U.S. bill would force defense contractors to stop buying Chinese rare earths

U.S. bill would force defense contractors to stop buying Chinese rare earths

A bipartisan bill introduced in the U.S. Senate on Friday would force defense contractors to stop buying rare earths from China by 2026 and use the Pentagon to create a permanent stockpile of strategic minerals.

The bill was sponsored by Sens. Tom Cotton, an Arkansas Republican and Mark Kelly, an Arizona Democrat, is the latest in a string of U.S. legislation designed to thwart China's near control over the sector.

It essentially uses the Pentagon's purchase of billions of dollars worth of fighter jets, missiles and other weapons to enable contractors to stop relying on China and, by extension, support the revival of U.S. rare earths production.

Rare earths are a group of 17 metals that are used in electric vehicles, weaponry and electronics after being processed. Over the past 30 years, China has slowly grown to control the entire sector, while the United States created the industry in World War II and the U.S. military scientists developed the most widely used type of rare earth magnet.

The United States has only one rare earths mine and no capacity to process rare earth minerals.

Cotton said that the U.S. defense and technology sectors need to be strengthened by ending American dependence on China for rare earths extraction and processing.

The senator, who sits on the Senate's Armed Forces and Intelligence Committees, described China's evolution into the global rare earths leader as simply a policy choice that the United States made, adding that he hoped fresh policies would loosen Beijing's grip.

The bill would make the Pentagon s ongoing stockpiling of the materials a priority as it became known as the Restoring Essential Energy and Security Holdings Onshore for Rare Earths Act of 2022. China temporarily blocked rare earth exports to Japan in 2010 and has issued vague threats that it could do the same to the United States.

The Pentagon buys supplies from China in part to build that reserve, a paradox that Senate staffers hope will abate in time.

The production process of rare earths can be highly pollutive, part of the reason why it grew unpopular in the United States. Ongoing research is attempting to make the process cleaner.

Cotton said he had talked to various U.S. executive agencies about the bill, but he wouldn't say if he had talked with President Joe Biden or the White House.

This is an area in which Congress will lead, because many members have been concerned about this topic, regardless of party, he said.

Most of the nascent U.S. rare earths sector praised the bill, but some worried defense contractors could still ask for waivers to buy Chinese rare earths after 2026.

The Aerospace Industries Association, a trade group for Northrop Grumman Corp., Lockheed Martin Corp. and other U.S. aerospace and defense companies, didn't say anything about the bill.

Marty Weems, North American president of Australia-based American Rare Earths Ltd., said that policies such as this one get us closer to the target of onshoring this critical supply chain.

MP Materials Corp., which operates the only US rare earths mine and relies on Chinese processors, said it appreciated efforts by the Department of Defense and the U.S. government to secure the domestic rare earth supply chain and promote fair and free competition. The sponsors expect to be able to integrate the bill into Pentagon funding legislation later this year, but it doesn't offer any direct support for U.S. rare earths miners or processors.

It requires Pentagon contractors to stop using Chinese rare earths within four years, which makes it impossible for waivers to be granted in rare situations. Defense contractors would have to state where they were getting the minerals.

Cotton said that the requirements should encourage more domestic rare earths development in our country.

The Pentagon grants have been given to companies that are trying to resume U.S. rare earth processing and magnet production, including MP Materials, Australia s Lynas Rare Earth Ltd., TDA Magnetics Inc. and Urban Mining Co.

Kelly, a former astronaut and a member of the Armed Services and Energy Committees, said the bill would strengthen America's position as a global leader in technology by reducing China's reliance on adversaries like the United States for rare earth elements. The bill only applies to weapons, not other equipment that the U.S. military purchases.

The U.S. trade representative would have to investigate whether China is distorting the rare earths market and recommend whether trade sanctions are necessary.

When asked if such a step could be seen as antagonistic to Beijing, Cotton said: "I don't think the answer to Chinese aggression or Chinese threats is to continue to subject ourselves to Chinese threats."