China seemed like a harmless country, and that's why the West outsourced the production of rare earth metals that pollute the environment. This resulted in an extreme dependence on the increased military power, writes Pekka Mykkänen, HS's foreign editor.
It seemed like incredible information when I first heard it. There is not a single mine in Europe from which rare earth metals, which are badly needed by high technology, are excavated.
In addition to the absence of mining, only less than a percent of the elements in question are managed to be recycled in EU countries. Therefore, 98 percent of the rare earth metals used by industry in the EU countries are imported from China.
If Europe was dangerously dependent on Russian energy before February 2022, the same mistake will be repeated with regard to China in metals. The prospect of ending the dependency relationship is not only hazy, but distant.
The American story is even more embarrassing, especially if you add a touch of history in addition to the current situation.
Rare ones earth metals are known by the English abbreviation REE (rare earth elements). It is about 17 elements, such as scandium, europium, neodymium, dysprosium and terbium. As a group, they belong to about 30 raw materials that the EU considers to be critically important for modern industry.
REE metals are needed, for example, in mobile phones, electric cars and wind turbine engines. They are also used by companies in the arms industry, for example, in the production of missiles, probes and fighter planes.
All countries in the world need REE metals at least as users, but only one is self-sufficient in them. About 60 percent of rare earth metals are mined from China's soil, and in addition, the country has a global share of about 87 percent of the metals' further processing.
How did this happen?
Deng Xiaoping, the architect of China's economic reforms, visited Texas in the United States in 1979.
One the explanation lies in China's way of planning its economy much more long-term than Western countries. In China, leaders have been rolling out economic strategies for a quarter of a century and longer to take over the world, and now is the time to harvest. REE metals are, of course, only one part of this multi-generational and successful saga for China.
China has been able to act more long-term than Western democracies, because people who questioned the views of those in power have been put under house arrest, labor camps, prison or exile. In China, there are hardly many surer ways to get yourself a prison sentence than to oppose a mining project that the leaders of the Communist Party have declared to be strategically important.
Because China has succeeded in so much, its example has caused the governments of many other countries to act more authoritarian.
The father of China's economic reforms Deng Xiaoping highlighted the importance of REE metals already in the
1980s and 1990s. At that time, China was still seen in Western countries as a weak and harmless country whose cheap labor and raw materials were being exploited.
Even at the end of the 1990s, the Chinese People's Army was more a subject of jokes than fear in Western countries, so even the Western arms industry could cooperate with the Chinese quite calmly.
Mineral material containing rare earth metals that had been taken to the Vital Metals company's factory in Saskatoon, Saskatchewan, Canada for processing. The picture is from last January. In October, it was announced that the factory has filed for bankruptcy due to its unprofitability.
From the west considered, subcontracting REE metals from China was a win-win situation, because their processing pollutes the environment. As a by-product of metals, emissions of radioactive thorium were created in China, for example, in Inner Mongolia's Bayan Obo, where the world's largest REE mine is located.
But while the environmental problems of REE processes were outsourced to China, China was able to dump the prices of raw materials and refined products to beat its few Western competitors one by one.
Mountain Pass, the only REE metal mine in the US, was closed in 2002 due to a toxic spill and unprofitable operations.
As early as 1995, the American car industry giant General Motors sold the Magnequench company that refines REE metals to the Chinese, which was an important subcontractor for the US defense industry. A Chinese company, led by Deng Xiaoping's son-in-law, was found behind the suspicious purchase pattern Zhang Hong.
Magnequench, which fully moved to China in 2006, specializes in NdFeB permanent magnets mixed with neodymium, iron and boron, which are used in hundreds of products from ventilation devices to headphones. The US defense industry needs tiny magnets for its precision missiles and submarine technology that use GPS positioning, for example.
Permanent magnets, also known as supermagnets, were developed in the United States and Japan in the early 1980s. The United States had a crushing market leadership in them for a long time.
But not anymore, says the US Department of Commerce in the report.
“The United States is dependent on foreign sources, especially China, for NdFeB magnets. China is the only country that has all parts of the NdFeB magnet value chain in its hands,” the report says.
of the European raw materials alliance ERMA review
says the same thing emphatically. Of the global market for permanent magnets, China has 94 percent, Japan 5 percent and EU countries less than 1 percent.
A mining machine drilling holes for blasting in Kiruna, Sweden, where a large deposit of rare earth metals has been found. The Per Geijer deposit is believed to contain at least 1.3 million tons of rare earth metals in association with a huge iron ore deposit. It takes about five years to dig a research tunnel to perform.
In the process while the former industrial powers have drifted into a vulnerable position, China has grown into the third largest industrial power on the planet and a major developer of space technology.
There is hardly a single Western country that has not established a working group to think about what would happen to the arms industry if a war broke out between the United States and China. Or almost any industry. When the diplomatic row between China and Japan flared up in 2010, China restricted the export of REE metals and the prices of some products jumped by hundreds of percent.
As it should be, the Western countries now each have some sort of strategy to try to extricate themselves from China's stranglehold on REE metals. In the past year, the EU has been happy with the news that promising deposits of REE metals have been found in Sweden, Finland and Norway.
It is not far-fetched to think that the enthusiasm of the United States to get Finland and Sweden into the military alliance NATO was at least partially increased by the fact that the Nordic duo could become a good partner in REE metals in the next decade.
In the US, the Mountain Pass REE mine in California has been brought back into production. However, the minerals mined there are still sent to China for processing.
The US is also seeking partnerships with countries such as Canada and Australia to increase its own control of strategically important minerals. Refineries for REE metals are being set up in various parts of Europe.
However, projects in Western countries have progressed rapidly. For example, in Canada, the processing plant of Vital Metals, the country's first mining company for REE metals, in the province of Saskatchewan went bankrupt in October as unprofitable.
Bastnäsite sacks filled at the Mountain Pass mine in California. Bastnäsite is a carbonate mineral containing rare earth metals. The picture is from 2020.
Kind of the balance of horror is created by the fact that the United States still has clear world domination in semiconductor products, which are important even for the arms industry. Adding to the horror is the fact that the semiconductor industry needs REE metals – and China is determined to become the world's number one in semiconductors as well.
Columnist for the financial magazine Forbes Jonathan Brill write, that Western countries are playing a dangerous game if they try to curb the development of China's semiconductor industry. However, the United States, the Netherlands and Japan have restricted exports of equipment needed by the semiconductor industry to China this year.
China has responded by limiting the export of gallium and germanium needed by Western semiconductor companies. They do not belong to the REE metals, but they are classified as “critically important” minerals and China has complete superiority in their production as well.
“Treating China as a strategic threat instead of a strategic peer is short-sighted management. We share a small planet and limited resources. It's crazy to limit strategic cooperation and increase competition when the fate of our world depends on it,” says Brill.
The columnist's idea starts from the fact that it would make more sense for the world to focus, for example, on the one-inch development of technology that slows down climate change. If the voice of reason were to dictate in the world, Russia, for example, could also join the ranks, whose soil would have enormous wealth useful for modern life, including REE metals.
As often before in history, there would be a lot of potential to support wise solutions.
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