Tens of thousands of drivers travel the same path between Los Angeles and Las Vegas every day, snaking along interstate highway and historic stretches of Route 66 through sunbaked desert before eventually, and probably unknowingly, speeding past one of the most important strategic reserves in the world.
Particularly now.
America’s only operational rare-earths mine is located next to Interstate 15 in Mountain Pass, California, not far from the Nevada border. It sat dormant for years before being acquired out of bankruptcy and restarting production in 2017. Related refining and manufacturing are also now at an early stage, rehabilitating a nascent domestic supply chain at portentous geopolitical moment.
Rare earths, once mostly a curiosity but now crucial for everything from computer chips to aircraft engines, are something the US needs badly. But like most countries, it tends to get them from China.
That dependence recently threw a spanner into an already-fraught reworking of trade relations between the world’s two biggest economies – a negotiation with global implications.
Rare earths provide timely fodder for an eternal question: if something is so important to have, why not just produce it on your own?
They aren’t actually all that rare, but the extensive investment, equipment, technical skills, and regulatory approval required to churn out rare earths in bulk, not to mention the risk of potentially significant environmental damage, can render a seemingly straightforward task unworkable. No matter how short-sighted that seems in retrospect.
The world is rife with examples of countries that forsook industries in favor of offshoring, only to change their minds at least to some degree. There’s a strong desire to restore a UK clothing and textile sector that played a prominent role in the Industrial Revolution; Australia wants to bring back forward-looking aspects of a domestic auto industry that collapsed; and Japan is spending trillions of yen to revitalize domestic semiconductor production.
In all of these cases, considerations of cost, cleanliness, and efficiency factored into a conclusion that it would be better to let someone else make things and then import the results. It’s not a coincidence that a subsequent change of heart has intensified in an era of fragmented trade relations and protectionist politics.
From colour TVs to EVs: how rare earths powered a new industrial age
The story of the rare-earths mine in Mountain Pass, California begins with the tongue-tying Molybdenum Corporation. Founded in 1919, it took its name from a particularly durable metal that it sourced in New Mexico, which turned up in Japanese swords and German cannons before being used to propel rockets.
In 1950, the company bought mining claims in a high-elevation patch of California’s Mojave Desert, after the discovery there of a rare-earth-bearing mineral called bastnaesite. By 1961, it was sponsoring academic research on rare earths. A revelation that one particular variety could enhance the red needed for increasingly popular color televisions triggered a surge in production.
The market had ups and downs over the years. There was a rebranding and an acquisition. When the use of rare earths as catalysts in oil refining waned in the 1980s, so did sales for America's biggest supplier. In 2002, as globalization flourished, the mining at Mountain Pass ground to a halt. There had been documented groundwater contamination. Competing in a global market increasingly dominated by China seemed futile.
At roughly the same time, the other end of the supply chain also exited when a maker of rare-earth magnets in Indiana shifted operations to China. It had been losing $5 million a year, according to its former CEO. Relocating production closer to the necessary raw materials seemed logical.
By 2023, China accounted for more than 69% of global rare-earths production, and about 90% of the finished magnets needed for things like electric vehicles and wind turbines. Demand was elevated and poised to continue growing.
Something else happened in 2023: the new owner of the mine at Mountain Pass started separating the rare earths it had begun extracting there again in 2017, instead of relying on a China-based firm to handle that task – “repatriating a critical national security capability” in the process.
The company’s hiring. A job as a crusher operator is paying as much as $36.80 per hour, or about four times the average mining wage in China. Earlier this year, it began manufacturing rare-earth magnets in Texas.
The number of jobs reshored annually in the US increased 26-fold between 2010 and 2023, according to one estimate. A smaller but consistent appetite for reshoring has been registered in Europe. One survey in Australia found that about half of the manufacturers there intended to reshore operations. But in most advanced economies, the relative value generated by making things continues to recede.
Even China has seen a dip in manufacturing’s contribution to its overall economy. The dynamic seems inseparable from modernizing and improving standards of living. It can feel self-defeating, but so can efforts to bandage it with a surface layer of protectionist policy, in place of the fundamental planning and investment necessary to nourish domestic industries.
Rare earths are a great example of something that may require that kind of planning, investment, and public-private partnership – and will likely always involve some degree of international cooperation. Because while they may be more common than their name indicates, some countries have far more than others.
Viet Nam is currently believed to have nearly twice the reserves as the US, and Australia and India are thought to have at least three times as much. Brazil may have about ten times the reserves. All aim to boost production.
Making the interconnections among these potentially significant suppliers work smoothly, instead of wielding them as leverage, could yield the greatest collective benefits for everyone.
Weform