Sunday, April 24, 2011

Rare Earth Elements in Defense Systems

By Michael Montgomery—Exclusive to Rare Earth Investing News

Over the course of past year, Chinese regulations that dominate the rare earth market have uncovered vulnerability in the vast power of the US military. The US is lacking in domestic supply chain of metals critical to high tech weapon systems; without these technological wonders, modern warfare would be impossible. Until the 1980’s the US was a dominant producer of rare earth elements. This was until the Chinese, with little regard for environmental protections, and low production costs, became a primary producer or rare earth elements. Currently, China’s rare earth production accounts for approximately 97 percent of the world’s supply.
The domestic US market switched the sourcing of these metals to China for they were far cheaper, and in seemingly unlimited supply. Mines like Molycorp’s Mt. Pass mine in California, closed down, and the North American supply chain of rare earths disappeared. However, with the explosion of high tech goods that are reliant on the various REE’s demand started rising, as did the negative effects of low cost production in China. China seized the moment and started cutting down on production and export quotas, and prices assumed their meteoric trajectory. This is where the US military finds itself today, dependent on the world’s next superpower to create the raw material for the US military domination. It’s a tricky balancing act. Interesting article here

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