Spring 2010
A Plan for the North American Rare Earth Value Chain
Ed Richardson - Magnetics Magazine  • Spring 2010, Volume 9, Issue 1, pp. 18-19

For the last year or so, we’ve all heard a lot about the looming rare earth crisis. You can’t attend a conference or forum on metals or magnetic materials and not hear a slew of dire descriptions of the rare earth industry. Clearly, with China dominating every part of the value chain, reestablishing a healthy and sustainable North American rare earth industry won’t be easy. A lot of things have to go right, and they have to happen over the course of many years. A big part of the challenge is just getting started. There are a lot of ideas floating around about how to get the domestic rare earth industry on its feet again. It can be difficult sorting through the hopes, dreams, claims, plans and guesses. Some argue that the free market will take care of the rare earth industry all on its own, and that we really have nothing to worry about. Pardon me, but I have my doubts. Rather than hoping that China takes care of us, I suggest we take matters into our own hands. In order to do this, we need a plan. A plan that takes into consideration the entire value chain. This is the only way we can solve the entire domestic value chain problem.

 Jeff Green, a leading consultant in Washington DC, has a plan.  It’s a plan that is endorsed by the USMMA (United States Magnetic Materials Association). It includes six steps:

1. Establish a data baseline. This part of the plan includes studies by affected government agencies to establish a data baseline. Since most of the current industry data comes from a limited number of sources, the current data is prone to errors and manipulation. The focus of the new studies will be on rare earth usage and dependence, plus any economic or national security issues that result. In addition, the studies will include an action plan to restore specific holes in the domestic supply-chain. These action plans will include mining, refining, alloying and manufacturing.

2. Obtain the raw materials necessary to resume defense-critical rare earth manufacturing in the face of a pending worldwide shortage. This part of the plan includes a program whereby the Defense National Stockpile purchases existing rare earth supplies on the open market in order to create a reserve inventory. This could ultimately be used to support the US Government’s critical needs while the domestic supply chain is rebuilt over the next five years.

3. Government initiated action to ensure fair trade. A government initiated action to investigate potential foreign government market manipulation or dumping in the rare earth market, as a means of leveling the playing field for domestic competitors. This would include investigations into subsidies, price controls, export quotas and other intentional market interference.

4. Investment in a globally competitive rare earth supply-chain. Restarting the domestic rare earth industry won’t happen by accident. The industry will need assistance in order to overcome the Chines dominance. This assistance will come in the form of direct aid: a $2 billion DOE led grant and loan guarantee program to support the reestablishment of mining and refining operations in the US that will support the domestic supply-chain.  This is the most difficult and costly part of the rebuilding effort.  Without federal aid, this part of the value chain will struggle to become operational.

5. Specific focus on defense critical components. Certainly, one of the most critical needs is to make sure the domestic military requirements are fulfilled. A wide range of US weapon systems are now dependent on rare earth components. More are being designed and tested for future deployment. The dependency of our military on rare earth components will undoubtedly grow in the near future. To address this specific need, numerous Defense Production Act programs will be initiated ($10 to 50 million each) to support the establishment of a domestic manufacturing capability in critical segments of the rare earth market.

6. Investment to ensure future innovation. It is not enough to merely catch up with the rest of the world’s rare earth industry. We also need to push technology forward, and once again become a leader in the global industry. This will only occur through targeted research in important development areas. This initiative will promote innovation, training and workforce development to support the rare earth element supply chain by providing base budget funding for academic institutions, government laboratories, companies, non-profits and industry associations.

The beauty of this plan is that it takes into consideration all aspects of the rare earth value chain issue. It gives a clear framework and outline of how to solve the problem. Without a roadmap of this kind, efforts to solve the rare earth issue will likely fall far short.  For instance, a plan to merely restart the mining of rare earths does not address the issue of how to refine and manufacture products out of the ore. Without a domestic market for turning the rare earth oxides into finished products, the mines would have to resort to selling their rare earth materials overseas. This would in effect support foreign manufacturers in their dominance of the domestic market. A viable plan to restart the domestic rare earth industry ultimately needs to enable the domestic economy to be self-sufficient. The six-part plan above fits the bill.

 Ed Richardson is vice president of Sales and Marketing for Thomas & Skinner, Inc., a high performance magnet manufacturer located in Indianapolis, IN. He has more than 15 years of experience in industrial manufacturing and business-to-business marketing. Ed has been widely quoted on the issue of China’s dominance of magnets and rare earth elements in publications such as the Wall Street Journal and US News and World Report. He was also featured in a news segment on the same topic on Dan Rather Reports. Ed has consulted with US Senators, Congressman and the Department of Defense regarding China’s threat to the United State’s strategic interests. He has a B.A. from DePauw University, where he was a Management Fellow, and an M.B.A. from Indiana University’s Kelly School of Business. Ed can be reached at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it