WASHINGTON Dec 17 The 2011 scare about Chinese
control of rare earth elements critical for defense
manufacturing has faded, with market forces boosting production
outside China and prompting a shift to alternative substances,
according to a new Pentagon report.
China, Japan and the United States are the biggest consumers
of rare earth elements, which are used in everything from wind
turbines, hybrid vehicles and earphones and computer hard drives
to television sets and energy-efficient lamps.
A jump in prices for rare earth elements in 2011, 95 percent
of which came from China, led to Pentagon concerns that the
supply of rare earths for defense manufacturing might dry up.
But an annual report sent to Congress in recent weeks said,
"Global market forces are leading to positive change in rare
earth supply chains, and a sufficient supply of most of these
materials likely will be available to the defense industrial
The report, dated October 2013 but not yet released
publicly, said there was a "significant reversal" in the
situation with rare earth elements between 2011 and 2012, with
one expert projecting a 20 percent drop in global demand.
The decline in demand, in part due to increasing use of
alternatives, has resulted in a 60 percent slide in the prices
of most rare earth oxides and metals from their peaks in the
summer of 2011, according to the annual industrial capabilities
"The private sector's reaction to market forces has been to
increase exploration for rare earth materials and development of
downstream processing capabilities," the report said, adding
that one expert said over 400 rare earth projects were under
The report said the Pentagon remained concerned about the
availability of some heavy rare earth elements and the ability
to produce related high-purity oxides and alloys.
"In general, the domestic supply chain for all of these
exists, but it is thin," the report said.
It said the United States still has no domestic production
of sintered neodymium-iron-boron magnets, which are used in
computer hard disks, electrical motors and magnetic resonance
The report said a U.S. plant was under construction and
should begin production by the end of the year, but the main
source of the magnets would remain Japan and China.
Since 2010, Beijing has been trying to exert more control
over the rare earth elements sector, where unauthorized
production, environmental pollution and smuggling have been
rife. It launched another campaign in early August aimed at
cracking down on illegal activities.
Its efforts to cut output and impose strict export quotas
have been criticized by foreign governments concerned about
China's chokehold over supplies.
The United States, Japan and the European Union have
complained to the World Trade Organization about Beijing's
efforts to control the sector, saying China is trying to use its
stranglehold over supplies to drive up prices and gain a
But China has repeatedly said rampant overmining has caused
untold ecological damage and that it no longer wants to pay the
environmental costs of supplying the vast bulk of the world's
(Reporting by David Alexander; Editing by Leslie Adler)