The Strategic Value Of Rare Earths : The Indicator from Planet Money Rare earths are essential to a wide variety of strategically important components, but the vast majority of rare earths are produced by mines in China. That's something that the U.S. is working to correct.
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The Strategic Value Of Rare Earths

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The Strategic Value Of Rare Earths

The Strategic Value Of Rare Earths

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UNIDENTIFIED PERSON #1, BYLINE: NPR.

CARDIFF GARCIA, HOST:

Hey, everyone. This is THE INDICATOR FROM PLANET MONEY. I'm Cardiff Garcia.

STACEY VANEK SMITH, HOST:

And I'm Stacey Vanek Smith. The New York Stock Exchange got a new member last month, a company called MP Materials, which started trading under the symbol MP. And MP's notable because it is the owner of one of the only rare earths mine in the United States, the Mountain Pass Mine in California.

GARCIA: And it's a big deal because rare earths themselves are a big deal. They are a key component of cellphones, wind turbines and electric cars and also in things like fighter jets and missile defense systems. And what's fascinating about them is that the U.S. gets nearly all of its rare earths from the country that it's been having a huge trade war with these past few years - China.

VANEK SMITH: And, of course, we've been thinking about what will happen in the coming year. After a new administration is in place, what will happen with rare earths? And with that in mind, we decided to bring back a show that we aired earlier in the year. Pamela Boykoff of CNN International told us about the rare earths industry and why it's so strategically important and what the U.S. is doing to try to become more self-sufficient in its production of rare earths.

(SOUNDBITE OF ARCHIVED NPR BROADCAST)

PAMELA BOYKOFF: Hey, Cardiff.

GARCIA: Pamela Boykoff, welcome back. I hear you've been to Las Vegas, where you were obviously playing slot machines and you were at the craps tables, right?

BOYKOFF: I wish. I wish I was closer to the Bellagio, but I was actually about an hour outside of Las Vegas in the desert.

GARCIA: Oh. And did you bring us anything back from the middle of the desert?

BOYKOFF: I always have a present for you, Cardiff. This time I brought you some pretty cool tape. Listen to this.

(SOUNDBITE OF ARCHIVED RECORDING)

UNIDENTIFIED PERSON #2: Three, two, one - fire in the hole.

(SOUNDBITE OF EXPLOSION)

GARCIA: Oh, nothing warms my heart like the sound of an explosion.

BOYKOFF: Music to an economy nerd's ears. So that is the sound of a blast at the Mountain Pass Mine. This site in California - Cardiff, it's the only place in the U.S. where we mine rare earths. And we really, really need these things.

(SOUNDBITE OF ARCHIVED RECORDING)

ROBBY RUESCH: So if we're looking across the pit, like, everything in the very bottom of the pit - the existing bottom - is all high-grade ore at this time.

BOYKOFF: So that's Robby Ruesch, and he's talking to CNN International. He's the mine manager at Mountain Pass. He's showing our team this huge open mine pit just packed, he says, with these rare earth elements.

(SOUNDBITE OF ARCHIVED RECORDING)

RUESCH: Beautiful sight to see.

BOYKOFF: He says this is the busiest he's ever seen it at Mountain Pass. And, Cardiff, one of the reasons it's so impressive to see this bustling, busy mine is that just two years ago, this mine was totally shut. At that point, China - they'd really taken over this strategic industry.

GARCIA: OK. That's fascinating in and of itself. But I actually think we should step back for a minute and explain a little bit more about what rare earths actually are. So, everyone, go back to high school chemistry for just a moment, just for a second.

BOYKOFF: I had a great high school chemistry teacher, Mr. Goodman (ph).

GARCIA: Rare earths are a set of 17 elements that appear on the periodic table. And they are an essential ingredient in making, like, super-strong, super-small magnets, which, as we just said, are used in a lot of electronics and by the military.

BOYKOFF: Despite the name, they are really not all that rare. They naturally occur in a lot of places. But the process to mine them is labor-intensive, and it can be environmentally destructive. It can create lots of pollution, and it can even involve radioactive waste.

GARCIA: Now, China - they put a lot of effort into building the mining and processing facilities for these rare earths and without the same environmental and labor standards that we have in the U.S. So China can produce rare earths very cheaply. And China started to actually dominate the industry. And, in fact, from about 2014 to 2017, the U.S. imported 80% of its supply of rare earths from China.

BOYKOFF: As the relationship between the U.S. and China started to get tense in the trade war, China's state media - they basically made a thinly veiled threat. They implied that rare earths could be used as a weapon in the trade war. China could restrict exports, basically cut off the flow of these elements to the U.S. China's president, Xi Jinping - he just happened to make a personal visit to a production facility that made these products.

GARCIA: I was just in the neighborhood, and there were the rare earths over there.

BOYKOFF: I thought I'd go check this out.

GARCIA: Yeah, just in case a camera sees them on the other side of me - right, yeah. And as the trade war has become nastier and nastier, this idea that China could restrict rare earths exports to the U.S. - it has spooked some people, especially in Washington, because as the world has become more dependent on high-tech electronics, it has also become more dependent on these elements, on rare earths.

BOYKOFF: This has focused a lot of attention on the mine I went to, Mountain Pass. It has actually been in operation since the 1950s. Back then, it produced europium, which makes the red color in very early televisions.

GARCIA: Yeah. And the previous owner invested more than a billion dollars on a new environmentally friendly facility back in 2015 just as the rare earths price collapsed. And so the company just went out of business, and the mine shut. And there was nowhere in the U.S. producing these elements. Now, the new owner of the mine, MP Materials - they've spent two years rebuilding it. And they say that they now produce about 10% of the world's supply of rare earths.

(SOUNDBITE OF ARCHIVED RECORDING)

JAMES LITINSKY: If there's going to be an American rare earth industry, it's going to be led by us. We're it.

BOYKOFF: That's James Litinsky on CNN International. He's the chairman of MP Materials. He wants to create an alternative supply chain to China, but he's got a problem. While he can dig these things out of the ground, he can't process them in the U.S. Everything needs to go back to China. In fact, a Chinese rare earths processor owns a 10% non-voting stake in MP Materials.

Mountain Pass produces bags and bags of this rare earths concentrate - basically, a brown dust that got all over my shoes when I was there. Then it all gets sent to China because there isn't a processing plant anywhere in this country that turns rare earths into the products that companies want to buy.

GARCIA: Next year, MP Materials - they plan to reopen the processing plant at Mountain Pass. And this way they can make processed rare earths to sell directly to global companies without going through China.

(SOUNDBITE OF ARCHIVED RECORDING)

LITINSKY: And, frankly, there were a lot of people who doubted that we could make this work. And so we felt an extra burden and a duty, and so we've had a sense of urgency from the very beginning. But I would say that there's definitely been a heightened sense of awareness of what we're up to.

GARCIA: When China started making its veiled threats, some people questioned if the U.S. needed to nationalize the rare earths industry, to take it over. But the experts we talked to don't really think so, and they point to what is going on at Mountain Pass as proof that the market is already correcting for China's near-monopoly. Now that there's increased demand for rare earths and pressure by companies for sources that are more diverse and environmentally friendly, suppliers outside of China are starting to grow.

BOYKOFF: And restricting rare earth exports - it's not a move China is going to make lightly because it would hurt Chinese businesses. A lot of the rare earths - they find their way into things that are manufactured inside China like mobile phones. To really completely cut the U.S. off, China would have to tell Chinese businesses to stop selling to the United States processed rare earths and rare earth magnets and all the electronics that use them. Chinese companies would lose a lot of business. The whole thing could hurt the Chinese economy, which is already suffering in the trade war.

GARCIA: Kind of the definition of a trade war - you can't hurt the other side without hurting yourself.

BOYKOFF: It's a messy business.

GARCIA: There we go. This episode of THE INDICATOR was produced by Richard Cohen, fact-checked by Emily Lang and edited by Paddy Hirsch. THE INDICATOR is a production of NPR.

(SOUNDBITE OF DROP ELECTRIC SONG, "WAKING UP TO THE FIRE")

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