With the coronavirus pandemic and growing geopolitical tensions having shone a light on U.S. over-reliance on foreign sources across our nation’s critical mineral value chains and its implications for our national and economic security, domestic stakeholders have stepped up their efforts to decouple U.S. supply chains from reliance on our adversaries.
While for “battery criticals” the most recent notable step was the passage of the Inflation Reduction Act (IRA) with its sourcing requirements for lithium, cobalt, graphite, nickel and manganese, measures addressing rare earth element supply chains included the invocation of Title III of the Defense Production Act for Rare Earth Elements and a DoD allocation of $35 million for a heavy rare earth separation and processing project in California.
While these are important steps, real-life examples show just how deep our nation’s over-reliance really is:
Earlier this fall, the Pentagon, as part of its “efforts to decouple U.S. defense companies’ sprawling global supply chains from China,” as the Wall Street Journal phrases it, said it had begun using artificial intelligence to analyze whether U.S. military contractors source aircraft parts, electronics and raw materials used in U.S. military equipment from China and/or other potential adversaries.
Learning that engine parts for new F-35 combat jets made by Lockheed Martin Corp. contained magnets sourced from Honeywell International, Inc. with a cobalt samarium metal alloy produced in China — which constituted a violation of U.S. procurement laws — the Defense Department last month halted accepting new jets from the company.
The company has since been granted a waiver, and with it, the Pentagon will accept all aircraft under the contract.
The waiver was granted because the “magnet does not transmit information or harm aircraft, and […] there are no security risks involved,” but Honeywell will have to work to find an alternative source for the metal alloy used in the F-35 engine parts.
Meanwhile, analysts say that with the waiver allowing an alloy of Chinese origins to continue to be used in the manufacture of F-35 combat jets, “the US military has exposed its dependence on Chinese rare-earth products, and China can opt to limit the export of such strategic resources to safeguard its national security.”
China, not surprisingly, is an interested observer in the U.S. supply chain travails. As the Global Times reports, citing a manager of a Chinese state-owned rare earth enterprise in Ganzhou, East China’s Jiangxi province, with China having a leading edge in the middle-to downstream rare earth magnet production, the “U.S. attempt to remove China-origin alloy imports from military equipment is almost ‘a mission impossible.’ from both a short-term and long-term perspective.” According to unnamed manager, “China is the only country in the world that has developed the ability to extract samarium and cobalt rare-earth metals, which means the middle product samarium oxide is almost 100 percent made in Chinese factories. We also account for over 70 percent of the final product samarium-cobalt rare-earth magnet. How can Washington take out Chinese rare-earth products from its jets in such a scenario?“
A similar dependency applies to China-made neodymium magnets.
A Beijing-based military expert, Wei Dongxu, contacted by the Global Times argued that with the U.S. using the materials for military purposes, which could “harm China’s sovereignty, territorial integrity and development interests,” “China should consider applying more strict export controls on rare earth products.”
The waiver referenced above is only the latest in a series of waivers granted by Pentagon officials under similar circumstances — all of which goes to show how difficult it is to untangle critical mineral supply chains.
However, with geopolitical and trade tensions rising — both between the United States and China and generally on the global stage — and with China’s known penchant for using its advantage as leverage, there is no alternative to turbo-charging the effort to secure U.S. domestic supply chains for critical minerals across the board.