Congressional Research Service, “Rare Earth Elements in National Defense: Background, Oversight Issues, and Options for Congress,” March 31, 2011

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Summary
Some Members of Congress have expressed concern over U.S. acquisition of rare earth elements that are used in various components of defense weapon systems. Rare earths are a collection of 17 elements on the periodic table, including a series of 15 elements beginning with atomic number 57 (lanthanum) and extending through number 71 (lutetium), as well as two other elements, yttrium and scandium, which have similar properties. These elements are referred to as “rare” because while they are relatively abundant in total quantity, they appear in low concentrations in the earth’s crust and economic extraction and processing is both difficult and costly.
 
From the 1960s to the 1980s, the United States was the leader in global production of rare earths. Since that time, production of the world’s supply of rare earths has shifted almost entirely to China, in part due to lower labor costs and lower environmental standards. China produces about 97% of rare earth oxides, is the only exporter of commercial quantities of rare earth refined metals, and is the majority producer of the world’s two strongest magnets (samarium cobalt (SmCo) and neodymium iron boron (NeFeB) permanent rare earth magnets). However, Molycorp, a U.S. company with mining operations in Mountain Pass, CA, recently announced that it restarted limited mining operations in December 2010 and has secured the final permits needed to construct a rare earth manufacturing facility, which is scheduled to open in 2012. A series of events and press reports over the last few months have highlighted the rare earth “crisis,” as some refer to it. Policymakers are concerned with the nearly total U.S. dependence on China for rare earth elements, including oxides, phosphors, metals, alloys, and magnets, and its implications for U.S. national security. The criticality and reliability of the rare earth element supply chain cuts across the manufacturing, defense, and science and technology sectors of the global economy. Some Members of Congress support development of a domestic source for rare earth elements. They view a reliable domestic supply chain as critical to maintaining existing and acquiring new defense weapons systems. Other policymakers see the existence of alternative
sources for rare earth elements outside of China as a possible solution to mitigate a lack of domestic mining and manufacturing capability.
 
Yet the “crisis” for many policymakers is not that China has cut its rare earth exports and appears to be restricting the world’s access to rare earths, but that the United States has lost its domestic capacity to produce strategic and critical materials. The Department of Defense (DOD) is examining whether there is a supply chain vulnerability issue. DOD estimates that the United States uses about 5% of the world’s production of rare earths for defense purposes. Congress awaits the release of the overdue assessment by DOD of the rare earth supply chain. In addition to the previously required DOD assessment, Congress has also mandated that the Secretary of Defense, pursuant to the Ike Skelton National Defense Authorization Act for Fiscal Year 2011 (P.L. 111-383), conduct a new assessment of the rare earth supply chain issues and develop a plan to address any supply chain vulnerabilities.
 
There are important questions with only partial answers at the present time. Given congressional interests in rare earths, Congress may use its oversight role to seek more complete answers to the following important questions:
 
• Is there a rare earth material vulnerability that will impact national security?
• Are there substitutes for rare earths that are economic, efficient, and available?
• What short-term and long-term options might DOD consider in response to a lack of domestic production and China’s continued dominance in this area?

In addition to requiring DOD to assess rare earth supply chain vulnerability issues, Congress may want to consider alternatives including
• development of a domestic rare earths stockpile;
• government investment in rare earths production, including various aspects of its supply chain; and
• partnering with foreign allies to diversify rare earth sources and decrease dependence on China.
 
Congress may encourage DOD to develop a collaborative, long-term, well-thought-out strategy designed to identify any material weaknesses and vulnerabilities associated with rare earths and to protect the long-term national security interests of the United States.

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Related articles: 

Congressional Research Service, “China’s Rare Earth Industry and Export Regime: Economic and Trade Implications for the United States,” April 30, 2012 

US-China Economic and Security Review Commission, “China’s Rare Earths Industry and its Role in the International Market,” Nov. 3, 2010