The UK and its allies need to diversify their rare earth element imports away from China to counter Beijing’s “exploitation” of its market dominance, according to a new report.
The Henry Jackson Society, a right-wing foreign policy think tank with ties to the Republican Party, has warned of China’s dominance of rare earth materials and called for the Five Eyes intelligence alliance to become more involved in matters of trade.
Importance of REMs
Rare earth minerals (REMs) are used in many electric products including laptops, phones and cameras, as well as technologies used in both defence and the clean energy transition.
Despite a fall in price at the start of the year, REMs remain in high demand as the world relies more on low-emissions technology.
REMs – in spite of what the name implies – are not actually that rare. Instead, they are found across the world and are not concentrated in one particular area.
The report states that China’s dominance is not due to an abundance of the resources within its borders, but instead due to China’s willingness to deal with the environmental and health downsides of processing them, a price their democratic counterparts are unwilling to pay.
The process uses a lot of very harmful chemicals and can damage the local environment. The UK, US and other nations have been reluctant to approve other projects.
“Based on these reasons, the West/Japan were happy to let the Chinese get on with processing up to 90% of REMs,” said Roger Marshall, a critical minerals specialist at the Chartered Institute of Export & International Trade.
Stretched supply chains
This has not been without consequence for the West’s supply chains.
At the end of 2023, a committee of UK MPs warned that China had “weaponised” its dominance of critical minerals. Alicia Kearns, chair of the parliamentary Foreign Affairs Committee, said that the reliance created a “vulnerability” for the UK.
Within the last year alone, China has restricted the export of gallium, germanium, graphite and certain magnet technology, typically in retaliation for a US or European trade measure.
To combat this, the Henry Jackson Society makes two recommendations: expanding the Five Eyes Alliance into trade and seeking alternative sources of the metal.
Five Eyes is an intelligence-sharing organisation whose primary members are the UK, New Zealand, the US, Canada and Australia. It has its origins in the code-breaking operation at Bletchley Park during the Second World War.
Alliance
Since 2018, the alliance has become increasingly involved in countering Chinese influence. Although nothing has been announced publicly, analysts have talked of the alliance expanding to include non-Anglophone nations such as France, Israel or South Korea.
““Five Eyes states have substantial REMs deposits. With appropriate internal policies and prioritised trade among themselves, these countries could reduce their dependence on China.”
The report says that this could be achieved by signing an agreement specifically on cooperation on critical minerals and making internal reforms so that REMs can be traded more efficiently, with easier processes for opening new mines and more funding for research.
Reducing reliance on China “will act as a robust safeguard for democracies across the globe”, says the report, “protecting them from the risks associated with depending on a potentially adversarial state that could change its stance unpredictably”.
“Based on the data presented, there are evident benefits to expanding the Five Eyes Alliance to include cooperation and trade on critical minerals.”
‘Most realistic’ move
“You can see the political environment will prompt the alliance to consider this,” says Marshall.
“However, this is not a simple decision, and whether there will be the political will to provide the necessary investment is questionable. If there are any easy decisions and/or relatively cheap solutions, then you can see they'll do it but often this is not the case.
“Probably the most realistic move is to pool investment and provide purchase commitments for a premium product coming out of Australia that neutralises the risk of being undercut commercially.”
The previous government launched a Critical Minerals Strategy in March 2023, promising to maximise the UK’s domestic production and to boost collaboration with other nations. Labour’s “securonomics” vision includes a place for securing more critical minerals by working with friendly nations.
Australia and Canada have published their own critical mineral strategies – the New Zealand version is still in draft status – also committing to working with friendly nations.
Popular moves
The society’s research points to extensive polling finding political support in all five nations for closer cooperation on REMs, diversification away from China and using resources to protect allied supply chains.
Mining and processing projects like Pensana’s Hull-based magnet factory, the Californian Mountain Pass Rare Earth Mine and Australia’s Mount Weld site are also in various stages of development.
In its half-year financial update, Pensana announced they had signed a letter of intent to develop a magnet facility within the Humber Freeport to work with materials sourced from Angola.
However, this is still behind the company’s stated timeline, which predicted a 2024 start-date for the site in Yorkshire.
