U.S. Sleepwalks into Rare-Earths Crisis as China Tightens Grip
The United States is facing a rare-earths crisis, with top economist Jeremy Siegel warning that the country's lack of preparation has left it vulnerable to China's tightening grip on the critical minerals used in advanced technologies.
According to data from the U.S. Geological Survey, China controls 90% of the world's refining capacity for rare earth elements (REEs), which are essential components in high-tech products such as smartphones, laptops, and renewable energy systems. The country's dominance has been further solidified by Beijing's recent announcement of sweeping new export controls that require companies worldwide to seek Chinese approval before shipping REEs.
Siegel, a Wharton finance professor and author known for his work on long-term stock market returns, called the U.S. lack of preparedness "scandalous" and a major security failure. He urged the country to build a rare earth strategic reserve similar to the Strategic Petroleum Reserve, which was created in 1975 after the Arab oil embargo left the United States exposed to geopolitical blackmail.
Market Implications
The rare-earths crisis has significant implications for U.S. businesses and consumers. The country's reliance on China for REEs makes it vulnerable to supply chain disruptions and price volatility. A study by the Rhodium Group estimates that a 10% reduction in global REE production could lead to a $1.5 billion increase in costs for U.S. companies.
Stakeholder Perspectives
Industry experts warn that the crisis has far-reaching consequences beyond just economic impacts. "The lack of rare earths is not just an economic issue, but also a national security concern," said Dr. Michael Silver, a materials scientist at the University of California, Los Angeles. "China's control over REEs gives them significant leverage in global trade and politics."
Future Outlook
As the crisis deepens, stakeholders are calling for urgent action to address the U.S.'s rare earth vulnerabilities. Siegel recommends that the country invest in building a strategic reserve of REEs, which would provide a buffer against supply chain disruptions and price volatility.
In response to Beijing's export controls, some companies are exploring alternative sources of REEs, such as recycling or developing new extraction technologies. However, experts warn that these alternatives will take time to develop and may not be sufficient to meet current demand.
Next Steps
As the rare-earths crisis unfolds, policymakers and industry leaders must work together to address the U.S.'s vulnerabilities. This includes investing in a strategic reserve of REEs, promoting domestic extraction and recycling, and developing new technologies to reduce dependence on China's supply chain.
In conclusion, the rare-earths crisis highlights the need for the United States to take proactive steps to secure its access to critical minerals used in advanced technologies. By building a strategic reserve and investing in alternative sources of REEs, the country can mitigate the risks associated with China's tightening grip on the global market.
*Financial data compiled from Fortune reporting.*
