technological development that depend heavily on rare earth elements.
Moreover, China's economic, diplomatic, and military tactics to create a robust international
supply system that meets its rapidly growing mineral demands is seen as a potential
strategic concern by many analysts.
The renewed wave of interest in minerals has been several years in the making. An early
incident, a disruption in supplies of rhenium, a mineral used to produce specialty alloys for
the aerospace industry, caused prices to spike from $1,000 to $6,000 per kilogram.
In 2007, China threatened to withhold exports of certain rare earth mineralsused as
catalysts in petroleum refining for long enough that American refiners warned of gasoline
shortages; the US State Department had to step in to help settle the tensions.
Most recently, rare earths have grabbed headlines and the US Congress and Obama
administration's attention, in large part due to China's regularly-changing export
quotasfor these minerals and its recent cessation of exports to Japan. Following a scuffle
in the East China Sea in September, Chinese exporters halted shipments of rare earths
to Japan for weeks, eventually resuming in late November. Although China's leaders
denied that they had imposed an official, government-sanctioned embargo, the move
made clear China's ability to leverage its current corner on the rare earths export market.
While this does not appear to have directly affected American companies, it served as a
warning about the possible effects of over-reliance on China by the US and other developed
countries. For the US, more than 90 percent of its rare earth minerals imports could
be at risk of supply disruptions of this kind. Beyond the direct economic costs of China
changing rare earths export policies, its control of the vast majority of current world supplies
allows it significant political power in relation to countries that have important military and
civilian needs for these minerals.
What to do?
The US must overcome several key challenges in order to better manage these minerals
issues - which may in the future extend beyond rare earths, given the country's complete
reliance on imports for at least 19 different minerals .
First, the government and private sector should increase information sharing regarding
mineral supply chains. The Japanese government, for example, has more open information
sharing between the government and private sector, helping to mitigate potential problems.
Second, governments of all industrialized countries should work to catalogue their
dependencies on the most contentious minerals, such as rare earth elements and indium,
for defense equipment needs and clean energy manufacturing goals. The US government
is in the early stages of taking on this task, but unfortunately it will take years to get even
a general sense of the country's true vulnerabilities. Finally, the government must improve
its understanding of the kinds of economic and geopolitical risks that mineral import
dependence could create when things go wrong. This will entail educating high-level
policymakers and especially diplomats of the connections between the global minerals
trade, defense industrial needs and international relations.
In the long term, experts project that supplies of rare earths (and most minerals on which
the global economy relies today) will be sufficient to meet demand for decades centuries in some cases. Unfortunately, this does not preclude the negative effects of shortterm supply shortages, market share consolidation by only a few suppliers, and exporting
countries flexing their geopolitical muscles by leveraging their control of important minerals.
The growing recognition that assured access to minerals and raw materials is important
for ensuring a reliable defense industrial base, developing a clean energy economy and
managing geopolitical tensions is therefore a positive development.
Understanding these issues and mitigating potential problems will become vitally important
in the future, as demand grows and tensions surrounding supply chains rise. The stakes are
high. In the past three years, these issues have led to trade disputes, detracted attention
from important diplomatic gains in the Asia-Pacific and renewed clashes over territory from
the Arctic to the South China Sea. We should expect to see minerals make even more
headlines in 2011 and beyond.
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