POLITICAL ECONOMY

Congress should motivate DOD to address U.S. REE issues-CSR Report

The Department of Defense may need prodding by Congress to define REE supply shortages important to national security, as well as projecting possible REE shortfalls in U.S. manufacturing supply chains.

RENO (MINEWEB) - 

A Congressional Research Service report on rare earth elements suggests the U.S. Defense Department has yet to fully appreciate the severity of the potential impacts a lack of domestic rare earths may have on U.S. weapon systems.

Meanwhile, CSR warns the country's manufacturing supply chain is even more vulnerable to disruptions stemming from a lack of domestic U.S. sources of rare earth metals.

In the CSR report, Valerie Bailey Grasso, a defense acquisition specialist, urges Congress to get answers to four important questions on rare earth elements including:

(1)Are rare earth elements essential to U.S. national security?

(2) How would the scarcity of rare earths affect the delivery or performance of defense weapon systems?

(3) Is the United States vulnerable to supply disruptions, and if so, are there readily available and equally effective substitutes?

4) What are the short-term and long-terms options that the Department of Defense may consider in response to a lack of domestic rare earth element production and China's continued dominance?

On March 7, 2012, the DOD released a seven-page report, Assessment of Rare Earth Materials Supply Chain, which concluded that although rare earth materials are "widely used within the defense industrial base...such end uses represent a small fraction of U.S. consumption."

"As a result, when looked at in isolation, the growing U.S. supply of these materials is increasingly capable of meeting the consumption of the defense industrial base," suggested the Under Secretary of Defense for Acquisition, Technology and Logistics in the DOD report.

Although the DOD declined Mineweb's request for a copy of the report nearly 10 days ago, Mineweb was able to obtain the document from non-governmental sources.

"Over the past year there have been a number of positive developments with regard to both supply and demand within these the rare earths materials markets," the report stressed. "Reactions to market forces have resulted in positive developments, such as prices decreasing by half from their peak levels in July 2011, increased investment and domestic supply of rare earth materials, corporate restructuring with the supply chain, and lower forecasts for non-Chinese consumption."

"By 2015, the Department believes this will help to stabilize overall markets and improve the availability of rare earth materials," the report advised.

Nonetheless, DOD said it remains committed to diversification of REE supply, pursuit of substitutes, and a focus on reclamation of waste as part of a larger U.S. government recycling effort. "In addition to the many positive developments that indicate an increasingly diverse and robust domestic and global supply chain for rare earth materials, the Department will continue to monitor these supply chains, prepare possible contingency plans for ensuring their availability, and implement such plans as appropriate."

However, the Congressional Research Service report disagrees with some of the assertions contained in the DOD document. The CSR asserts "the United States almost entirely lacks the refining, fabricating, metal-making, alloying, and magnet manufacturing capacity to process rare earths." The report highlights one U.S. company, Electron Energy Corporation, which manufactures SmCo permanent magnets, now using rare earths for which there is no U.S. production.

Among the elements needed to produce NeFeB rare earth magnets are small amounts of dysprosium and possibly terbium, the CSR observes. "Currently, dysprosium and terbium are only available from China."

"Clearly, rare earth supply limitations present a serious vulnerability to our national security," the Congressional Research Service noted. "Yet early indications are that the DOD has dismissed the severity of the situation to date."

The CRS report suggests Congress consider both short-range and long-range options for securing a source for rare earth elements as part of its oversight role in addressing U.S. national security interests.

Among the actions Congress could take are meeting with defense suppliers at all tiers of the supply chain "to ascertain their knowledge of material shortages and bottlenecks."

Congress could also require the DOD to convene the Strategic Materials Protection Board to define more rare earth elements as strategic to national security, the report advises. So far, the SMPB has only defined one rare earth element, beryllium as strategic to national security.

The report also suggests that Congress consider requiring a strategic rare earth element stockpile to increase the security of the U.S. domestic rare earths supply. "Congress may consider compiling a ‘virtual' stockpile database, with commitments and contracts with suppliers to buy the items when needed."

Other recommendations for congressional action contained in the report include: federal funding of downstream supply capacity where material shortfalls exist; and federal funding of rare earth application sciences in curriculums for military and other government institutes or in national research and development centers.

Should the DOD determine that rare earths fall into the classification of critical materials, CSR advises Congress could institute a new Critical Materials Program.

Finally, the report suggests, "Congress may encourage DOD to pursue joint ventures with other nations, as many other nations are seeking alternatives to a near total dependence on rare earths from China. However, the CRS advises, "It is critical for DOD to consider the implications of sourcing utilized by these partner nations. For example, if DOD relies on a partner nation for its rare earth metals, and that nation procures their oxides from China, this partnership may not provide the requisite security of supply."

iPad Version: Picture - A worker at the a smelting workshop prepares to pour the rare earth metal Lanthanum into a mould near the town of Damao in China's Inner Mongolia Autonomous Region: REUTERS/David Gray