Rare earths are crucial to industrial components that surround us on a daily basis and are in any high-tech device. They are strategically relevant at national and international level.
Rare materials are the new gold of modern society, China’s former political leader Deng Xiaoping said in 1992: ¨The middle East has oil. China has rare earths¨. The concept of rare earths groups together 17 chemical elements, metals, from the periodic table. These elements, considered the vitamins of metals, make possible the characteristics of certain industrial components that surround us on a daily basis, especially many of those related to high technology.
These metals have a recognised strategic relevance at national and international level and play a fundamental role in the energy transformation towards renewable energies, in the medical sector, the telecommunications sector and in general are essential and present in any high-tech device, including our mobile phones.
Rare Earths in the Defence Sector
In the defence sector, rare earths enable the development of more efficient, agile, and intelligent military capabilities and combat systems. They are now essential for, to name but a few examples:
- night vision devices
- precision guided weapon systems
- communications equipment
- navigation systems
- batteries
- stealth technology
- drones
- laser target designators
- communication satellites
Alloys, superalloys, and high-performance metals are also used in armoured vehicles and projectiles to make them hard and tough. These rare earth metals and alloys can be found in a stand-alone weapon system or as part of subsystems that form part of a more complex weapon system such as a frigate or fighter aircraft.
In short, it is safe to say that without rare earths, many of our high-performance weapon systems could not be produced. Potential disruptions in the rare earth supply chain would have a serious impact on the defence capabilities of any country with a technologically developed military.
China’s Monopoly on Rare Earths
China has strategically developed a monopoly on the rare earths market since the 1990s. Currently 80 per cent of rare earth metals are produced in China. During 2010, as a result of a territorial dispute on the Japanese island of Senkaku, China suspended shipments of rare earths to Japan.
More recently, in 2020, there was a direct threat from the Chinese Government to three major US defence contractors. Its foreign ministry said it would sanction Lockheed Martin, Boeing and Raytheon for selling arms to Taiwan, the self-ruled island that Beijing claims as its sovereign territory.
This threat ultimately failed to materialise. However, a hypothetical projection of the threat towards Europe suggests that European companies that could indirectly endanger China’s security could be sanctioned. These would be enterprises selling arms to any country or territory which China is in conflict with. They could be sanctioned with limitations or disruptions in their supply of rare earths.
One example, only theoretical, could be the French company Dassault Aviation. Dassault, backed by the French Government, has produced the majority of French fighter aircraft from the second world war to the present day. Dassault sold 36 RAFALE fighter aircraft to India, which are currently under delivery, and plans to sell more in the future. In addition, on 7 June, Dassault signed an agreement to sell another 36 RAFALE aircraft to Indonesia.
Geopolitical Tensions in the Indo-Pacific
China has been engaged in a border dispute with India for years. It also actively claims, through its fishing militia, part of Indonesia’s Exclusive Economic Zone in the Natuna Sea, and at the end of 2019 there was an incident that led to military action.
Following the same logical line of argument that China threatened to sanction by cutting off the supply of rare earths to US companies on national security grounds, it could also target sanctions against Dassault and thus France for selling weaponry to countries that threaten its security or national interests.
Obviously, this example could be extended to other European weapon system manufacturers such as frigate manufacturers which have a growing presence in the Indo-Pacific. This presence in the Indo-Pacific region will possibly be increased in accordance with the ‘EU Strategy for cooperation in the Indo-Pacific’, published in April 2021. It states the EU’s intention: ¨…to cooperate with partners’ navies, and build their capacities where relevant, to establish comprehensive monitoring of maritime security and freedom of navigation, according to international law.¨
Equipment Specifics
Many modern frigates incorporate a total of more than 1.5 tonnes of rare earths but the case of the RAFALE is particularly significant as this aircraft can carry nuclear weapons, constituting, together with the strategic nuclear submarines, a fundamental vector in power projection and a cornerstone of the French national defence strategy based on nuclear deterrence. The dependence of this aircraft on critical materials, including rare earths, is noted. But the EU and its defence enterprises as Dassault are no exception. A Congressional Research Service report of the US said that each F-35 required 417 kg of rare-earth materials.
In its relationship with China and the US, the EU maintains a balancing act between its economic interests on the one hand and its moral values and Western foreign and defence policy on the other. Thus, while the EU’s biggest trade agreement with China to date was signed in December 2020, sanctions against China, arising from its policy towards the Uyghurs minority in the Xinjiang region, were signed only with some months of difference. So far, sanctions have been limited by both sides to the diplomatic sphere without affecting the wider economy. However, as tensions rise, the EU is aligning itself with US foreign and security policy and sanctions could affect other areas such as rare earths and the defence sector.
EU Reliance on Rare Earths
On the other hand, since 2020 the European Commission has officially recognised the dependence of its arms industry on rare earths. According to findings of the European Commission, entitled “European Critical Raw Materials for Strategic Technologies and Sectors” published in 2020.
As clearly stated in this report, rare earths are a key element in the development of EU weapons systems. In the case of the US, this dependence was identified earlier, as seen in the data provided by the National Defence Stockpile Center’s in spring 2010.
European weapon arsenals are largely equipped with weapons systems sourced from our American allies. It is important to note that the US DoD possesses a small stockpile of rare earth metals, which the EU does not possess, and which would allow it to cope with certain supply shortages.
Throughout 2020, the United States, through its Department of Defense, took an initiative aimed directly at sustaining its defence industry through an assured supply of rare earths. Several contracts were awarded in this initiative to the Australian company Lynas Rare Earths Ltd., the largest Rare Earth element mining and processing company outside of China. The most important is the creation of a refinery in Texas, which focuses on undoing the bottleneck strategically created by China downstream in the production chain, precisely on the refining and manufacturing side in order to obtain the metals.
2025 – EU Rare Earths Shortage
The European Union has taken steps to try to secure industrial supplies of rare earths. The Action Plan on critical Raw Materials published in September 2020 includes a European Raw Materials Alliance to bring the main stakeholders (member states, industry, and investors) together and strengthen the EU strategic autonomy. Another focus of this Plan is the encouragement of the research and innovation sector to develop the substitution and recycling of rare earths. However, these measures leave the development of a supply chain in the hands of EU civilian companies of the mining and metallurgy sector.
So far, no specific measures have been produced aimed at securing the supply of rare earths to major European arms manufacturers. For instance, the strategic storage of raw materials, could be a main instrument to bridge a shortage induced by sanctions. Furthermore, the Action Plan reveals a long-term solution but doesn´t provide with a sustainably architecture to react to crises flexibly.
Regardless of whether the European arms industry is exposed to sanctions by China, in the form of rare earth supply cuts, the more real danger is that a rare earth supply shortage will arrive from 2025 onwards, as the European Commission itself points out.
The demand for rare earths worldwide is so growing that China will not be able to supply all markets, possibly prioritising its own. A general lack of supply could have huge repercussions for national and international security, including the security of individuals, as virtually all our technological devices are equipped with them.
Time to React
Developing a complete rare earth supply chain is not achieved in a year or two. A new mine normally takes a minimum of 5 years from the time it is planned, until it becomes operational. Perhaps the time has come for European governments and the EU to take stronger interventionist measures on the market of rare earths and not to leave the problem in the hands of the theoretically ¨efficient¨ market. Therefore, some actions must be taken to guarantee the EU stability and open strategic autonomy as soon as possible:
1. Vertical integration of the value and supply chain of rear earths (and more widely of strategic raw materials) by the EU Commission or the EU nations governments, securing the provision for the defence sector with direct contracting and investment.
2. Governmental protection and support for development of key technologies of recycling and substitution.
3. Building strategic reserves, storing rear earths and other strategic raw materials to flank a predicted shortage.
The scarcity or rare earths is a subject that may at times appear to be purely economic and commercial, but it is essential for and could jeopardise the international security. Its relevance should not be underestimated.