WinnCad Elements Blog: Washington Mulls Stockpiling Rare Earths

Friday, April 8, 2011

Washington Mulls Stockpiling Rare Earths

With China building up its strategic reserves of rare earth metals even as it crimps exports, a new piece of counter-China legislation on rare earths introduced to the U.S. Congress reflects the depths of Washington’s anxiety over the sector.

China has been storing up supplies of rare earths for months, recently passing a tax that could help further fund the effort, in what analysts see as a bid by Beijing to further tighten its control over a market it already dominates.

The issue of whether the U.S. itself should start stockpiling on national defense grounds is one the biggest questions surrounding the global response to China’s tight control over rare earths, which are crucial for making magnets in wind turbines and polishing the glass in night-vision goggles.

The new bill, introduced Wednesday by Colorado Republic Rep. Mike Coffman, “Seeks to Curtail Dangerous Reliance on China for Critical Materials,” according to the press release.

The Armed Services Committee member’s bill – dubbed “Resart” – stops short of calling for a permanent military stockpile. Instead, it would establish a quasi-government inventory built from U.S. production sources, which at this moment are limited.

According to his press release, Mr. Coffman proposes establishment of a “Defense Logistics Agency” that would set long-term contracts to inventory rare earths and make the material available for purchase by government contractors, presumably in the defense industry. The Department of Defense estimates the U.S. uses around 5% of the global supply of rare earths for military purposes.

It is unclear how the logistics system would work and a spokesman didn’t immediately respond to a question about the bill, which also calls for cabinet-level support, financial assistance and faster mine approval for the industry.

Though Mr. Coffman’s new agency sounds meaty, a bill he sponsored around a year ago that died in Congress was more direct, calling specifically for a “national stockpile” of rare earths. In a January interview with The Wall Street Journal, the congressman said a national stockpile isn’t his preferred route to build a U.S. supply chain in the metals because he would prefer market forces to spur its development.

Direct U.S. government involvement as a buyer of rare earths would mark an important new wrinkle for the price-sensitive sector, which in the past year has taken virtually all its cues from China. The market is in a Catch-22: An American stockpile would mean higher prices on more demand but a lack of one could also support prices on fears of supply shortfalls. Nervousness about China’s export policies has already pushed importers Japan and South Korea to stockpile the metals.

In February a group of U.S. scientists issued a report that warned against rare earth stockpiles, saying they can “act as disincentives to innovation” in terms of efficiency and innovation http://www.aps.org/about/pressreleases/elementsreport.cfm A Congressional Research Center report published last month described a stockpile as one option, while a Department of Defense assessment of the industry is awaited.

An association of U.S. magnet makers that supports Mr. Coffman’s issued a statement on Wednesday defending a stockpile: “The bill reconfigures the Defense National Stockpile into an interactive strategic reserve to meet national security needs for neodymium magnets and potentially other rare earths products, breaking China’s current stranglehold on the supply chain by giving industry the tools necessary to provide a reliable strategic reserve of neo alloys and magnets on an accelerated timeline.”

Other congressional efforts touch on how to counter China’s dominance in rare earths, but don’t take stands on stockpiling.