The U.S. military is almost completely dependent on China for the rare earth elements that go into everything from batteries to precision-guided bombs, according to a report by the Congressional Research Service.
U.S. materials manufacturers recognize the Chinese near-monopoly as a national security issue and are encouraging a debate over how to regain the nation’s ability to create these valuable substances, said Vijendra Sahi, vice president of government affairs for Palo Alto, Calif.-based Nanosys.
“China is right on our heels. We still have a slight lead, but it’s not a very large lead,” Sahi said of battery manufacturing technology. “While we make a lot of the finished cells for batteries here, a lot, if not most, of the chemistry is sourced from China.”
China produces 97 percent of the world’s rare earth oxides, said a Congressional Research Service report published in April. It is also the only exporter of commercial quantities of refined rare earth elements, the report concluded.
“There may be repercussions if these materials are not available for commercial and defense applications,” the CRS report said. “The rare earths supply chain vulnerability question may adversely affect the ability of the United States to plan strategically for its national security needs.”
The Defense Department conducted its own study, published in March, and found that China’s stranglehold on rare earth production could soon be at an end with new production facilities coming online in the United States and Canada. The U.S. military will be able to meet most of its demand for rare earths by 2013, the Defense Department report concluded. One such company, MolyCorp Inc., has a rare earth mine and production facility at Mountain Pass, Calif., where it is stockpiling oxides used in both commercial and military technologies.
For Sahi, pursuing domestic battery chemistry production is a question of national security. Nanosys is one of only a handful of U.S. companies that make the raw materials for batteries used by the military.
In the 1980s, as the manufacture of consumer electronics was increasingly outsourced to Japan, South Korea and then China, battery manufacturing went along. It hasn’t come back and domestic companies are finding it difficult to compete with Chinese suppliers of rare earth elements that are used to build batteries. The CRS report found that domestic production of rare earths would likely not rebound for 10 to 15 years.
Domestic companies, like Newark, Calif.-based Envia Systems, have components in China, where labor and materials are far less expensive. Envia, which like Nanosys is primarily focused on improving fuel-cell technology in electric vehicles, prototypes and manufactures fuel cells in Jiaxing, China. Nanosys, anticipating a need to expand its operation in future years, is weighing similar options out of necessity.
MolyCorp and its subsidiary Toronto-based Neo Materials Technologies, buy much of their feedstock elements from China, where they also have mining and production facilities, according to the CRS report.
“The risk is that we don’t break the cycle and, through lack of action, we end up in a situation where there remains a dependence on Chinese battery chemistry for the next generation of lithium-ion batteries,” said Sahi.
To hedge its bets, Congress could require a strategic rare earth stockpile, which “might possibly increase the security of the domestic U.S. supply,” the CRS report concluded.