Very useful WSJ report on how China gained control of rare earths processing/ permanent magnet production -- and how it kept control 1/
The Journal goes through past attempts to revive Mountain Pass/ US rare earths production -- including the now forgotten case of Molycorp from 05 to 14 "Beginning around 2005, China’s government tightened the screws, levying export taxes on rare earths that made it costlier for
And in 2021 the Biden administration did make an effort to revive interest in US rare earth production as part of a broader supply chain push -- but it foundered when China flooded the market 3/
What is clear, at least to me, as that digging out of this kind of strategic dependency will take policy -- the unfettered market won't invest in capex heavy sectors where China is the low cost producer and can inundate the market at any time 4/ https://www.wsj.com/economy/tr...
active pharma ingredients/ key chemical precursors is the same -- as likely are battery critical minerals (the US and EU will need to decide if they can rely on China for the batteries used in drones for example at some stage) Hard choices, as success takes time and money 5/
And these are sectors that are unlikely to generate the kind of big returns that gets American investors excited ... but they are equally the kind of activities that are needed for full strategic autonomy in a geopolitically fractured world. 6/6
@Brad_Setser If you need a protected market, just do it. If you want a free market, just do it. Nothing is more hypocritical than preaching free market for decades and then when outcompeted, crying foul and calling for a protectionist economy.
@Brad_Setser Excellent observations, Brad. China didn’t just anticipate, it structured it integrating mining, refining, standards and finance into a single playbook. As we argue in Mining Is Dead. Long Live Geopolitical Mining, the real contest isn’t extraction but midstream control and the
@Brad_Setser @gladstein It's worse than most think! Read this carefully: https://cdn.prod.website-files...
@Brad_Setser Sounds ripe for a good ol' Hamiltonian policy of encouraging domestic manufacturing
@Brad_Setser ... total bs. The US has a whole bunch of heavily subsidized industries. If profit margin was the issue, the president could simply allocate some $ in his budget bills and it would pass without a problem.
@Brad_Setser Good post. Thanks
@Brad_Setser Here are the analysis results. 👇
@Brad_Setser A post on x from Sydney Buyer: Why is the US willing to import rather than build its own plants to refine rare earth elements? Because: For every ton of rare earth produced, 2,000 tons of toxic waste are generated.
@Brad_Setser Those China rare earth companies all high in debt and with low profit margin because of China government policy. With export restrictions sooner or later all of them will have cash flow problem. That's how you kill off China rare earth industry
@Brad_Setser Sounds like a case for tariffs...
@Brad_Setser Wow it's almost like a command economy has a whole host of advantages!