Seventeen elements in the periodic table – the so-called “rare earths” – play a major role in the calculations and strategies of various nations. In many ways, rare earths are the vitamins of industrial society in the 21^st century: they are vital to key products from hi-tech items (smartphones and monitors) to energy conversion systems (wind turbines, photovoltaic panels and electrical machinery) and even military equipment (lasers and radar). The difficulties involved in replacing them with alternative materials make rare earths uniquely strategic resources.

Among their many possible applications, some of these metals (for instance, indium and gallium) are important for the production of semiconductors, which represent a cornerstone of today's high-tech industries. The relevance of these metals has become clear over the last year following a shortage of production with serious effects on a number of sectors. Precisely because of their industrial and strategic importance, the production of semiconductors is increasingly considered as a "geopolitical imperative", deepened by the ongoing tensions between the US and China. Therefore, the fate of semiconductors and rare earths is intertwined and bound to this rising global race for technology and industrial leadership. It is not by chance that, in 2019, China's President Xi Jinping threatened to cut the imports of rare earths as retaliation against the US' opposition to Huawei and the ongoing dispute around semiconductors, ultimately accelerating Washington's countermeasures to reduce its own vulnerability.

To be precise, we should point out that rare earths are not actually rare. Cerium, for example, is more abundant than copper, and rare earth deposits occur in many parts of the world. What defines these elements as “rare” is their low concentration: they do not occur in pure form in nature but are always compounded with other elements.

Rare earth deposits worldwide

Source: https://mrdata.usgs.gov/ree/map-us.html#home

Though the market for rare earths is relatively limited in terms of volume, any nation dominating it enjoys significant geopolitical influence and leverage over other countries, given the importance of rare earths to key industries.

 

Chinese centrality

The market is currently dominated by China, which produces some 60% of the world’s rare earths, processes and refines around 80%, and is the central player in the global supply chain. The world’s major economies are presently all over-dependent on Chinese imports: 80% of imports to the USA and 98% of imports to the EU come from China. The worry that supply restrictions or even stoppages could cause serious damage to economies, industries and decarbonisation plans is therefore leading many nations to seek alternative sources. Concerns first emerged in 2010 when, for political reasons, Beijing announced its was halting exports to Japan. At the time, it was estimated that some 97% of the world’s rare earth supplies came from China. Rising (geo)political tensions between the United States and China are also fuelling misgivings and anxieties. China has on various occasions threatened to reduce or block rare earth exports to the USA and this has made all importing nations eager to find new sources of production in order to reduce Chinese dominance. 2010 saw the beginning of this process.

Global production of rare earths

Source: UNCTAD

 

The rise of Africa

In this context, Africa has an opportunity to emerge as a production region, and this is likely to intensify competition between global players. The African continent is home to numerous rare earth deposits, especially in eastern and southern nations like South Africa, Madagascar, Malawi, Kenya, Namibia, Mozambique, Tanzania, Zambia and Burundi.

Nevertheless, as things stand, Africa has not yet progressed beyond the stage of great potential. The only extraction currently ongoing is on the Gakara Rare Earth Project in Burundi, though the Steenkampskraal deposits in South Africa could come on line shortly. A number of African countries have begun to implement projects at different stages, however, including Namibia (Lofdal Heavy Rare Earths Project), Malawi (Kangankunde), Angola (Longonjo Project), Tanzania (Ngualla Rare Earth Project), Uganda (Makuutu Project) Madagascar (Tatalus) Mozambique (Xiluvo REE Project) and South Africa (Glenover and Phalaborwa Projects).

 

Obstacles to development

The start-up of new projects is presently hindered by market laws, which present challenges such as high costs, the need for major investment and political, environmental and social acceptability considerations. The decisive factor behind China’s dominance in global production and refinement, even more than the ready availability of domestic rare earth deposits, was the country’s clear and decisive political will to develop the sector through political and industrial policy and state subsidies.

Though the emergence of alternative sources outside China may be discouraged by market conditions, developments could well be driven by the growing politicisation of rare earths, a factor that is rapidly boosting their strategic importance earths and inducing importers to increase their support for new extraction projects.

 

How the different nations are moving

The United States more than anyone else is determined to minimise its vulnerability towards China, a policy that has been supported by the last two administrations. In 2019, the US Department of Defence entered negotiations with Malawi and Burundi to discuss support for a number of projects in order to ensure future rare earth supplies from the African continent.

The European Union too is determined to reduce its almost total dependence on China, which could otherwise prove a serious impediment to implementing the Green Deal. While the EU is eager to increase strategic autonomy in this sector by developing domestic rare earth deposits and recycling, it also affirmed in September 2020 that it was willing to establish new strategic partnerships with African countries to obtain additional supplies.

Other players, including Australia and Japan, are also keen to increase their presence in Africa. Australia, for example, though already the world’s second largest producer of rare earths, is continuously striving to develop new sources to reduce Chinese dominance in line with Washington’s interests. Two Australian companies are currently involved in projects in Tanzania (Ngualla Mining Project) and Malawi (Makuutu Project). As a result of the threats issued in 2010, Japan too is supporting African rare earth projects, for example in Namibia and South Africa, through the Japan Oil, Gas and Metals National Corporation.

China, of course, is not going to be left behind. Beijing could well see itself obliged to increase its presence on the African continent to guarantee future supplies of rare earths if it is serious about implementing its ambitious industrial plans for energy and technology transition. Since 2018, China has begun importing certain rare earths in response to rising internal demand and as a result of environmental restrictions on illegal extraction practices. Beijing is therefore certain to take action to safeguard its imports, and such action will inevitably be played out in Africa. China is likely to offer infrastructural investments and finance in exchange for resources and mineral and energy exploration rights on the African continent.

Since state backing and finance are essential to developing alternative rare earth resources, China will have a head start thanks to its geo-economic influence in Africa, its standing as a major consumer and its control over the refining industry. The United States will therefore have to offer African nations seriously advantageous conditions if it is not to fall behind in the race for rare earths, and must clearly understand that reducing Chinese dominance in this sector is not going to be easy.