Scarce Strategic Mineral Alternative Sourcing Likely To Leave US Supply Chain At Risk Over Next 3-5 Years

Key Findings:
Due to lack of alternative strategic mineral sources, susceptibility to supply chain vulnerabilities likely to persist in next 3-5 years:

The biggest risk the US faces is likely supply chain vulnerabilities:

• US imports 80 percent of all strategic minerals.
• US imports 28.4 percent of strategic minerals from China.
• Strategic minerals highly likely to remain essential for key industries, including defense, electronics and energy.
• National mining likely presents opportunity to reduce import dependence.
• One US company currently pursuing strategic mineral mining in the Arctic.
• Legislation to quicken mine opening unlikely to pass Congress.

Arctic likely opportunity to reduce dependence:

• US abuts Arctic region, allowing for undisputed access to resources.
• US federal government issued call to explore Arctic region for strategic minerals.
• China is likely to continue expanding its mining operations outside its mainland to include Africa and the Arctic.
• Greenland, with growing access due to ice shelf melt, is likely an opportunity for domestic mining; however, little is being pursued presently.

Law enforcement highly likely most at risk:

• Dependent on businesses and federal government for critical supplies, making its supply chain likely at high risk for potential disruptions.
• State-by-state legislation likely impedes proactive, unified response to supply chain risk.
• Metal theft likely to remain top strategic mineral priority for law enforcement.

About This Document:

The eleven students of the Collaborative Intelligence class assembled this document. Students researched and analyzed findings over the 2012 autumn term at Mercyhurst University. The class split into three teams with each team responsible for a specific topic. Four students were assigned to research national security issues, four were assigned to research business issues, and three students were assigned to research law enforcement issues. All three teams were tasked to answer the following question: “What are the likely US national security, business and law enforcement implications over the next 3-5 years of trends in critical or strategic minerals?” Teams collaborated to establish definitions and create a list of “critical strategic minerals.”

 

This report identifies the following as critical and strategic minerals for US national security, businesses, and law enforcement:

• Antimony
• Aragonite
• Arsenic (trioxide)
• Asbestos
• Barite
• Bismuth
• Calcite
• Cesium
• Chalcocite
• Chalcopyrite
• Chromium
• Cobalt
• Copper
• Gallium
• Germanium
• Gold
• Indium
• Iodine
• Lithium
• Magnesium metal
• Manganese
• Nickel
• Niobium
• Nitrogen (fixed),
• ammonia
• Peat
• Perlite
• Phosphate rock
• Platinum-group metals
• Potash
• Quartz crystal
• (industrial)
• Rare earth elements
• Rhenium
• Rubidium
• Scrap
• Selenium
• Strontium
• Tantalum
• Tellurium
• Thallium
• Thorium
• Tungsten
• Vanadium

Overall analytic confidence is moderate. All groups agreed on moderate analytic confidence for each set of group findings. Source reliability varied from medium to high, and sources could be successfully corroborated.

This book is a summary of a ten-week graduate class examining strategic mineral use and implications for US business, national security, and law enforcement. The project is the culmination of the research, along with the estimative findings, of the 11 second-year Intelligence Studies, Collaborative Intelligence (INTL 650) class in the Fall, 2012. It can be viewed and/or downloaded as a PDF from the link below. Scarce Strategic Mineral Alternatives Likely To Leave US Supply Chain At Risk Over Next 3-5 Years

US Far Behind in Race for Arctic Assets

The United States is not look at the Arctic as an investment

BARROW, ALASKA (GLOBALPOST) - The melting of the Arctic has opened up the potential to access oil and minerals beneath the floor of the Arctic Ocean.  Economists are predicting that there could be trillions of dollars in profit in the coming decades.  Alaska Lt. Governor Mead Treadwill believes the United States in not even in competition for the race for oil and minerals in the Arctic.   Despite the profits and opportunities in the Arctic, American administrators are not utilizing the Arctic's potential.  Many international observes believe the US is failing to understand the need and importance to establish itself as a leader in the Arctic.  It will take a long time for the United States to become as active as China and Russia in the Arctic.  The US Coast Guard does not have the resources for the shipping surge or oil exploration, including ice cutters.    Source: US Far Behind in Race for Arctic Assets (Reliability: Medium)

Comments:  The ice in the Arctic Ocean has shrank to an all-time low this year due to man-made global warming.  

Arctic Region Rich In Resources, Lacking In Framework

The arctic region.

MADRID (Eurasia Review)--Arctic ice has receded more over the past decade than at any other point in history, with summer ice melts making more areas accessible than ever before. The newly-accessible areas of the Arctic hold huge amounts of oil and gas as well as massive stock of high quality gold, diamond, plutonium and other rare earth minerals. A recent CSIS study found that although some Arctic countries (such as Russia) have claimed to support international cooperation in the Arctic, they have bolstered their military presence in the region. Since the region lacks any coherent framework to address international interests and concerns, it remains a potential flash point for all countries bordering the Arctic or with interests there. Source: Restructuring Arctic Stability And Global Security - Analysis (Reliability: Medium)

Comments: With even non-Arctic groups ranging from the EU to China expressing interest in exploiting Arctic resources, Arctic countries such as the US must act quickly if they are to protect their interests in strategic minerals, oil, gas, and even fishing.

Great Western Minerals Group To Conduct Yttrium Oxide Assessment for DoD

MICHIGAN (PROACTIVE INVESTORS) - The US Department of Defense announced on 1 October 2012 that it has chosen Great Western Minerals Group's (GWMG) rare earth processing subsidiary, Great Western Technologies of Troy, Michigan, to conduct a supply chain assessment for high purity yttrium oxide.

Yttrium Oxide (Y2O3)

Almost all high-purity yttria is currently produced in China. The DoD uses yttrium oxide in several defense applications such as polishing compounds for precision lasers and thermal barrier coatings for jet engines. The DoD has projected an annual shortfall of 93 short tons of elemental yttrium from domestic sources by 2013.

"We intend to advance previous Department of Defense research to uncover the extent to which the defense industrial base has the capacity to produce high-purity yttrium oxide to support critical defense programs," interim GWMG chief executive Robert Quinn said in a release. Source: Great Western Minerals to conduct yttrium oxide purification assessment for U.S. Department of Defense.
(Reliability: Moderate)

Comments: Since China produces nearly 95 percent of the world's rare earths, and since there are not effective substitutes for yttrium, finding domestic sources for mining and production is likely to become more important to national defense security. The use of yttrium as a component in phosphors and electronics is especially important to US economics and defense applications.

Mineral Trade War Looms In East Asia

The Senkaku/Diaoyu Islands dispute
is a continuing source of tension
between Japan and China.

NEW SOUTH WALES, AUSTRALIA (THE AUSTRALIAN)--Due to the recent flare-up of a territory dispute between China and Japan, China is reportedly planning to halt all rare earth sales to Japan. Japanese companies are scrambling to find alternate sources, which shows in recent deals with companies like Lynas Corp and Alkane Resources. Unfortunately these sources have lower concentrations of  heavy rare earths such as dysprosium and neodymium that Japanese companies require to make everything from wind turbines to handheld electronics. In light of China's recent attempts to corner the global gold market, experts are also keeping watch on gold prices. Source: Rare earths a victim of Japan-China islands spat (Reliability: Medium)

Comment: China enacted a similar rare earth embargo on Japan in 2010, causing the price of some rare metals to more than triple. Two years later but still with few alternate sources for the heavy rare earth metals, Japan again faces potential shortages. Alkane Resources' Dubbo Project does contain heavy rare earths, but since Japanese companies will be required to process the metals in Japan it will almost certainly take a few years to develop before it significantly affects global prices.

Price of Gold Soars as Investors Seek Safe Haven

People are investing more in gold because of the increased price.

AUSTRALIA (ABC NEWS) -   For most of this year, the price of gold has been around it's all time high of USD 1700 an ounce and is predicted to rise to USD 2000 in 2013.  Sources claim economic problems in the United States and Europe are causing the increase in the price of gold.  Gold is becoming a safe investment against market volatility due to the economic stimulus measures by the U.S. and Europe according to financial advisor Jordan Eliseo.  Analysts are predicting mergers and take-over bids to increase because gold miners are undervalued compared to the price of gold.  Countries are also starting to stockpile gold in order to build up their reserve currency during the tough economic times.  China in particular is a government that is known to stockpile bulk commodities and industrial related metals.  Analysts suggest this is the time to start investing in gold.       Source:  Price of Gold Soars as Investors Seek Safe Haven (Reliability: High)

Comments:  Before gold, iron ore was in the focus of Western Australia's mines.  Due to the economic times, more and more people are beginning to invest in gold instead. 

China Pursuing Arctic Mineral Riches

NUUK, GREENLAND (New York Times)--Although China does not currently hold any Arctic territories, it is deploying its wealth and diplomatic clout to secure a foothold. The country sees its involvement as important so that it is not shut out of mineral and shipping decisions. The Arctic region has risen rapidly on the country's foreign policy agenda: this year alone diplomats have visited Denmark, Sweden, Iceland, and also Greenland, where Chinese companies are investing to create a mining industry. Retreating of Greenland's ice cap has made accessible deposits of many valuable minerals; so far there has been little exploitation of Arctic resources. Greenland's proximity to the US is also of concern to American officials, who have accordingly stepped up diplomatic efforts with Arctic countries. Source: China Joins Nations Seeking Treasure in Warming Arctic (Reliability: High)

Comment: If China is successful in establishing a significant presence in the Arctic region, the supply of critical minerals such as cobalt and rare earth minerals, over which China already holds considerable control, will almost certainly become more skewed in favor of the Chinese. Furthermore, in light of the recent flare-up of the Senkaku (Diaoyu) Islands dispute with Japan, China will highly likely double its efforts to gain Arctic territory, and its scramble for Arctic territory will likely be a source of diplomatic tensions among prominent nations.

Despite International Research, Thorium Fluctuations Unlikely To Threaten U.S. Nuclear Power Supply Over Next 3 To 5 Years

Executive Summary:
It is unlikely that thorium will threaten United States national security by way of critical infrastructure over the next three to five years. Key factors include lack of advantages over uranium nuclear power, minimal domestic demand, and the abundant thorium reserves in the U.S.

Discussion:

Countries such as India and China are
conducting research with molten salt
reactors, technology the US developed
over 40 years ago.

Thorium nuclear power is not significantly better than uranium power. Solid thorium reactors are comparable to uranium reactors in terms of waste, vulnerability, and efficiency. Numerous countries are currently conducting research on molten salt reactors using thorium, but these reactors lack real-world testing and are not commercially ready. Although the molten salt method poses advantages over traditional systems, the U.S. has discarded it. Experts say that proponents overstate the advantages, suggesting a switch to thorium nuclear power is not economically viable.

Thorium currently is of limited value to the U.S.  In 2009, the U.S. spent USD 150,000 on thorium imports, suggesting there is little interest in using the mineral. Thorium nuclear reactors create no weapons-grade byproducts, and thorium is less versatile than uranium. 

Experts estimate that the U.S. holds 8 percent of the world’s total thorium reserves. The U.S. has two high-grade thorium resources in the west. More than ten states also have reserves of a lower grade content of thorium. These deposits are highly exploitable if needed and cover 13 separate regions of the country.

Analytic Confidence:
Analytic confidence for this assessment is medium. Source reliability ranges from medium to high. Sources could be corroborated. Analysts were of low expertise and worked as a team of two. The subject is highly complex. Time available for the task was adequate.

Methods And Processes:
Analysts communicated via Gmail and Google Docs to share independently collected sources, information, ideas, and to create the document. Analysts continued to develop and refine the document  as they found more information.

With Google Docs, it was extremely easy to seamlessly alter the document, improving it and shaping it as the analysts proceeded in research. As analysts discovered further information, analysts were forced to reassess the original scope. The Google Docs chat and comment functions were of great use in facilitating easier communication.

Authors:
Sara Marinello (email - Google+)
Laura Suprock (email - Google+)

China To Reduce Rare Earth Mining Permits By 40 Percent

According to MIT, China controls 97
percent of Rare Earth production

CHINA (CD) -- In its latest effort to curb excessive mining, the Ministry of Land and Resources, a major regulator of China's rare earth industry, cut its issuance of mining permits for the industry. On 13 September 2012,  the ministry issued a statement that it reduced the number of Rare earth mining permits from 113 to 67, or 40 percent less. Ganzhou Rare Earth Mineral Industry Co Ltd, a major conglomerate of rare earth miners, saw its number of permits reduced by half, from 88 to 44.  A white paper released by the Chinese State Council last month said that the amount of rare earth metals exported from China in 2011 was 2.2 times higher than the official amount recorded by Chinese Customs. Source: Rare earth mining permits reduced by 40% (Reliability: Medium)

Comment: Industry experts say the reduction of permits is unlikely to effect actual mining production as illegal mining operations are prevalent in the industry.

China To Stockpile Germanium

Major end uses for germanium include applications
in optics, polymerization, and electronics.

HONG KONG (Reuters)--According to the Fanya Metal Exchange, the Chinese state buyer has sent purchase notices to China's four leading producers of germanium, Yunnan Germanium, Yunnan Chihong Zinc & Germanium, Shenzhen Zhongjin Lingnan Nonfemet, and China Germanium Company Ltd. Fanya has no information on how much the state buyer will purchase, or when. Sources claim that a deal in June between Yunnan Germanium and energy company Hanergy tightened international supply, and experts predict that state purchases will drive the prices up further. Source: China's state buyer to stockpile germanium (Reliability: High)

Comment: Although substitutes exist in optics and electronics, germanium remains the most economic and efficient choice. If the Chinese government's purchases of germanium are significantly large, the price of germanium in international markets will almost certainly rise, causing a ripple effect in relevant industries.

India To Increase Rare-Earth Mineral Production

India is estimated to have the third largest rare-earth mineral
reserves in the world, but current does very little production.

Wall Street Journal (NEW DELHI) -- Recognizing economic opportunity resulting from China allegedly restricting rare-earth exports, India announced their intentions to boost their exports of rare earth minerals in order to meet global demand. Rare Earth Ltd., owned by the Indian government, is building a new rare-earth processing plant as preparation for increased output in the state of Orissa with operations expected to begin in September. Additionally, the government is seeking to mine rare earth from the seabed off the southern coast of the country in an industrial scale. It is estimated that India has 3.1 million metric tons of rare-earth reserves. Despite these efforts, concerns over corruption and red tape in the Indian mining industry, investments may be hindered. The United States, Malaysia, and Australia also recently announced plans to increase rare-earth mining efforts. Due to the increase in prices globally, nations are searching for additional places to source these minerals from in order to offset rising costs. Source: India Bets on Rare-Earth Minerals (Reliability: Medium)

Comment: As the Sino-India relationship becomes more complicated, the decision to increase rare-earth mineral output by India is likely strategic, as it will decrease their dependency on China for rare-earth while improving their overall economic standing.

China Raises Rare-Earth Export Quota

China's decreasing export quota

NEW YORK (WSJ) - For the first time since 2005, the Chinese Government reduced its restrictions on rare-earth exports.  China's Ministry of Commerce reported that they now export 2.7 percent more volume of rare earth, equivalent to 30,996 metric tons, than in 2011.  The tighter limits imposed by China in 2005, led to price surges two years ago leaving some of the exported elements more valuable than gold.  A complaint filed with the World Trade Organization by the U.S., the European Union, and Japan, and accepted in July of this year, put pressure on China to lower their restrictions during a time when other trade disputes exist between China and the U.S. ranging from cars to solar panels.  However, industry observers believe that China's rare-earth exports are less important because manufacturers are looking to reduce their use of Chinese-produced minerals.    Colorado based company, Molycorp Inc., said they will be producing rare earths at a rate of 19,050 metric tons annually by the end of this year.  Molycorp Inc. believes that rare-earth oxide production could fall by 20 percent this year causing China's concern to be production quotas and not export quotas. 

Source: China raises rare-earth export quota for first time since 2005 (Reliability: High)

Comment: China is continuing to see a decrease in the exports, which is currently less than their quota.

India Makes Rare Earthy Pitch To Rival China

Arial image of Mountain Pass RE mine in California.
The mine was recently reopened after closing in 2002.

NEW DELHI (DNA) -- India might emerge as one of the countries that can challenge China’s rare earths (REs) hegemony. China overviews 97% of RE production; however, US Geological Survey estimates that China has half of the world’s reserves at 55 million tons (MTs). Forecasts show that the currently estimated world consumption of 136,000 tons/year is likely to grow to 185,000 tons/year by 2015. Based on current estimates, the US has 12% (13MTs) of global reserves, Australia (1.6 MTs), and Commonwealth of Independent States (19 MTs). Latest Indian government statistics show that India may have 9% (10.7MTs) of global RE reserves. India used to be the world’s leading RE producer in the 1950s, followed by the US through the 1960s and 1980s. Source:  DNA special: India makers rare earthy pitch to rival China (Reliability: Medium)

Comment: As a consequence of Chinese export restrictions on REs, some countries are likely to reopen their RE mines, which were closed down because of low-cost Chinese production. This will results in higher costs compared to Chinese domestic production; however, foreign companies do not have to worry about the theft of their trade secrets in China.