A rare earth element is like air. It only seems to become important when you are running out.

With China suddenly cutting back on exports while controlling 95 percent of the world’s production of rare earth elements,the United States and other countries suddenly finds themselvesvulnerable. This vulnerability has to do with the stability of thesupply of these strategic commodities. Countries from around the worldhave suddenly woken up to the realization that the future of their hightechnology industries could be in the hands of one supplier – China.

In the USA, this realization comes at a time when the Obamaadministration has committed the United States to replacing more than amillion gasoline powered cars with hybrid and electric cars by 2015.These cars – referred to as “green” vehicles – use A LOT of rare earthelements in their power trains. Reducing the US’s reliance on foreignoil is one motivation for moving to green cars. However, given thecurrent situation, and unless alternative supply sources are found –soon – it appears that the US might be replacing a dependence on onecommodity (oil) for reliance on a much more difficult to find and moreexpensive one (Rare Earth Elements – REEs). And these REEs are almost exclusively available from its main trade rival.Somewhat belatedly the USA has discovered the looming crisis in rareearth availability and has only recently begun to look at securingdomestic supplies and rebuilding its supply chain.

“If we don’t think this through, we could be trading a troubling dependence on Middle
Eastern oil for a troubling dependence on Chinese neodymium.”
Irving Mintzer, Senior Adviser, Potomac Energy Fund

American rare earth dominance ends only recently

And yet, it didn’t have to be this way. Given China’s near monopoly in rare earths productionit might come as a surprise to learn that the United States was theworld’s leading producer of rare earths as recently as 1995.

Until 1948, most of the world’s rare earths were mined in India andBrazil. In the 1950s, South Africa assumed the status of world’s leadingrare earth source, but a single mine in the United States eventuallyovertook South Africa’s production output. From the late 1950s, into themid-1980s the Mountain Pass rare earth mine in California was theworld’s leading producer of REEs.

The deposits at Mountain Pass were discovered in 1950 by twoprospectors who found a radioactive outcrop and assumed they had locateda source of uranium. The prospectors were disappointed to learn thattheir claim did not contain uranium but rather flouro-carbonatebastnaesite. This mineral was completely worthless to them but was veryinteresting to the US Geological Survey. The Geological Survey undertookfurther surveys and discovered non-radioactive deposit of bastnaesite.One of the two original prospectors who found the deposit worked forMolyCorp and he persuaded the company to claim the land although itdidn’t exactly know what to do with its rare earth ore. MolyCorp spentthe next two decades developing a market for the rare earth elements found in its mine: Cerium, lanthanum, samarium, gadolinium, neodymium, praseodymium and europium.

Throughout the 1970s and 1980s, the Mountain Pass mine produced morethan 70 percent of the world’s supply of these valuable minerals. At thepeak of its operations, the mine produced 20,000 tonnes of rare earthoxides a year.

However, during the mid-90’s commodity prices bottomed out and themine found it increasingly difficult to compete with cheaper Chineseimported rare earths. In 1998, after hundreds of thousands of gallons ofwater carrying radioactive waste spilled into and around Ivanpah DryLake, the chemical processing at the mine was stopped and the mine shutits doors. After the California mined closed, China assumed the mantleof world leader in rare earth extraction.

Whether focusing on REEswas a deliberate and clever trade strategy or a happy accident, Chinanow had firm control of the world supply of REEs. And while demandremained stable and China exported its REEs at low price points, the USbecame complacent. Remaining REE stockpiles around the country were soldoff and the US as a whole let the REE market completely get away from them.

To read the rest of this article, head over to Kidela.com: Can America Regain the Rare Earth Elements Crown?