U.S. aims to end China's rare earth metals monopoly

WASHINGTON Thu Sep 30, 2010 6:14pm EDT

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WASHINGTON (Reuters) - The United States wants more countries to boost production of so-called rare earth metals used in clean energy technology products to break China's monopoly on the supplies, a top Energy Department official told Congress on Thursday.

Diversifying supplies of the rare metals is important to the Obama administration, because they are used in electric cars, solar panels and wind turbines, all of which the White House is promoting in its overhaul of U.S. energy policy.

China accounts for 95 percent of global production of rare earth metals. Its market dominance came in focus this month when industry sources cited concerns Beijing was apparently holding back shipments to Japan. A Japanese trading firm source has said China ended the de facto ban, but Japanese customers are looking elsewhere for supplies.

The incident fueled concern that clean-energy products could become more expensive and harder to manufacture outside of China.

"This concentration of production creates serious concerns," David Sandalow, U.S. Assistant Energy Secretary for Policy and International Affairs said at a congressional hearing on the matter. "It goes without saying that diversified sources of supply are important for any valuable material."

Sandalow, testifying before the Senate Energy Subcommittee, said the Obama administration plans to encourage U.S. trading partners to quickly develop rare earth metals production.

"We must globalize chains for these materials," he said. "To manage supply risk, we need multiple, distributed sources of clean energy materials in the years ahead."

Sandalow said the Energy Department will release a plan this autumn for developing more rare earth metal supplies.

The metals are found in many countries including the United States, Canada and Australia. The United States was the global leader in rare earth metals production in the late 1980s.

The rare metals are often difficult to extract in profitable quantities, which has led their production to be geographically concentrated, said Sandalow.

China holds 37 percent of known rare metal reserves, the United States 13 percent and the rest is in other countries.

The 17 rare earth metals, some with exotic names like lanthanum and europium, form unusually strong lightweight magnetic materials.

Lanthanum is used in the batteries of hybrid cars, neodymium is used in magnets in the electric generators of wind turbines and europium is used in colored phosphors for energy-efficient lighting.

Legislation has been introduced in both the Senate and House of Representatives to increase investment and production of the rare metals in the United States, including providing extraction companies with federal loan guarantees. However, the legislation is not expected to clear the Congress this year.

(Reporting by Tom Doggett; Editing by David Gregorio)

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