The Old Magnet King

The world economy is evolving. The new robotic revolution fuelled by AI is changing the global equations rapidly. America wants to purchase Greenland, annex Canada as the 51st state, dig deep into Ukrainian soil, and plough dollars into the clays of the third-world mines. Meanwhile, with advanced military infrastructure and tactical lawfare, China is trying to tame the South China Sea. It is strengthening its roots in Vietnam, influencing Myanmar, grabbing African land, expanding its presence in polar regions, and now it aims to mine the moon rocks. All this is to power the tiny AI chip that needs some exotic elements - the critical metals, and minerals.

These elements are used in AI chips and shape many products that represent modern life. They bring colors and light up our mobiles, TV screens and laptops. They add comfort and stability to our cars. These elements are essential for germinating seeds and guiding missiles and jets at war. Their unique properties make them critical components in transforming the technology, healthcare, energy, and defense.

These are 17 elements collectively known as Rare Earth Elements (REE) found in rocks and clays all across the Globe. But then what makes them “rare”? Well! They are called rare as they rarely exist in pure form. Their deposits are usually smaller than a kilometre in diameter, and their economically exploitable ores are scarce. Generally, these elements are mined as byproducts of widely used metals and minerals. They require numerous complicated and costly refining processes before they are put to end-use. Although these minerals are essential for clean energy transition, their processing plants often generate radioactive waste that is costly to dispose of or causes environmental hazards that are difficult to dodge. As a result, many countries prefer importing over capital-intensive domestic mining and/or processing. Notably, despite being a wealthy and developed country, America has only one active mine and processing facility, and it imports 70% of its REE requirements from China-Hong Kong.

Nevertheless, China ignored environmental consequences and capitalised on the critical demand and short supply of REEs. Currently, China holds approximately half of the global reserves of rare minerals and is said to be the largest miner in the world, mining 75 per cent of the world's total extraction. Over decades, China has been building smelting and refining capacity, and currently, it controls almost 90 per cent of Global REE processing.

China is the only country that carries out all phases of the supply chain, from extraction to processing, and the steps of separating, purifying, and refining each REE. It also manufactures super magnets at remarkably low cost. Consequently, Western countries send their ores to China for refining, or import end products for their EVs. With decades of strategic investments, unparalleled economies of scale, and an ever-growing REE market, China continued to exploit a flexible pricing strategy and strengthened its monopoly in the global mineral market. Control over these strategic elements has empowered China to maintain economic stability and power to create global chaos.

When Xi and Trump are racing for rare earth resources, one might ask, why isn't Putin joining the game? Despite the ongoing war and U.S. sanctions, recently, Putin launched the "New Materials and Chemistry" initiative. He expressed openness to collaborating with the U.S. to secure rare earth minerals! It could be a strategic move by Putin to loosen the sanctions grip and catch up in the race for rare earth minerals.

As for Europe, the region is almost “entirely” dependent on China for the supply and processing of Key rare earths, which is a serious economic threat. China can exploit this situation anytime by banning the export of strategic minerals or restricting processing facilities like it did in the past. Hence, European countries are exploring affordable and dependable alternatives to obtain REE. The region aims to recycle electronic waste to source at least 30 per cent of its REE demand and reduce dependence on China. Now, the question is whether these recycled magnets would be strong enough for future EVs, wind turbines, and so on to pull the whole of Europe out of China’s magnetic field.

Researchers at Cambridge University are developing a large-scale industrial process to manufacture high-performance magnets from “stardust”. If successful, these cosmic magnets could eliminate the reliance on rare earth materials. For several years, America too has been examining various cost-effective techniques. As a result, it is now planning to exploit unconventional resources like coal ash and mining waste to extract critical rare earths. We may soon see the rare element rise from the ashes, “Unleashing American Energy”.

Countries are rushing to secure REE supplies by signing Mineral Security Partnerships (MSP) with the United States or negotiating tariffs and peace accords! US-MSP might consider all the possible measures to counter China, but the new mines and processing facilities take decades to commercialise! In this scenario, will these unconventional methods and newly established partnerships without dollar funding be genuinely able to challenge the old magnet king??

(The author is a foreign affairs expert. Views personal.)