Twenty years ago, there were very few cell phones in use, but the number has risen to over 7 billion today. Other devices such as computer memory, camera lenses, rechargeable batteries, magnets, fluorescent lighting and much more are all made of rare earth metals.
Many people do not realise the enormous impact rare earth elements have on their daily lives, but it is almost impossible to avoid a piece of modern technology that does not contain any. Even a product as simple as a lighter flint contains rare earth elements. Because of their unique magnetic, luminescent, and electrochemical properties, these elements help make many technologies run with reduced weight, reduced emissions, and energy consumption.
China produces more than 80 percent of the world’s supply of rare earth metals, according to statistics compiled by the United States Geological Survey. “This is a leverage point for China,” said Northeastern University’s professor of International Business and Strategy, Ravi Ramamurti. China’s monopoly allowed it to raise prices by hundreds of percent for various rare earth materials from 2009 to 2011 and to impose export quotas on many of these products.
For the U.S., who in comparison produce zero percent of rare earth metals, it leads to complete dependence on China. A trade war could prompt China to cut off supplies of rare earth metals to American manufacturers. Although China has not overtly threatened to retaliate in a trade war by limiting the supply of rare earth metals, it has already demonstrated its ability to do so in the past. In 2010, the Chinese increased the prices of the metals by almost 700 percent in less than two years and it was effective in letting the world know the power they held. As a result, the prices dropped to the 2009 levels.
China, who might seem to be enjoying the monopoly, has also heavily invested in mining and processing technology. Ramamurti says that the key to China’s market dominance is the complete economic ecosystem it has built around rare earth metals. “Reducing our dependence on China does not involve a single product or resource, so you can’t simply buy it somewhere else,” he said. “They monopolize the whole ecosystem of supply, production, and workers. To move elsewhere you would have to replicate that entire ecosystem.”