Bill Aimed at Addressing Potential U.S. Rare Earths Supply Crisis Welcomed by Industry, but Warns of Long Road Ahead

Sean Barry, Metal Pages

The U.S. rare earths industry has welcomed the introduction of a bill in Congress this week that aims to tackle a potential supply crisis, but market participants warn that the legislation still has a long way to go.

The Rare Earth Supply-Chain Technology and Resource Transformation (RESTART) Act, introduced by Colorado Congressman Mike Coffman, aims to reestablish a domestic rare earth supply chain in the U.S. in a bid to curb the country’s reliance on foreign sources for rare earth materials.

The bill calls for a “whole-of-government” approach and the creation of a national stockpile within the Department of Defense and government-backed loan guarantees for domestic rare earths supply-chain development.

As part of the first step, the bill outlines the need for the Federal government to establish a rare earths working group to assess and monitor strategic needs and evaluate international trade practices.

“There is no rare earth element mining taking place in North America and with worldwide demand growing exponentially the situation is only going to get worse. Rare earth elements are critical to high-technology industries and many critical weapons systems. It is a critical national security issue with potentially severe consequences. The looming crisis can be averted, but the U.S. needs to act now.” Coffman said.

The RESTART act has been welcomed by the U.S. rare earths industry as concerns deepen that the country is failing to develop a domestic supply chain to reduce the country’s dependence on overseas raw materials and finished products.
China currently produces about 96.8% of the world’s total estimated output of rare earths and is the world’s largest consumer of rare earths, accounting for about 60% of demand.

“It’s an important step and encouraging that it’s in committees with a good history of passing legislation and moving things forward,” Jeff Green, president of Washington D.C.-based lobby group J.A. Green & Co LLC, told Metal-Pages.

“I’ve long believed that it’s an advantage to have responsible legislation introduced. If a supply crisis hits sometime between 2012 to 2015, as some are predicting, then at least there’s already a plan in place rather than Congress being forced into a knee-jerk reaction.”

Green, who is working with The United States Magnet Materials Association (USMMA), added that the bill would now be referred to several committees to debate including the Financial Services, Armed Services and House Committee on Ways and Means.

But the process of getting the bill passed into law could take sometime and the government still faces an education issue on rare earths and a mountain of other legislation that will likely take priority, according to some rare earth market participants.

“I honestly believe that Congressman Coffman can be congratulated on bringing forward this issue of domestic self-sufficiency. But the proposed act has a long road to go and we could be years out,” Jack Lifton, managing director of Jack Lifton LLC, told Metal-Pages.

“The DoD is of two minds. One says that their actual usage is very small and that they will always be able to get it in the marketplace, if price is no object. But the other says that the rare earths are strategic and critical and a domestic supply must be created. This bill will therefore be assailed by the one group and welcomed by the other. Let’s wait and see who wins the argument.”
He added that although the issue of a possible rare earth supply crimp had gathered momentum over the past year due to possible restrictions by China, raising public and government awareness was still a challenge.

“There’s many important bills being debated right now like healthcare. So it could be a long time before this gets onto the floor,” said one trade source.

“It’s certainly a step in the right direction, but we can’t depend on the government and a supply crisis may not be far away.”

Green said he believed the education process was developing and had hit the radar in Congress because of the possible national security implications.

The USMMA said the U.S. was already in a “silent crisis” as it takes 3 to 5 years to reestablish a domestic supply chain and it was now unclear whether rare earth material will be available outside China in the coming years.

“USMMA believes that urgent and collective action is needed by the federal government in order to head off the impending rare earth crisis. It is estimated that Chinese domestic consumption of rare earth materials will outpace Chinese domestic supply as early as 2012,” the association said.