Pentagon Invests in MP Materials to Counter China's Rare Earth Dominance

The U.S. and Europe are facing a critical challenge in the realm of rare earth elements, which are essential for modern technology and defense systems. The Pentagon's recent investment in MP Materials, the owner of the Mountain Pass Rare Earth mine, underscores the strategic importance of these elements. This move is part of a broader geopolitical strategy aimed at countering China's dominance in the rare earth market, which has been achieved through aggressive pricing and environmentally harmful production methods.

China's control over rare earth elements is a significant geopolitical lever, much like oil. The country has engineered a monopoly by undercutting competitors and using cheap, environmentally damaging processes. This has allowed China to supply high-tech industries with rare earth elements at unbeatable prices, making it difficult for Western producers to compete. The U.S. and Europe have long relied on China for these critical materials, but recent actions by China have highlighted the risks of this dependence.

The Pentagon's investment in MP Materials is a response to the acute pain felt by the U.S. due to its reliance on China for rare earth elements. Modern weapons and high-tech industries cannot function without these materials, and the U.S. is now taking steps to secure its own supply. However, the solution lies not just in mining but also in recycling and reprocessing critical material feedstock and waste streams locally. This approach, which India has successfully implemented, involves banning the export of e-waste to China and addressing the problem onshore.

The West does not need to resort to dirty, environmentally harmful chemistry to achieve strategic independence from China. New technologies that are cheaper and cleaner are available and are being developed by governments and private entities. The U.S. Department of Defense, Department of Energy, and Department of Commerce, along with UKRI in the UK and Horizon in Europe, are working to break China's stranglehold on these critical materials. However, time is running out, and if the West's industrial emaciation continues, it will soon be too late to address this issue.

Onshoring and nearshoring of critical and strategic metals and minerals are becoming massive trends. Investors need to start looking for investment plays in this arena, as the recycling and reprocessing of rare earth elements will be vital to onshore critical and strategic material supplies. Circularity, when done properly, is more efficient and cheaper than traditional mining methods. The West must act quickly to secure its supply of rare earth elements and reduce its dependence on China, or risk facing severe consequences in the future.