Rare Earth minerals in a museum. [Image: Ismoon / Wikimedia Commons (CC BY-NC-SA 2.0)]

Rare Earth Supply Crunch- Vietnam to the Rescue?

ASEAN China

Rare earth elements are a set of 17 metallic elements (fifteen lanthanides on the periodic table plus scandium and yttrium) that play an important role in the manufacturing of high-tech consumer electronic products such as smartphones. Given the increasing demands for high-tech electronic products, rare earth’s importance has also become more prominent than ever. China currently holds the largest reserve of rare earth in the world with 44 million metric tons, representing nearly 40% of the global reserve. Yet, tapping into the resource is just as important as having it in reserves. China, with 70.6% of total global production, has an absolute advantage in this regard. Furthermore, the country has shown its willingness to use its dominance in rare earth production as a bargaining chip, which could be devastating for the United States.

Indeed, China’s rare earth composed 80% of total United States rare earth imports from 2014 to 2017. The disruption in the supply of rare earth from China, due to diplomatic tensions, could spell trouble not just for consumer electronic companies such as Apple, but also defense companies like Raytheon, and Lockheed Martin. For the latter two, the disruption in rare earth supplies could impact not just the US economy, but also its defense capability.

The United States has one rare earth mine at Mountain Pass, California, currently under the ownership of MP Materials. However, MP Materials exports 50,000 tons of rare earth concentrate to China annually. During the US-China Trade War, China has subjected these imports 25% tariff, exposing the vulnerabilities of United States rare earth supply chain.

Given the trajectory of relations with China, the United States may need to find an alternative source of rare earth. Vietnam, with the second-largest reserve of rare earth (22 million metric tons), could be a possible alternative to China. One problem, however, is its inability to tap into the vast resource at its disposal. By an estimate of the US Geological Survey, Vietnam's production of rare earth barely reached 1,000 metric tons in 2019. To address the problem with production, Vietnam and Japan have established the Rare Earth Research and Technology Transfer Centre, with equipment worth about $5.3 million. The center’s main aim is to create innovations in rare earth acquisition, helping to boost Vietnam’s rate of production. Thanks to this effort, Vietnam had become Japan’s largest rare earth supplier by 2017. Japan has been able to diversify its rare earth supply and move away from its reliance on China.

The United States could gain by following the footstep of its ally, Japan, and help Vietnam’s rare earth production. By doing this, the United States could help itself and its companies by reducing its reliance on Chinese rare earth at a time of diplomatic tension.

Tri Vo is a participant of the Young Professional Program of the East-West Center. He recently graduated from the Elliott School of International Affairs, George Washington University.