I hate to write about this because Rare Earth is where I have been operating the last few years. However, what just happed with MP materials is seismic.
The Pentagon just bought 15% of MP Materials, the owners of the Mountain Pass Rare Earth mine. The boss said he wanted everyone to know that this wasn’t nationalisation by the US government. The US doesn’t do nationalisation much, apart from swathes of Wall Street in the 2007-2009 financial crisis, the railroads in the 1970s and the Tennessee Valley project in 1933, so even a whiff of ‘nationalisation’ underlines the huge stakes at risk and giant forces at play.
This ‘investment’ is all about the USA v China cold war, a theme driving the markets and pretty much everything else until further notice. Rare Earth is part of this story as is AI, Chip making, tariffs, the dollar as reserve currency… the list goes on and on.
The Rare Earth story goes like this.
You can’t have a modern world without rare earth. If you can control Rare Earth, you have a geo-political lever like oil and it can and will get pulled to huge effect. Those kinds of levers sow catastrophe as is clearly seen in the Middle East. China considers Rare Earth as one of its ‘oil’ like levers and has engineered a monopoly of it as a key component of it hard power toolkit.
How has it done that?
China has large deposits, but more importantly it is prepared to undercut every other producer to keep that monopoly and it does that by government support and critically producing RE in a cheap and nasty way that no developed country dare. Processing cheap RE is a nasty business using nasty acid precursors that come with inherent risks that bump up the prices of processing in the environmentally considerate West. These cost factors do not apply in places happy to cut corners for strategic reasons, so those producers can easily snuff out free trading competitors who have to care about safety and pollution issue they don’t have to worry about.
In consequence high tech industries have being getting Rare Earth at unbeatable prices from China and no one in the West can even start to compete on price. As a magnet maker told me last week, RE using magnet users have been drinking champagne and eating caviar at McDonald’s prices and don’t see why it should be otherwise. In summary, China controls Rare Earth because it has been using the oldest trade war tactic in the book: dumping. It controls the base of the value chain and little cost and can kill the whole chain at will. That is the geopolitical strategy and its in place.
So for years this has been just fine for the West but now China is pulling those levers and the acute pain is felt. Got Terbium…. Nope. Need Terbium… yep. Tough luck.
In addition to all those consumables that need Rare Earth and think pretty much every piece of technology central to your happiness, you simply cannot build modern weapons without them. For instance according to a recent report by Morgan Stanley an F-35 has 920lb of rare earth in it and RE simply permeates all high technology that is modern warfighting.
So it is no surprise that up pops the Pentagon and secures a big chunk of US rare earth production, or at least some of what it needs.
The are a lot of different Rare Earths and other strategic minerals and no single mine has enough of any of them.
However all is not lost.
The following is how the world of critical and strategic minerals work. It’s a gross simplification but its close enough to what is going on if you walk the floor at a e-waste conference.
Dig up the mineral feedstock, collect the e-waste and cat converters, used batteries etc, grind it up and sell it to China. Get it, grind it, sell it to China is the cycle.
China then processes it in a way you’d never get away with in for example Europe and resells the output so cheaply no one can compete so no one does. Then the only customer to buy the new feedstock is, you guessed it, China. So the circular monopoly is complete.
This ploy is understood and there is a fix. India did it. India banned the exports of E-waste to China. Its forcing the problem to be addressed onshore. They see e-waste as a resource and a reserve.
The solution to this strangle hold is to reprocess critical material feedstock and waste streams locally and crucially reprocess them with new technology, technology that doesn’t need dangerous China reagents or China made equipment. It’s a tough call because while the consumers of critical materials are used to paying uncommercial prices for their supplies, they aren’t yet prepared to pay for them at a strategic level, although the current price of Terbium is an example of what they will face if they aren’t facilitated to take a long view.
With the Pentagon’s move, the days of free riding on China’s trade war largesse are coming to an end.
The good news is the West doesn’t need to use dirty old chemistry that wrecks the environment to become strategically independent from China there is new technology that is cheaper and cleaner to enable the divorce, I know because I’m working with some of the brightest chemists in Europe on exactly that. Not only does the technology exist but governments in the form of the huge US agencies like the DoD, DOE and DOC, UKri in the UK, Horizon in Europe are grinding away trying to put the pieces in place to break the strategic stranglehold China has on the world for the basic ingredients of our civilisation. However, time is certainly running out and if the West’s industrial emaciation is projected much further it will soon enough be too late.
While mining the earth is part of the solution, mining the cities with recycling is even more vital to onshore critical and strategic material supplies. Circularity done properly is more efficient and cheaper than dig and dump.
Onshoring and near shoring of critical and strategic metals and mineral is now on track of being a massive trend and as such investors need to start looking for investment plays in this arena.
Disclosure: I am the founder of Silex World, a university spinout developing advanced rare earth element (REE) refining and recycling technologies. Silex World focuses on clean, scalable solutions for processing strategic minerals—particularly rare earth oxides—using proprietary low-waste chemistry and modular infrastructure. The company is actively engaged in commercial pilot development and partnerships across the U.K., EU and India.