As China consolidates its near-monopoly status in critical minerals and rare earth elements – essential raw materials for the production of numerous high-value items in the technology and defence sectors – Washington’s proposed US$5 billion fund to secure its access to these supply chains may come too late to close the gap, analysts said.
The fund, still under negotiation, would be structured as a joint venture between the US International Development Finance Corporation, a government development finance institution, and the New York-based materials investment firm Orion Resource Partners. Each party would contribute roughly half of the capital, according to the report.
The move is an important statement of intent, he said, but given China’s outsize role in the supply and pricing of critical minerals, the profitability of new entrants into the sector should not be considered a certainty.
“For any attempt to break that chokehold, there has to be a separate conversation around whether these operations can be viable against intense Chinese competition.”
China’s dominance in rare earth elements – it accounts for about 60 per cent of global supply and roughly 90 per cent of the world’s refining capacity – has become a major bargaining chip in its protracted trade dispute with the US.
“The US has been vulnerable to disruptions in rare earth supply for some time. As trade tensions bubble, this threat has been thrust into the spotlight,” said Harry Murphy Cruise, head of global trade at Oxford Economics.
“These are all worthy efforts, but it will be difficult to catch up to China given its decade-long head start.”
“Both the US and China are racing to de-risk those supply chains that are essential for their economic and national security, so a move like this was a matter of when, not if,” said Alfredo Montufar-Helu, managing director at Ankura Consulting’s GreenPoint Business.
“However, true independence in rare earths comes from mastering the entire industrial process, from the mine to the magnet,” he said. “Building this capability will take time and sustained effort.”
During a press briefing in Beijing on Tuesday, Adam Smith, the senior Democrat on the House of Representatives’ Armed Services Committee, said the rare earths issue remains unresolved.
“I think that still needs to be worked on,” said Smith, who is leading the US’ first House delegation to China since 2019.
https://www.scmp.com/economy/article/3326696/rumoured-us-rare-earth-fund-coming-too-late-catch-china