Reducing U.S. Dependency on Chinese Critical Minerals
If China were to ban the export of critically important minerals to the U.S., it should come as no surprise. U.S. relations with China have been brittle for some time and could worsen.
The importance of minerals needed for weapons production and advanced technologies, such as batteries for electric cars and modernization of the nation's electricity system, has ignited a new political battle over heavy U.S. dependence on China. This issue has gained greater significance as the U.S. is rushing to bolster stockpiles of smart bombs and precision-guided artillery shells to aid Israel and Ukraine.
Annually, the Department of Defense requires 750,000 tons of minerals, and Chinese imports are surging due to the increasing demand and Chinese companies' acquisitions of mines worldwide. Simultaneously, many U.S. mines have closed or been depleted, posing a significant problem. With its dominant position in mineral extraction and processing, China is working towards monopolizing global production of both rare minerals and commodity metals like copper and nickel. What truly underscores this new reality is China's attempt to exploit U.S. dependence on vital raw materials for political and military leverage.
Is there doubt about the evidence supporting this claim? Absolutely not.
China recently announced it will require foreign companies to obtain permits to receive shipments of graphite, a key battery metal. The U.S. is nearly 100% reliant on China for graphite, as it is for several other metals and minerals. Previously, China restricted the export of two minerals—gallium and germanium—used in military technologies, essentially cutting off all access to their supplies.
Now, with increased U.S. investments in arms production, copper or rare earths could be the next target.
Currently, the U.S. only operates one rare earth mine and already imports more rare earth minerals from China than any other country. Rare earths are indispensable to modern military applications, including smart bombs, laser-guided munitions, radar, sonar, night-vision goggles, bulletproof vests, jet engines, and armored vehicles.
It is imperative to recognize the ramifications of this dependence on China's minerals for U.S. security and our nation's economic well-being.
On the other hand, the current dire predictions about the future of Sino-U.S. relations may prove to be incorrect, and it is possible that we will once again enjoy the fruits of globalization and international cooperation. However, it would be unwise to bet on this. China's demonstrated inclination to use its growing economic and political power to undercut established rules and coerce other countries is deeply concerning.
While concerns about U.S. reliance on China are justified, the U.S. should view critical minerals as a challenge that can be largely solved by making improvements to the mine permitting process, ensuring that companies don't face interminable delays when opening new mines. Additionally, we need to prioritize an international strategy to diversify supply chains for mining and mineral processing, recognizing the benefits of sourcing minerals from democracies.
Danny Ervin is a Professor of Finance in the Perdue School of Business at Salisbury University.
