Rare Earth Materials in the Defense Supply Chain
Gao ID: GAO-10-617R April 14, 2010This letter formally transmits the briefing in response to the National Defense Authorization Act for Fiscal Year 2010 (Pub. L. No. 111-84), which required GAO to submit a report on rare earth materials in the defense supply chain to the Committees on Armed Services of the Senate and House of Representatives by April 1, 2010.
GAO-10-617R, Rare Earth Materials in the Defense Supply Chain
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GAO-10-617R:
United States Government Accountability Office:
Washington, DC 20548:
April 14, 2010:
The Honorable Carl Levin:
Chairman:
The Honorable John McCain:
Ranking Member:
Committee on Armed Services:
United States Senate:
The Honorable Ike Skelton:
Chairman:
The Honorable Howard P. "Buck" McKeon:
Ranking Member:
Committee on Armed Services:
House of Representatives:
Subject: Rare Earth Materials in the Defense Supply Chain:
This letter formally transmits the enclosed briefing in response to
the National Defense Authorization Act for Fiscal Year 2010 (Pub. L.
No. 111-84), which required GAO to submit a report on rare earth
materials in the defense supply chain to the Committees on Armed
Services of the Senate and House of Representatives by April 1, 2010.
As required, we provided a copy of this briefing to the committees on
April 1, 2010, and subsequently briefed the Senate Armed Services
Committee staff on April 5, 2010, and the House Armed Services
Committee staff on April 6, 2010.
We are sending copies of this report to the appropriate congressional
committees. We are also sending copies to the Secretaries of Defense,
Commerce, Energy, and the Interior. This report is also available at
no charge on the GAO Web site at [hyperlink, http://www.gao.gov].
Should you or your staff have any questions concerning this report,
please contact me at (202) 512-4841 or martinb@gao.gov. Contact points
for our Offices of Congressional Relations and Public Affairs may be
found on the last page of this report. Key contributors to this report
were John Neumann, Assistant Director; James Kim; Erin Carson; Brent
Corby; Marie Ahearn; Barbara El Osta; and Morgan Delaney Ramaker.
Signed by:
Belva M. Martin:
Acting Director:
Acquisition and Sourcing Management:
Enclosure:
[End of letter]
Rare Earth Materials in the Defense Supply Chain:
Briefing for Congressional Committees:
April 1, 2010:
Contents:
* Introduction;
* Objectives, Scope, and Methodology;
* Background;
* Summary;
* Objective 1: Current and Projected Availability;
* Objective 2: Defense System Dependency;
* Objective 3: DOD Identified Risks and Actions;
* Agency Comments;
* Points of Contact.
Introduction:
Rare earth elements are used in many applications for their magnetic
and other unique properties. These include the 17 chemical elements
beginning with lanthanum, element number 57 in the periodic table, up
to and including lutetium, element number 71, as well as yttrium and
scandium, which have similar properties.
Rare earth materials”rare earth ores, oxides, metals, alloys,
semifinished rare earth products, and components containing rare earth
materials”are used in a variety of commercial and military
applications, such as cell phones, computer hard drives, and
Department of Defense (DOD) precision-guided munitions. Some of these
applications rely on permanent rare earth magnets that have unique
properties, such as the ability to withstand demagnetization at very
high temperatures.
Media reports have noted worldwide availability of these materials may
be limited to a few overseas sources”primarily China.
[End of section]
Objectives, Scope, and Methodology:
The National Defense Authorization Act for Fiscal Year 2010, Section
843, directed GAO to submit a report on rare earth materials in the
DOD supply chain.[Footnote 1]
Objectives:
* What does existing information show about current sources and
projected availability of rare earth materials?
* Which defense systems have been identified as dependent on rare
earth materials?
* What national security risks has DOD identified due to rare earth
material dependencies, and what actions has it taken?
To conduct our work, we obtained documentation and interviewed
officials to determine the current sources and projected availability
of rare earth materials and national security risks DOD has identified
and actions DOD has taken.
We contacted federal agencies and offices, including the following:
* Department of the Interior,
- U.S. Geological Survey (USGS);
* Department of Commerce,
- Bureau of Industry and Security,
- International Trade Administration;
* Department of Energy,
- Vehicle Technology Program,
- Wind Technologies Program,
- Energy Information Administration, and,
- Ames (Iowa) Laboratory;
* DOD,
- Office of the Secretary of Defense ” Industrial Policy, Office of
Technology Transition, Defense Research and Engineering, Science and
Technology, and Net Assessment,
- Defense Logistics Agency, Defense Contract Management Agency,
Defense Intelligence Agency, Defense Advanced Research Projects
Agency, and Missile Defense Agency,
- Military departments including: Army Research, Development and
Engineering; Army Acquisition, Logistics, and Technology; Army Tank
and Automotive Command; Air Force Research Lab Materials and
Manufacturing; Naval Surface Warfare Center; Naval Research
Laboratory; Navy Research, Development, and Acquisition; and Navy
Program Executive Office for Ships.
We contacted members of industry and academia, including the following:
* Institute for Defense Analyses, a nonprofit corporation that
administers federally funded research and development centers;
* Academic experts at the University of Delaware and Northeastern
University;[Footnote 2]
* The National Academies;
* Rare Earth Industry and Technology Association; and;
* Selected rare earth suppliers from each stage of the supply chain.
[Footnote 3]
To determine which defense systems are currently dependent on, or
projected to become dependent on, rare earth materials, we held
discussions with and gathered evidence from government, industry, and
academic officials, who identified certain defense systems that use
and will continue to use rare earth materials.[Footnote 4] In
addition, we analyzed the supply chains of two specific defense
systems to provide illustrative examples of systems that use rare
earth materials.
We used industry reports and data to evaluate the projected worldwide
supply and demand of rare earth materials. Uncertainty exists in these
estimates due to the assumptions made by different projections. As our
findings do not rely on precise estimates of the amount of rare earth
material available throughout the world, we found these data to be
sufficiently reliable for the purposes of our reporting.
We conducted this performance audit from January 2010 through April
2010 in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit
to obtain sufficient, appropriate evidence to provide a reasonable
basis for our findings and conclusions based on our audit objectives.
We believe that the evidence obtained provides a reasonable basis for
our findings and conclusions based on our audit objectives.
[End of section]
Background: The Rare Earth Elements:
The term "rare earth" denotes the group of 17 chemically similar
metallic elements, including lanthanum, cerium, praseodymium,
neodymium, promethium, samarium, europium, gadolinium, terbium,
dysprosium, holmium, erbium, thulium, ytterbium, lutetium, scandium,
and yttrium.
Figure 1: Rare Earth Elements in the Periodic Table:
[Refer to PDF for image: periodic table]
Source: GAO graphic based on USGS data.
[End of figure]
Rare earths are often classified into two groups: Heavy Rare Earth
(HREE), and Light Rare Earth (LREE), according to their atomic weights
and location on the periodic table.
Background: Rare Earth Materials Are Used in Multiple Commercial
Products:
Rare earth elements are used in materials for a number of commercial
products, including hybrid cars, wind power turbines, computer hard
drives, and cell phones.
Table 1: Examples of Rare Earth Elements Used in Commercial Products:
Rare Earth Element Used: Neodymium, praseodymium, dysprosium, terbium,
lanthanum, cerium;
Commercial Product: Hybrid electric motors and hybrid batteries.
Rare Earth Element Used: Neodymium, praseodymium, terbium, dysprosium;
Commercial Product: Computer hard drives, mobile phones, and cameras.
Rare Earth Element Used: Promethium;
Commercial Product: Portable x-ray units.
Rare Earth Element Used: Scandium;
Commercial Product: Stadium lights.
Rare Earth Element Used: Europium, yttrium, terbium, lanthanum;
Commercial Product: Energy-efficient light bulbs.
Rare Earth Element Used: Europium, yttrium;
Commercial Product: Fiber optics.
Rare Earth Element Used: Cerium, lanthanum, neodymium, europium;
Commercial Product: Glass additives.
Source: GAO analysis of government and industry data.
[End of table]
Background: Rare Earth Material Production Requires a Number of Key
Processing Steps:
Rare earth materials require a number of processing stages before they
can be used in an application:
* mining rare earth ore from the mineral deposit;
* separating the rare earth ore into individual rare earth oxides;
* refining the rare earth oxides into metals with different purity
levels;[Footnote 5]
* forming the metals into rare earth alloys; and;
* manufacturing the alloys into components, such as permanent magnets,
used in defense and commercial applications.
Background: DOD Responsibilities for Managing Supplier Base:
DOD's Office of the Director of Industrial Policy sustains an
environment that ensures the industrial base on which DOD depends is
reliable, cost-effective, and sufficient to meet DOD requirements. It
routinely identifies and works to mitigate short-term supplier-base
gaps when these gaps span multiple DOD components.
The Defense National Stockpile maintains and manages strategic and
critical materials.
DOD military service components (Army, Navy, and Air Force) assess
supplier-base issues for existing defense programs or sectors.
[End of section]
Summary: Objective 1: Current and Projected Availability:
While rare earth ore deposits are geographically diverse, current
capabilities to process rare earth metals into finished materials are
limited mostly to Chinese sources.
The United States previously performed all stages of the rare earth
material supply chain, but now most rare earth materials processing is
performed in China, giving it a dominant position that could affect
worldwide supply and prices.
Based on industry estimates, rebuilding a U.S. rare earth supply chain
may take up to 15 years and is dependent on several factors, including
securing capital investments in processing infrastructure, developing
new technologies, and acquiring patents, which are currently held by
international companies.
Summary: Objective 2: Defense System Dependency:
DOD is in the early stages of assessing its dependency on rare earth
materials and is planning to complete its study by the end of
September 2010.
Government and industry officials have identified a wide variety of
defense systems and components that are dependent on rare earth
materials for functionality and are provided by lower-tier
subcontractors in the supply chain.
Defense systems will likely continue to depend on rare earth
materials, based on their life cycles and lack of effective
substitutes.
We found examples of components in defense systems that use Chinese
sources for rare earth materials and are provided by lower-tier
subcontractors.
Summary: Objective 3: DOD Identified Risks and Actions Taken:
DOD has not yet identified national security risks or taken
departmentwide action to address rare earth material dependency, but
expects to consider these issues in its ongoing study expected to be
completed by the end of September 2010.
Some DOD components, other federal agencies, and companies are taking
initial steps to limit their reliance on rare earth materials or
expand the existing supplier base.
[End of section]
Objective 1: Rare Earth Ore Deposits Are Geographically Diverse:
Significant rare earth ore reserves exist in China as well as other
worldwide locations, including the United States.
The less-abundant, and more-valuable, heavy rare earth ore deposits
are currently found in southern China, but such deposits have also
been identified in Australia, Greenland, Canada, and the United States.
According to industry, rare earth deposits in the United States,
Canada, Australia, and South Africa could be mined by 2014.
Table 2: World Mine Reserves and Production:
Country: United States;
Reserves (t REO)[A]: 13,000,000;
2009 Mine Production (t REO): 0.
Country: Australia;
Reserves (t REO)[A]: 5,400,000;
2009 Mine Production (t REO): 0.
Country: Brazil;
Reserves (t REO)[A]: 48,000;
2009 Mine Production (t REO): 650.
Country: China;
Reserves (t REO)[A]: 36,000,000;
2009 Mine Production (t REO): 120,000.
Country: Commonwealth of Independent States (CIS)[B];
Reserves (t REO)[A]: 19,000,000;
2009 Mine Production (t REO): N/A[C].
Country: India;
Reserves (t REO)[A]: 3,100,000;
2009 Mine Production (t REO): 2,700.
Country: Malaysia;
Reserves (t REO)[A]: 30,000;
2009 Mine Production (t REO): 380.
Other Countries:
Reserves (t REO)[A]: 22,000,000;
2009 Mine Production (t REO): N/A.
World Total (rounded):
Reserves (t REO)[A]: 99,000,000;
2009 Mine Production (t REO): 124,000.
Source: USGS.
Note: Data are from the Mineral Commodity Summaries 2010.
[A] According to USGS, reserves are the part of the reserve base that
could be economically extracted or produced at the time of
determination but need not signify that extraction facilities are in
place and operative. t REO = metric tons of rare earth oxide.
[B] Regional association made up of former Soviet republics.
[C] Not available.
[End of table]
Objective 1: U.S. Industry Previously Performed All Stages of the
Supply Chain:
U.S. industry previously performed all stages of the rare earth
material supply chain, and the Mountain Pass mine in California
produced the majority of the global supply of rare earth materials.
Figure 2: History of the U.S. Rare Earth Industry:
[Refer to PDF for image: illustration]
1949:
Large rare earth deposits discovered in the United States:
Large amounts of Light Rare Earth Elements (LREE) discovered at
Mountain Pass, California.
1965-1985:
U.S. performs all stages of rare earth material processing:
Mountain Pass deposit is the paramount source of rare earth elements.
1998-2005:
U.S. Rare Earth Manufacturing Begins to Decline:
1998: Mountain Pass separation plant closes following regulatory
problems with the main wastewater pipeline.
2002: Mountain Pass rare earth mine suspends operations.
2003: Magnequench, a NdFeB[A] permanent-magnet producer, closes plant
and moves equipment to China.
Germany's Vacuumschmelze, a NdFeB permanent-magnet producer, closes
Elizabethtown, Kentucky, operations.
2005: Hitachi Magnetics Corporation, a NdFeB permanent-magnet
producer, closes its Edmore, MI, production facility.
2007:
Some U.S. Production Resumes:
Mountain Pass rare earth separation plant resumes operations. Mountain
Pass facility separates bastnasite concentrates from stockpiles
produced before the shutdown.
Source: GAO analysis of USGS and industry data.
[A] Neodymium iron boron.
[End of figure]
Objective 1: Most Rare Earth Material Processing Occurs in China:
Most rare earth material processing now occurs in China. In 2009,
China produced about 97 percent of rare earth oxides.
Officials of the minerals and rare earth company that owns the
Mountain Pass mine expect that by 2012 it will achieve full-scale
production of mining and separating cerium, lanthanum, praseodymium,
and neodymium oxides.
The Mountain Pass facility does not currently have the full capability
needed to refine the oxides into pure rare earth metals.
Figure 3: Example of Permanent-Magnet Rare Earth Supply Chain:
[Refer to PDF for image: illustration]
1. Mine rare earth ore:
No U.S. Production;
China produces about 97 percent of rare earth ore.
2. Separate ore into oxides:
Limited U.S. Production;
According to industry, China produces about 97 percent of rare earth
oxide.
3. Refine oxide to metal:
No U.S. Production;
Refined metal is available exclusively from China[A].
4. Form metals into alloys:
Limited U.S. Production;
According to industry, China produces 89 percent of rare earth alloys.
5. Manufacture magnets/other components:
Limited U.S. Production of SmCo magnets; No U.S. production of NdFeB
magnets;
According to industry, China produces 75 percent of NdFeB magnets and
60 percent of SmCo magnets.
Source: GAO analysis of industry data.
[A] According to industry, only Chinese companies are producing and
selling commercial quantities of rare earth metals. While some
Japanese companies produce rare earth metals in a limited capacity,
they do not offer these metals as a product but use them to produce
alloys and magnet and are dependent on China for rare earth ore. One
company in the United Kingdom produces a small quantity of samarium
cobalt metal, but also relies on oxides and metals from China.
[End of figure]
According to industry data, refined rare earth metals are almost
exclusively available from China.
The United States has the expertise but lacks the manufacturing assets
and facilities to refine oxides to metals.
The United States is not currently producing neodymium iron boron
(NeFeB) permanent magnets and has only one samarium cobalt (SmCo)
magnet producer.
Objective 1: China's Market Dominance May Affect Future U.S.
Availability of Rare Earth Materials:
According to government and industry data, the future availability of
materials from some rare earth elements”including neodymium,
dysprosium, and terbium”is largely controlled by Chinese suppliers.
China's dominant position in the rare earths market gives it market
power,[Footnote 6] which could affect global rare earth supply and
prices. In addition:
* China has adopted domestic production quotas on rare earth materials
and decreased its export quotas, which increases prices in the Chinese
and world rare earth materials markets.
* China increased export taxes on all rare earth materials to a range
of 15 to 25 percent, which increases the price of inputs for non-
Chinese competitors.
Some government and rare earth industry officials believe that China
plans on greater vertical integration of the rare earth materials
market in the future, which would increase China's total market power
and dominance.
While China is currently exporting rare earth oxides and metals, some
rare earth industry officials believe that in the future China will
only export finished rare earth material products with higher value.
Objective 1: Rebuilding a U.S. Supply Chain Is Dependent on Several
Factors:
Although the Mountain Pass mine is the largest non-Chinese rare earth
deposit in the world, the mine currently lacks the manufacturing
assets and facilities to process the rare earth ore into finished
components, such as permanent magnets.
The Mountain Pass mine also does not have substantial amounts of heavy
rare earth elements, such as dysprosium, which provide much of the
heat-resistant qualities of permanent magnets used in many industry
and defense applications.
Other U.S. rare earth deposits exist, such as those in Idaho, Montana,
Colorado, Missouri, Utah, and Wyoming, but these deposits are still in
early exploratory stages of development. Once a company has secured
the necessary capital to start a mine, government and industry
officials said it can take from 7 to 15 years to bring a property
fully online, largely due to the time it takes to comply with multiple
state and federal regulations.
Other factors may affect the rebuilding of a U.S. supply chain:
* Capital investment: Industry officials noted that processing
companies will need to secure a large amount of capital to begin
operations, but investors are concerned about the possibility of the
Chinese undercutting U.S. prices and negatively affecting their return
on investments.
* Processing plants: Industry officials said it would take from 2 to 5
years to develop a pilot plant that could refine oxides to metal using
new technologies, and companies with existing infrastructure said they
would not restart metal production without a consistent source of
oxides outside of China.
* Environmental concerns: Some rare earth minerals are accompanied by
radioactive products, such as thorium and radium, which make
extraction difficult and costly. In addition, U.S. mines and
processing facilities must comply with environmental regulations.
* New technologies: Some academic experts believe that new processing
technologies are needed in order to compete with Chinese producers on
price, and academic experts do not believe these technologies will be
available on a full production scale for up to 4 years and will
require large start-up costs.
* Intellectual property rights: Japanese and other foreign companies
currently own key technology patents for manufacturing neodymium iron
boron magnets. Some of these patents do not expire until 2014. As a
result, companies preparing to enter the neodymium iron boron magnet
market in the United States must wait for the patents to expire.
* The development of alternatives to rare earth materials could reduce
the demand and dependence on rare earth materials in 10 to 15 years,
but these materials might not meet current application requirements.
[End of section]
Objective 2: DOD Has Begun Assessing Rare Earth Material Dependency:
DOD has begun a review, on its own initiative, assessing its
dependency on rare earth materials, that it plans to complete by the
end of September 2010. DOD plans to assess its use of these materials
as well as vulnerabilities in the supply chain.[Footnote 7]
In 2008, DOD Industrial Policy conducted an initial inquiry of DOD
departments and agencies to identify strategic and critical materials
required for national defense purposes. Although respondents
identified a range of systems and components whose production could
potentially be delayed due to a lack of availability of rare earth
materials, DOD officials stated that this information was not based on
a formal study on the use of rare earth materials in these systems.
Objective 2: Rare Earth Materials Are Widely Used and Lack Substitutes:
According to government, industry, and academic officials the use of
rare earth materials is widespread in defense systems. These include,
among others:
* precision-guided munitions,
* lasers,
* communication systems,
* radar systems,
* avionics,
* night vision equipment, and,
* satellites.
Officials emphasized the significance of the widespread use of
commercial-off-the-shelf products in defense systems that include rare
earth materials, such as computer hard drives.
Officials also cited specific components within defense systems that
rely on rare earth materials, such as traveling-wave tubes, which
amplify radio-frequency signals using rare earth permanent magnets.
Government and industry officials told us that where rare earth
materials are used in defense systems, the materials are responsible
for the functionality of the component and would be difficult to
replace without losing performance. For example, fin actuators used in
precision-guided munitions are specifically designed around the
capabilities of neodymium iron boron rare earth magnets.
Objective 2: Defense Systems Will Continue to Rely on Rare Earth
Materials:
Many defense systems will continue to use rare earth materials in the
future based on their life cycles and the lack of effective
substitutes.
* For example, the Aegis Spy-1 radar, which is expected to be used for
35 years, has samarium cobalt magnet components that will need to be
replaced during the radar's lifetime.
* According to officials, defense system components that have rare
earth materials in them will wear out and need to be replaced.
* Defense officials said that future generations of some defense
system components, such as transmit and receive modules for radars,
will continue to depend on rare earth materials. Moreover, in some
cases, new systems in development will also rely on components that
depend on rare earth materials.
Objective 2: DOD Defense Systems Use Rare Earth Materials from China:
GAO analysis shows that subcontractors at the lower tiers of the
supply chain use rare earth materials sourced from China to produce
components used in larger defense systems.
For example, the DDG-51 Hybrid Electric Drive Ship Program uses
permanent-magnet motors using neodymium magnets from China.
Figure 4: Neodymium iron boron (NeFeB) magnets used in DDG-51:
[Refer to PDF for image: illustration]
* Supplier purchases NeFeB magnets from Chinese company and refines
them;
* DOD subcontractor builds NeFeB permanent magnet motor;
* DOD prime contractor uses motor to build hybrid electric drive on
ship;
* DDG-51 delivery to Navy.
Source: GAO analysis of data from government, defense contractors, and
rare earth material suppliers.
[End of figure]
For example, the M1A2 Abrams tank has a reference and navigation
system that uses samarium cobalt (SmCo) permanent magnets. The
samarium metal used in these magnets comes from China.
Figure 5: Samarium used in M1A2 Abrams tank:
[Refer to PDF for image: illustration]
* Company purchases samarium from China and makes SmCo magnets;
* Subcontractor builds reference/navigation unit with SmCo magnets;
* Prime contractor builds tank with reference/navigation unit;
* Delivery of M1A2 Abrams tank to Army.
Source: GAO analysis of data from government, defense contractors, and
rare earth material suppliers.
[End of figure]
[End of section]
Objective 3: DOD in Process of Identifying Departmentwide Security
Risks:
DOD has not yet identified departmentwide national security risks due
to rare earth material dependencies and is in the process of assessing
such risks.
* While Industrial Policy is aware of rare earth material supply
concerns raised by industry and in its initial 2008 inquiry, officials
also noted that as part of the office's current study, to be completed
by the end of September 2010, they will address vulnerabilities in the
supply chain and include recommendations to mitigate any potential
risks of supply disruption.
* DOD has also been involved in efforts to transform the National
Defense Stockpile so that materials not produced domestically will be
available to support defense needs.
* A 2009 National Defense Stockpile configuration report identified
lanthanum, cerium, europium, and gadolinium as having already caused
some kind of weapon system production delay and recommended further
study to determine the severity of the delays.[Footnote 8]
Industrial Policy has existing criteria in the Defense Acquisition
Guidebook for when program offices should elevate supplier base
concerns. These are when an item is produced by a single or sole-
source supplier and meets one or more of the following criteria: (1)
is used by three or more programs; (2) represents an obsolete,
emerging, or enabling technology; (3) requires 12 months or more to
manufacture; or (4) has limited surge production capability.
Generally, Industrial Policy can help DOD offices address a supplier
gap or vulnerability when requested. For example, while not related to
rare earth materials, Industrial Policy worked with the Army to
request a waiver that would allow the Hellfire Missile program to
procure a chemical from China that was no longer produced in the
United States. This allowed the program to explore a longer-term
solution to develop a domestic source for the chemical.
Objective 3: Some DOD Components Have Taken Steps to Address Rare
Earth Risks:
Apart from Industrial Policy's current study, DOD components are also
taking steps to address rare earth risks.
* Air Force's Materials and Manufacturing Directorate examined the
availability of rare earth materials and manufacturers of rare earth
magnets in a 2003 internal report, which raised concerns about U.S.
dependency on Chinese rare earth materials and U.S. industry's lack of
intellectual property rights to produce neodymium iron boron magnets.
An Air Force industrial-base official told us that he was unaware of
any actions taken to address the issues raised by the report. However,
as we note in this briefing, DOD is in the process of studying these
issues.
* Army's Armament Research Center and the Naval Surface Warfare Center
have begun informal efforts to understand the extent of their current
and future dependencies on rare earth materials.
* Also in 2006, Navy considered funding the Mountain Pass mine and
processing facility under a Title III[Footnote 9] program to secure a
domestic source of supply for rare earth materials but ultimately did
not award a contract for that purpose as it lost interest in the
project.
* Although DOD has initiated a Title III program for domestic
production of traveling-wave tubes, the program does not address
domestic sources for the rare earth materials that are required for
their production.
Objective 3: Other Government Agencies and Industry Also Starting to
Address Rare Earth Risks:
Several government agencies have made efforts, in which DOD
participated, to address rare earth risks.
* The Department of Commerce assembled a roundtable to review
governmentwide options in addressing potential rare earth shortages.
* The Office of Science and Technology Policy in the Executive Office
of the President recently hosted an interagency meeting to discuss
rare earth materials supply and demand and plans ongoing interagency
coordination on the issue.
The Department of Energy reported that it has several research and
development efforts to develop non-rare-earth material-dependent
motors, reduced rare earth material usage in magnets, and alternatives
to rare earth dependent wind generators. In addition, the department
recently announced that it will develop a strategic plan for
addressing the role of rare earth and other strategic materials in
clean energy technologies.
A major defense contractor is informally surveying its suppliers to
understand rare earth materials use in its defense system components
and determine alternative solutions to their use.
Rare earth industry and defense contractors have raised concerns about
the Chinese monopoly for rare earth metals.
[End of section]
Agency Comments:
We provided a draft of this briefing to DOD and the Departments of
Commerce, Energy, and the Interior. DOD, Commerce, and Interior
provided technical comments, which we incorporated as appropriate.
Energy provided no comments.
[End of section]
Footnotes:
[1] Pub. L. No. 111-84 (2009).
[2] We selected a nongeneralizable sample of academics recommended to
us through interviews.
[3] 3We selected a nongeneralizable sample of suppliers representing
each processing step from mining to end product based on interviews
with government 6 and industry officials.
[4] We contacted three of the top five defense contractors, as
identified by DOD based on contract award value for fiscal year 2009,
as well as selected subcontractors identified by government and
industry officials as producers of components containing rare earth
materials. These contractors are not intended to be representative of
the entire defense supplier base.
[5] Metallurgists refer to conversion of oxides into metals as
reduction. For the purposes of this briefing, we refer to this step as
refining.
[6] Market power is defined as the ability of sellers to exert
influence over the price or quantity of a good, service, or commodity
exchanged in a market.
[7] USGS will conduct a portion of the study that focuses on rare
earth element reserves and resources. The Defense Contract Management
Agency's Industrial Analysis Center will review trends in pricing of
rare earth materials and assess domestic rare earth material
production capability.
[8] Industrial Policy noted that the stockpile report relied on the
same data collected by DOD's 2008 inquiry, which indicated that only
one DOD office reported actual production delays due to rare earth
material shortages.
[9] Title III of the Defense Production Act of 1950, as amended,
provides financial incentives to domestic firms to invest in
production capabilities for national defense needs. 50 U.S.C. App. §§
2091 et seq.
[End of section]
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