The Future Of EVs Depend On Rare Earths. Should The U.S. Still Delegate To China?

Electric vehicles have traversed harsh road conditions, but they are still far from their final destination. At issue are the rare earths that go into making the electric motor — minerals primarily controlled by China. The question for Western policymakers is whether to ease the rules to mine for those elements or to continue to rely on China, which is quickly industrializing and which is also the fastest-growing EV market.

The United States mined rare earths from the 1960s through the 1980s at a single mine in California. But this country defaulted to China because of its cheap labor cost — and the environmental footprint left behind. Rare earths contain 17 minerals that must be separated, which is a dirty and labor-intensive effort. Beyond China, Australia, Brazil, and Canada produce rare earths. Given that the United States wants more EVs on the road, should it pursue more rare earths mining?

“We cannot stop mining,” says Luisa Moreno, president of Defense Metals Corp. that explores for rare earths, in a talk with this writer. “Our way of life depends on advanced materials — from the car we drive to the buildings that house us. We need these advanced materials. We need to educate the people that mining is no longer irresponsible or compromised. Most companies are adopting environmental, social, and governance standards. They are working with environmentalists and engineers to ensure that the mining is cleaner and safer.” 

China mines 63% of the rare earths today: 140,000 tons of the 240,000 tons that is globally developed. China used to mine 90% of all such minerals. But it nevertheless controls 85% of the processing — the effort made to separate the 17 minerals from the rare earth rock. Consider that the United States still produces 38,000 tons. But that is sent to China for processing. 

At the same time, China has consolidated three of its state-owned rare earth companies into one enterprise: China Minmetals Rare Earth Co., which also uses the minerals for smart phones, TVs, and fighter jets. Those elements had flown under the radar. But China implicitly threatened to use them as a weapon against the United States during the tariff war started by the Trump Administration. 

Dr. Moreno says that the demand for rare earths will more than double by mid-century to 500,000 tons — once the EVs start to roll out en masse. Even more powerful, those same minerals are used in windmills, electrolyzers, and transmission lines that are also needed to hit net-zero goals. 

Prime the Pump

Policymakers understand the dilemma: the European Union is phasing out the internal combustion engine by 2040, while the Biden Administration wants half of all U.S.-sold vehicles to run on electricity by 2030. If electricity can replace gasoline, that would help countries meet their climate goals. 

In the United States, General Motors, Ford Motor Co., and Stellantis support President Biden’s initiative. In Europe, policymakers have approved granting $3.5 billion under the European Battery Innovation project to move away from fossil fuels — something that includes developing rare earths. Among the companies in line to get funding are Fiat Chrysler, BMW, and Tesla, along with Arkema, Borealis, Enel X, Solvay, and Sunlight Systems. 

“It is important for the government to be more supportive of these critical materials,” says Defense Metals’ Moreno. “It takes a long time to bring mines into production, and demand is fast approaching. The other thing is education — to impart to the public that we have to mine these advanced materials if we are to go greener. It can be done responsibly. When the public supports this movement, the financial markets will understand the value proposition.” 

EVs comprise 2% of the global car market. The U.S. Energy Information Administration projects passenger vehicles, fleets, and smaller trucks that use both electricity and gas to grow from 1.31 billion vehicles in 2020 to 2.21 billion by 2050. It estimates that hybrids will make up 34% of cars in developed countries and 28% in emerging economies by 2050.

The Tire Track

But can the United States wean itself from China’s rare earths? The Biden Administration’s push to reduce U.S. reliance on Chinese imports has renewed domestic efforts to produce rare earths minerals — something that has spawned legislation to curb such imports as it relates to the defense sector. But any such laws will be hard to pass here, mainly because a more liberal-leaning Congress would oppose any domestic expansion of mining. 

The International Energy Agency says that EVs use six-times more minerals than do those that run on the internal combustion engine. But it adds that, globally, there is no shortage of rare earth elements. Implicit in its analysis is that the mining techniques must become best-in-class.

Under the best of circumstances, it would take the United States many years to catch up with China. According to the U.S. Geological Survey, it accounts for the preponderance of global production and 40% of its reserves. 

Moreover, China plans to build 6 million EVs by 2023, which would necessitate 30,000 tons of rare earths, says Research and Markets. How will it impact EVs?

“The demand for rare earths will continue, and if we do not develop these projects, China will likely acquire assets in South America and Africa,” says Dr. Moreno. “It not only wants to control production but also where they export, how much, and when. The European Union gives aid to companies because it helps advance the green technology agenda.” 

The international economy is so interwoven that it would be hard for China to weaponize rare earths or hoard them for internal use. But that does not obviate the need to diversify suppliers and minimize the political risks. While it is unlikely that the United States will start mining those minerals, Washington can still create incentives similar to the European Battery Innovation project — to improve environmental performance in all segments of the EV value chain.

See Also:

— The Argument Against EVs is Shallow

— The Trucking Sector is Going Electric

— Tesla: Recycling Batteries is Key

— Automakers Lay Out Map to Expand Chargers

— EO Charging Targets Fleets

— China’s EVs Try to Outrun the Competition