Rare Earth Elements:
The Global Supply Chain
Marc Humphries
Specialist in Energy Policy
June 8, 2012
Congressional Research Service
7-5700
www.crs.gov
R41347
CRS Report for Congress
Pr
epared for Members and Committees of Congress

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Rare Earth Elements: The Global Supply Chain

Summary
The concentration of production of rare earth elements (REEs) outside the United States raises the
important issue of supply vulnerability. REEs are used for new energy technologies and national
security applications. Is the United States vulnerable to supply disruptions of REEs? Are these
elements essential to U.S. national security and economic well-being?
There are 17 rare earth elements (REEs), 15 within the chemical group called lanthanides, plus
yttrium and scandium. The lanthanides consist of the following: lanthanum, cerium,
praseodymium, neodymium, promethium, samarium, europium, gadolinium, terbium,
dysprosium, holmium, erbium, thulium, ytterbium, and lutetium. Rare earths are moderately
abundant in the earth’s crust, some even more abundant than copper, lead, gold, and platinum.
While more abundant than many other minerals, REEs are not concentrated enough to make them
easily exploitable economically. The United States was once self-reliant in domestically produced
REEs, but over the past 15 years has become 100% reliant on imports, primarily from China,
because of lower-cost operations.
There is currently some new rare earth mine production in the United States at Molycorp’s
Mountain Pass mine. U.S.-based Molycorp also operates a separation plant at Mountain Pass, CA,
and sells rare earth concentrates and refined products from previously mined above-ground
stocks. Neodymium, praseodymium, and lanthanum oxides are produced for further processing
but these materials are not turned into rare earth metal in the United States. Molycorp anticipates
production at full capacity (19,050 metric tons) in the second half of 2012. Molycorp announced
plans to purchase Neo Materials Technology, a rare earth processor and producer of permanent
magnet powders with facilities in China and establish a joint venture with Daido Steel and
Mitsubishi Corporation of Japan to produce neodymium-iron boron magnets in Japan.
Some of the major end uses for rare earth elements include use in automotive catalytic converters,
fluid cracking catalysts in petroleum refining, phosphors in color television and flat panel
displays (cell phones, portable DVDs, and laptops), permanent magnets and rechargeable
batteries for hybrid and electric vehicles, and generators for wind turbines, and numerous medical
devices. There are important defense applications, such as jet fighter engines, missile guidance
systems, antimissile defense, and space-based satellites and communication systems.
World demand for rare earth elements is estimated at 136,000 tons per year, with global
production around 133,600 tons in 2010. The difference is covered by previously mined above-
ground stocks. World demand is projected to rise to at least 185,000 tons annually by 2015.
Additional mine capacity at Mt. Weld Australia is expected to come onstream in 2012, to help
close the raw materials gap in the short term. Other new mining projects could easily take 10
years to reach production. In the long run, however, the USGS expects that global reserves and
undiscovered resources are large enough to meet demand.
In March 2012, the Obama Administration announced the filing of a World Trade Organization
case against China, citing unfair trade practices in rare earths. Several legislative proposals have
been introduced in the 112th Congress in the House and Senate to address the potential of U.S.
supply vulnerability and to support domestic production and supply chain development of REEs
because of their applications for national security/defense systems and clean energy technologies.
The House Committee on Natural Resources approved H.R. 2011, the National Strategic and
Critical Minerals Policy Act of 2011, on July 20, 2011.
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Contents
Introduction...................................................................................................................................... 1
What Are Rare Earth Elements? ...................................................................................................... 2
Major End Uses and Applications ................................................................................................... 2
Demand for Rare Earth Elements.............................................................................................. 3
Rare Earth Oxide Prices ............................................................................................................ 5
The Application of Rare Earth Metals in National Defense ............................................................ 7
Rare Earth Resources and Production Potential .............................................................................. 8
Supply Chain Issues ................................................................................................................ 13
Molycorp’s “Mine to Magnet” Vertical Integration Approach for Rebuilding the
U.S. Rare Earth Supply Chain........................................................................................ 14
Other Recent Supply Chain Developments....................................................................... 16
Role of China........................................................................................................................... 16
Japan’s Interests....................................................................................................................... 19
Selected Possible Policy Options................................................................................................... 20
Research and Development ..................................................................................................... 20
Authorize and Appropriate Funding for a USGS Assessment................................................. 20
Support and Encourage Greater Exploration for REE............................................................. 20
Challenge China on Its Export Policy ..................................................................................... 20
Establish a Stockpile................................................................................................................ 21
Hearings on Rare Earths and Related Legislation in the 112th Congress ....................................... 22
Executive Branch Activities........................................................................................................... 22
Department of Energy ....................................................................................................... 22
Department of the Interior................................................................................................. 23
Department of Defense...................................................................................................... 23
Other Federal Agencies ..................................................................................................... 24
White House Office of Science and Technology Policy ................................................... 24

Figures
Figure 1. Rare Earth Demand by Application-U.S. and World, 2010.............................................. 5
Figure 2. Rare Earth Demand by Application-U.S. and World, 2015.............................................. 5
Figure 3. Selected Rare Earth Oxide Prices, 2007-2011.................................................................. 7
Figure 4. Rare Earth Elements: World Production, Reserves and U.S. Imports............................ 11

Tables
Table 1. Rare Earth Elements (Lanthanides): Selected End Uses.................................................... 3
Table 2. Rare Earth Elements: World Production and Reserves—2010 ........................................ 10
Table 3. China’s Rare Earth Production and Exports, 2006-2011 ................................................. 19

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Appendixes
Appendix. Rare Earth-Related Legislation in the 112th Congress ................................................. 25

Contacts
Author Contact Information........................................................................................................... 27

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Introduction
The concentration of rare earth elements (REEs) production in China raises the important issue of
supply vulnerability. REEs are used for many commercial applications including new energy
technologies, electronic devices, automobiles, and national security applications. Is the U.S.
vulnerable to supply disruptions? Are these elements essential to U.S. national security and
economic well-being?
The examination of REEs for new energy technologies reveals a concentrated and complex global
supply chain and numerous end-use applications. Placing the REE supply chain in the global
context is unavoidable. The current goal of U.S. mineral policy is to promote an adequate, stable,
and reliable supply of materials for U.S. national security, economic well-being, and industrial
production. U.S. mineral policy emphasizes developing domestic supplies of critical materials
and encourages the domestic private sector to produce and process those materials.1 But some
raw materials do not exist in economic quantities in the United States, and processing,
manufacturing, and other downstream ventures in the United States may not be cost competitive
with facilities in other regions of the world. However, there may be public policies enacted or
executive branch measures taken to offset the U.S. disadvantage of its potentially higher cost
operations. The private sector may achieve lower cost operations with technology breakthroughs.
Based on this policy framework, the Congress and the Administration are discussing the impact
of China’s near-monopoly position in rare earth elements and a range of potential federal
investments that would support the development of a vertically integrated rare earth supply chain
in the United States.
Aside from a small amount of recycling, the United States is 100% reliant on imports of REEs
and highly dependent on many other minerals that support its economy. For example, the United
States is more than 90% import-reliant for the following minerals: manganese (100%), bauxite
(100%), platinum (94%), and uranium (90%). While import reliance may be a cause for concern,
high import reliance is not necessarily the best measure, or even a good measure, of supply risk.
The supply risk for bauxite, for example, may not be the same as that for REEs due to the
multiplicity of potential sources. In the case of REEs, the dominance of China as a single or
dominant supplier of the raw material, downstream oxides, associated metals and alloys, may be a
cause for concern because of China’s export restrictions and growing internal demand for its
REEs.
This report provides a discussion of the major issues and concerns of the global supply chain for
REEs, their major end uses, and legislative and other policy proposals that Congress may
consider to improve the U.S. rare earth position. An Appendix section provides a summary of
rare earth-related legislation in the 112th Congress.

1 U.S. mineral policies provide a framework for the development of domestic metal mineral resources and for securing
supplies from foreign sources. Specifically, the Mining and Minerals Policy Act of 1970 (30 U.S.C. §21a) declared that
it is in the national interest of the United States to foster the development of the domestic mining industry “... including
the use of recycling and scrap.” The National Materials and Minerals Policy, Research and Development Act of 1980
(30 U.S.C. 1601) declares, among other things, that it is the continuing policy of the United States to promote an
adequate and stable supply of materials necessary to maintain national security, economic well-being and industrial
production, with appropriate attention to a long-term balance between resource production, energy use, a healthy
environment, natural resources conservation, and social needs.
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What Are Rare Earth Elements?
There are 17 rare earth elements (REEs), 15 within the chemical group called lanthanides, plus
yttrium and scandium. The lanthanides consist of the following: lanthanum, cerium,
praseodymium, neodymium, promethium, samarium, europium, gadolinium, terbium,
dysprosium, holmium, erbium, thulium, ytterbium, and lutetium. Rare earths are moderately
abundant in the earth’s crust, some even more abundant than copper, lead, gold, and platinum.
While some are more abundant than many other minerals, most REEs are not concentrated
enough to make them easily exploitable economically.2 The United States was once self-reliant in
domestically produced REEs, but over the past 15 years has become 100% reliant on imports,
primarily from China, because of lower-cost operations.3 The lanthnides are often broken into two
groups: light rare earth elements (LREEs)—lanthanum through europium (atomic numbers 57-
63) and the heavier rare earth elements (HREEs)—gadolinium through lutetium (atomic numbers
64-71). Yttrium is typically classified as a heavy element.4
Major End Uses and Applications
Currently, the dominant end uses for rare earth elements in the United States are for automobile
catalysts and petroleum refining catalysts, use in phosphors in color television and flat panel
displays (cell phones, portable DVDs, and laptops), permanent magnets and rechargeable
batteries for hybrid and electric vehicles, and numerous medical devices (see Table 1). There are
important defense applications such as jet fighter engines, missile guidance systems, antimissile
defense, and satellite and communication systems. Permanent magnets containing neodymium,
gadolinium, dysprosium, and terbium are used in numerous electrical and electronic components
and new-generation generators for wind turbines. About 75% of permanent magnet production is
concentrated in China. See Table 1 for selected end uses of rare earth elements.

2 U.S. Department of the Interior (DOI), Geological Survey (USGS), Minerals Yearbook, Volume 1, 2007, Rare Earths
(Advance Release).
3 DOI/USGS, Rare Earth Elements—Critical Resources for High Technology, Fact Sheet 087-02.
4 DOI/USGS, Principal Rare Earth Elements Deposits of the United States-A Summary of A Domestic Deposits and a
Global Perspective, Scientific Investigations Report 2010-5220.
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Table 1. Rare Earth Elements (Lanthanides): Selected End Uses
Light Rare Earths
Heavy Rare Earth
(more abundant)
Major End Use
(less abundant)
Major End Use
Lanthanum
hybrid engines, metal
Terbium phosphors,
permanent
alloys
magnets
Cerium
auto catalyst, petroleum
Dysprosium permanent
magnets,
refining, metal alloys
hybrid engines
Praseodymium magnets
Erbium
phosphors
Neodymium
auto catalyst, petroleum
Yttrium
red color, fluorescent
refining, hard drives in
lamps, ceramics, metal
laptops, headphones,
alloy agent
hybrid engines
Samarium
magnets
Holmium
glass coloring, lasers
Europium
red color for television
Thulium
medical x-ray units
and computer screens
Lutetium
catalysts
in
petroleum
refining
Ytterbium
lasers,
steel
alloys
Gadolinium
magnets
Source: DOI, U.S. Geological Survey, Circular 930-N.
Demand for Rare Earth Elements
The demand for mineral commodities is a derived demand which differs from consumer goods
demand. Minerals are used as inputs for the production of goods and services. Consumers have
no direct need for the commodity itself as a consumer good. The demand for rare earth elements
is derived from the production of their end use products, such as flat panel displays, automobiles,
catalysts, etc. As a result, the demand for REEs (as with other minerals) depends on the strength
of the demand of the final products for which they are inputs. An increase in the demand for the
final product will lead to an increase in demand for REEs.
In the case of derived demand, when prices rise, the extent to which the quantity of a material
declines depends largely on the degree to which its price increase can be passed on to the final
consumer, as well as the proportion of the final good’s price that is accounted for by the
mineral/metal commodity. That is, it might depend on the amount of REEs used per unit of
output. For commodities that are characterized by derived demand, the demand conditions for the
final consumer goods to which they contribute are key factors. The major variables that determine
the growth in demand for consumer goods are price and income growth.5
World demand for REEs was estimated at 136,100 tons in 2010,6 with global production around
133,600 tons annually.7 The difference is covered by above-ground stocks or inventories. By

5 Theory of Mineral Demand, Gary A. Campbell, Economics of the Mineral Industries, American Institute of Mining,
Metallurgical, and Petroleum Engineering, Inc. 1985.
6 “Lynas Says Rare Earths Demand to Grow at 9% a Year,” bloomberg.com/news, October 25, 2010.
7 U.S. Geological Survey (USGS), Mineral Commodity Summaries, January 2011.
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2015, global demand for rare earth elements may reach 210,000 tons per year, according to one
estimate.8 The Industrial Minerals Company of Australia (IMCOA) estimates demand will be
185,000 metric tons in 2015. China’s output may reach 140,000 tons per year (up from 130,000
tons in 2010) in 2015 as China’s annual demand is estimated to rise from 73,000 metric tons (mt)9
to 111,000 mt, according to the IMCOA.10 But the Chinese Rare Earth Industry Association
estimates China’s demand increasing to 130,000 metric tons by 2015. Based on the above
estimates, the non-China annual output would need to be between 45,000 mt to 70,000 mt to meet
global demand for REEs. Although new mine production may be able to make up the difference
for some lighter elements (there may be an excess supply of the lighter elements such as cerium,
lanthanum, and praseodymium), several forecasts show that there will likely be shortfalls of other
light rare earths (LREEs) and several heavier rare earth elements (HREEs), such as, dysprosium,
terbium, neodymium, europium and erbium. This potential shortfall has raised concerns in the
U.S. Congress.
While the Lynas Corp. Mt Weld project and Molycorp’s Mountain Pass operation are projected to
come on-stream in 2012, with annual capacity to produce a total of 40,000 mt by 2013 (and
additional potential annual capacity of 20,000 mt from Molycorp’s Mountain Pass mine by the
end of 2013), most new (greenfield) mining projects could easily take 10 years for development.
In the long run, however, the USGS expects that global reserves and undiscovered resources are
large enough to meet global demand.
As world demand continues to climb, U.S. demand for rare earth elements is also projected to
rise, according to the USGS.11 For example, permanent magnet demand is expected to grow by
10%-16% per year over the next several years. Demand for rare earths in auto catalysts and
petroleum cracking catalysts is expected to increase between 6% and 8% each year over the same
period. Demand increases are also expected for rare earths in flat panel displays, hybrid vehicle
engines, and defense and medical applications. The 2010 composition of U.S. and world demand
is shown in Figure 1. The anticipated composition of demand in 2015 is shown in Figure 2.

8 “Global Rare Earth Demand to Rise to 210,000 Metric Tons by 2015,” October 18, 2010, Bloomberg News. Estimate
provided by Wang Caifeng, Secretary General of the Chinese Rare Earth Industry Association.
9 A metric ton equals 2200 lbs., or 1.1 short tons.
10 IMCOA, Meeting Rare Earth Demand in the Next Decade, March 2011.
11 DOI/USGS Minerals Yearbook, Volume 1, 2007.
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Figure 1. Rare Earth Demand by Application-U.S. and World, 2010

Source: IMCOA, 2011
Note: Figure created by CRS.
Figure 2. Rare Earth Demand by Application-U.S. and World, 2015

Source: IMCOA, 2011
Note: Figure created by CRS.
Rare Earth Oxide Prices
Prices of rare earth oxides and metals rose rapidly in 2010 and 2011 but declined in the first half
of 2012. Most rare earth experts would agree that the most recent restrictions on Chinese exports
and lack of capacity elsewhere has led to the sharp price rise. Figure 3 illustrates recent price
increases of selected rare earth oxides. With a surge in demand and export restrictions it will take
time for global supply to catch up. Prices may remain high in the short-term but, typically, tend to
fall back to the industry’s marginal cost of production after supply increases.12
However, there are likely structural shifts taking place in the global economy. Well over half the
world’s population is now part of emerging economies, led by China (population 1.3 billion) and

12 Comment: “Unravelling the causes of the mineral price boom,” David Humphreys, Resources Policy, v. 34, 2009.
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India (population 1.0 billion) and followed by Africa (population nearly 1 billion), South America
(population 400 million), and other parts of Asia (nearly 1.5 billion people). Their economies are
expected to grow in the coming years which could keep prices under pressure even as new supply
comes on-stream.
It is unclear where rare earth prices will plateau because this rate of growth suggests a structural
shift in demand. Emerging economies’ growth is usually more materials-intensive than developed
economies because of the huge materials need for new infrastructure projects. If REE producers
have a difficult time catching up to the expected sustained growth in the industry, prices may
likely remain high for some time, particularly for the less available HREEs. Prices will depend on
the long-term strength of demand in the emerging economies. History shows, however, that the
long-run supply curve does adjust to meet demand.13
In general terms, costs of mineral extraction are increasing because of lower ore grades and
increasing capital costs. China’s costs of production are likely to rise as environmental and social
costs and the potential for rising labor costs begin to be incorporated into China’s REE production
and processing operations. China would likely be unable to increase production significantly to
drive prices down, as they have done in the past, because of higher costs, internal demand for
domestic consumption, and the value-added export market. Byproduct REEs could also be
impacted by rising downstream processing costs.14
Manufacturing costs of consumer goods that contain REEs may continue to decline per unit of
output even as raw material costs continue to rise. Prices for many consumable goods have come
down so that households are likely to have multiple units of a variety of products such as cell
phones, laptops, flat panel televisions, and iPods, etc. Even with materials efficiencies, where less
metal is used per unit of output, there is upward pressure on mineral prices because of overall
demand growth and lack of supply capacity.15 Because the materials intensity (small amounts per
unit output) of REEs are relatively low for most end-use applications, low-cost manufactured
goods may contain high-cost materials.
Adequate mine capacity is only a part of the solution to any REE supply shortfall. Additional
processing, refining, and manufacturing capacity is necessary to meet growing demand. Some
raw material dependence will be addressed in the near term but the longer-term challenge is
building out the entire supply chain outside China to meet growing global demand. While
sustained high prices may attract some investors, the technology and skills must also be available
to carry out the work.

13 Ibid.
14 Byproducts are materials produced as a result of production of a primary product for which the mine was developed.
The costs of production are assigned to the production of the primary product.
15 “The great metals boom: A perspective,” David Humphreys, Resources Policy, v. 35, 2010.
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Figure 3. Selected Rare Earth Oxide Prices, 2007-2011
(US $/kg)

Source: IMCOA, 2011 and METI, 2011.
Notes: According to the Ministry of Economy Trade and Industry (METI) of Japan, prices for dysprosium and
neodymium metals rose dramatical y. The price for dysprosium metal rose form $250/ kg in April 2010 to
$2,840/kg by July 2011, while the price for neodymium metal rose from $42/kg in April 2010 to $334/kg in July
2011. 2011 prices taken from CRS Report R42510, China’s Rare Earth Industry and Export Regime: Economic and
Trade Implications for the United States, by Wayne M. Morrison and Rachel Tang.
The Application of Rare Earth Metals in
National Defense16
It has been estimated that the Department of Defense (DOD) uses about 5% of domestic
consumption of rare earths. However, no firm estimates are available at this time. Rare earth
elements used for defense purposes are primarily found in two types of commercially available,
permanent magnet materials. They are samarium cobalt (SmCo), and neodymium iron boron
(NdFeB). NdFeB magnets are considered the world’s strongest permanent magnets and are
essential to many military weapons systems. SmCo retains its magnetic strength at elevated
temperatures and is ideal for military technologies such as precision-guided missiles, smart
bombs, and aircraft. The superior strength of NdFeB allows for the use of smaller and lighter
magnets in defense weapon systems. Permanent magnets containing neodymium, gadolinium,

16 This section was prepared by Valerie Grasso, CRS Foreign Affairs, Defense, and Trade Division. For more details,
see CRS Report R41744, Rare Earth Elements in National Defense: Background, Oversight Issues, and Options for
Congress, by Valerie Bailey Grasso.
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dysprosium, and terbium are also used in numerous electrical and electronic components and
generators for wind turbines.
With the exception of small amounts of yttrium, rare earths have yet to be included in the
strategic materials stockpile for national defense purposes. Generally, strategic and critical
materials have been associated with national security purposes. In the Strategic Materials
Protection Board’s (SMPB) last report (December 2008), the SMPB defined critical materials in
this way: “the criticality of a material is a function of its importance in DOD applications, the
extent to which DOD actions are required to shape and sustain the market, and the impact and
likelihood of supply disruption.”17 DOD’s current position on strategic materials was largely
determined by the findings of the SMPB.18 Many scientific organizations have concluded that
certain rare earth metals are critical to U.S. national security and becoming increasingly more
important in defense applications.19
Some experts are concerned that DOD is not doing enough to mitigate the possible risk posed by
a scarcity of domestic suppliers. As an example, the United States Magnet Materials Association
(USMMA), a coalition of companies representing aerospace, medical, and electronic materials,
has recently expanded its focus to include rare earth metals and the rare earth magnet supply
chain. In February 2010, USMMA unveiled a six-point plan to address what they describe as the
“impending rare earth crisis” which they assert poses a significant threat to the economy and
national security of the United States.20 However, it appears that DOD’s position assumes that
there are a sufficient number of supplier countries worldwide to mitigate the potential for
shortages.
Rare Earth Resources and Production Potential
Rare earth elements often occur with other elements, such as copper, gold, uranium, phosphates,
and iron, and have often been produced as a byproduct. The lighter elements such as lanthanum,
cerium, praseodymium, and neodymium are more abundant and concentrated and usually make
up about 80%-99% of a total deposit. The heavier elements—gadolinium through lutetium and
yttrium—are scarcer but very “desirable,” according to USGS commodity analysts.21
Most REEs throughout the world are located in deposits of the minerals bastnaesite22 and
monazite.23 Bastnaesite deposits in the United States and China account for the largest

17 2010, http://www.bloomberg.com/news/2010-11-01/pentagon-is-myopic-over-china-s-rare-earths-monopoly-u-s-
lawmakersays.
18 U.S. Government Accountability Office, Rare Earth Materials in the Defense Supply Chain, GAO,-10-617R,
April 1, 2010.
19 Green Jeffrey A. Defense, Energy Markets Should Brace for Shortages of Key Materials. National Defense Industrial
Association, October 2009; U.S. Lacks Data on Supply of Minerals Critical to Economy, National Security; Defense
Stockpile is Ineffective. National Academy of Sciences, October 5, 2007, at http://www8.nationalacademies.org/
onpinews/newsitem.aspx?RecordID=10052007.
20 Magnet Materials Supply Chain Players Propose Six-Point Plan to Address Impending Rare Earths Crisis, USMMA,
February 4, 2010, at http://www.usmagnetmaterials.com/?p=74.
21 DOI/USGS Fact Sheet 087-02, Rare Earth Elements-Critical Resources for High Technology.
22 Bastnaesite is mineral with the formula (Ce, La)CO3(F,OH) that may contain other rare earth elements.
23 Monazite is a mineral with the formula (Ce, La, Nd, Th)PO4 that may contain other rare earth elements.
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concentrations of REEs, while monazite deposits in Australia, South Africa, China, Brazil,
Malaysia, and India account for the second largest concentrations of REEs. Bastnaesite occurs as
a primary mineral, while monazite is found in primary deposits of other ores and typically
recovered as a byproduct. Over 90% of the world’s economically recoverable rare earth elements
are found in primary mineral deposits (i.e., in bastnaesite ores).24
Concerns over radioactive hazards associated with monazites (because it contains thorium) have
nearly eliminated it as a REE source in the United States. There are high costs associated with
thorium disposal. Bastnaesite, a low-thorium mineral (dominated by lanthanum, cerium, and
neodymium) is shipped from stocks in Mountain Pass, CA. The more desirable HREEs account
for only 0.4% of the total stock. Monazites have been produced as a minor byproduct of uranium
and niobium processing. Rare earth element reserves and resources are found in Colorado, Idaho,
Montana, Missouri, Utah, and Wyoming. HREEs dominate in the Quebec-Labrador (Strange
Lake) and Northwest Territories (Thor Lake) areas of Canada. There are high-grade deposits in
Bayan Obo, Inner Mongolia, China (where much of the world’s REE production is taking place)
and lower-grade deposits in South China provinces providing a major source of the heavy rare
earth elements.25 Areas considered to be attractive for REE development include Strange Lake
and Thor Lake in Canada; Karonga, Burundi; and Wigu Hill in Southern Tanzania.
Table 2 and Figure 4 illustrate China’s near-monopoly position in world rare earth production.
However, REE reserves and the reserve base are more dispersed throughout the world. China
holds 50% of the world’s reserves (55 million metric tons out of 110 million metric tons) and the
United States holds about 13% according to the most recent USGS estimate.26 South Africa and
Canada (included in the “Other” category) have significant REE potential, according to the
USGS. REE reserves are also found in Australia, Brazil, India, Russia, South Africa, Malaysia,
and Malawi.
According to some geologists, careful consideration should be given to the feasibility of mining
and processing of REEs as a byproduct of phosphorus deposits and from titanium and niobium
mines in Brazil and elsewhere in the world.27 Canadian, Chinese, and U.S. firms have recently
assessed various REE deposits associated with development of primary minerals such as gold,
iron ore, and mineral sand projects in the United States.

24 DOI/USGS Circular 930 N, International Strategic Minerals Inventory Summary Report—Rare Earth Oxides, by
Wayne Jackson and Grey Christiansen, 1993.
25 Dr. Anthony N. Mariano, The Nature of Economic REE and Y Minerals on a World Level, presented at the MIT
Energy Initiative Workshop, April 29, 2010.
26 USGS Mineral Commodity Summaries, January 2011.
27 Ibid.
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Table 2. Rare Earth Elements: World Production and Reserves—2010
Mine
Reserve Basea
Production
% of
Reserves
% of
(million metric
% of
Country
(metric tons) total
(million metric tons)
total
tons)
total
United States
none

13.0
13
14.0
9.3
China 130,000
97.3
55.0 50
89.0
59.3
Russia

19.0
17 21.0
14
(and other
former Soviet
Union countries)
Australia

1.6 1.5
5.8
3.9
India 2,700
2
3.1 2.8
1.3
1
Brazil 550
0.42
Smal


Malaysia 350
0.27
Smal



Other NA

22.0
20
23
12.5
Total 133,600

110.0

154
Source: U.S. Department of the Interior, Mineral Commodity Summaries, USGS, 2010.
a. Reserve Base is defined by the USGS to include reserves (both economic and marginally economic) plus
some subeconomic resources (i.e., those that may have potential for becoming economic reserves).

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Figure 4. Rare Earth Elements: World Production, Reserves and U.S. Imports

Source: U.S. Geological Survey, Mineral Commodity Summaries, 2008-2011. (Figure created by CRS.)
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There is currently some rare earth mine production at Mountain Pass, CA, in the United States.
U.S.-based Molycorp operates a separation plant at Mountain Pass, CA, and sells the rare earth
concentrates and refined products primarily from previously mined above-ground stocks.
Neodymium, praseodymium, and lanthanum oxides are produced for further processing, but these
materials are not turned into rare earth metal in the United States. While the United States exports
much of its REE stocks to Japan, that material is not counted in the trade equation for import
reliance because the material is not produced from a primary source.
Molycorp, which has an exploration program underway to further delineate its rare earth mineral
deposits, has plans for full mine production in the second half of 2012 and has plans to modernize
its refinery facilities. Molycorp’s Mountain Pass deposit contained an estimated 30 million tons of
REE reserves and once produced as much as 20,000 tons per year.28 Mountain Pass cut-off
grade29 (below which the deposit may be uneconomic) is, in some parts, 5.0%, while the average
grade is 9.2%.30 Molycorp anticipates becoming the low cost producer. U.S. Rare Earth (another
U.S. based company), in the pre-feasibility stage of mine development, has long-term potential
because of its large deposits in Idaho, Colorado, and Montana.31
Canadian deposits contain the heavy rare earth elements dysprosium, terbium, and europium,
which are needed for magnets to operate at high temperatures. Great Western Minerals Group
(GWMG) of Canada and Avalon Rare Metals have deposits with an estimated high content (7%
and 20% respectively) of heavy rare earth elements.32 Avalon is developing a rare earth deposit at
Thor Lake in the Northwest Territories of Canada. Drilling commenced in January 2010. Thor
Lake is considered by some in the industry to contain one of the largest REE deposits in the world
with the potential for production of heavy REEs.33 GWMG owns a magnet alloy producer in the
U.K. When GWMG begins production in Canada and elsewhere, they plan to have a refinery near
the mine site allowing greater integration and control over the supply chain. GWMG’s biggest
competitive advantage could be its potential for a vertically integrated operation. The Japan Oil,
Gas, and Metals National Corporation (JOGMEC) signed an agreement with Midland Exploration
Inc. for development of the Ytterby project in Quebec, Canada. JOGMEC is under the authority
of the Japanese Ministry of Economy, Trade, and Industry with a mandate to invest in projects
worldwide to receive access to stable supplies of natural resources for Japan.
The Lynas Corp., based in Australia, has immediate potential for light rare earths development,
according to investor analyst Jack Lifton. Development of Lynas’s Mt. Weld deposit in Australia
is underway to begin new mine production in 2012 and there is potential to reopen the rare earth
mine Steenkampskraal in South Africa. An agreement between GWMG and Rare Earth
Extraction Co. Ltd. of Stellenbosch to develop the mine is in progress.

28 The Jack Lifton Report, The Rare Earth Crisis—Part I, by Jack Lifton, October 2009.
29 Defined by the Department of the Interior’s Dictionary of Mining, Mineral, and Related Terms, as the lowest grade
of mineralized rock qualified as ore in a given deposit and the lowest assay that is included in an ore estimate.
30 Industrial Minerals Company of Australia (IMCOA), Meeting Rare Earth Demand in the Next Decade, March 2011,
p. 7.
31 Rare Earth Strategic Supplies More Important Than Price, Industrial Metals/Minerals Interview of Jack Lifton by
The Gold Report, December 14, 2009.
32 IMCOA, p.7.
33 Ibid.
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Access to a reliable supply to meet current and projected demand is an issue of concern. In 2010,
China produced 97% of the world’s rare earth elements (measured in rare earth oxide content)
and continues to restrict exports of the material through quotas and export tariffs. China has plans
to reduce mine output, eliminate illegal operations, and restrict REE exports even further. China
has cut its exports of rare earth elements from about 50,000 metric tons in 2009 to 30,000 metric
tons in 2010—a 60% reduction from 2009. The Chinese Ministry of Commerce announced export
quotas were about 30,000 mt for 2011 and are established at 31,438 mt. The 2012 export
allocations are awarded to companies if they meet government established
environmental/pollution controls standards.
While limited production and processing capacity for rare earths currently exists elsewhere in the
world, additional capacity is expected to be developed in the United States, Australia, and Canada
within two to five years, according to some experts.34 Chinese producers are also seeking to
expand their production capacity or seek long-term supply agreements in areas around the world,
particularly in Africa and Australia. There are only a few exploration companies that develop the
resource, and because of long lead times needed from discovery to refined elements, supply
constraints are likely in the short term.
A Department of Energy report highlights mines that could potentially come on-stream in the next
five years. These include Mt. Weld (Australia) in 2011; Mountain Pass (USA) in 2012 and 2013;
Eastern Coast (Brazil); Nolans bore (Aus); Nechalacor (Canada); Domng Pao (Vietnam); Hoidas
Lake (Canada); and Dubbo Zirconia (Aus).35
Supply Chain Issues
The supply chain for rare earth elements generally consists of mining, separation, refining,
alloying, and manufacturing (devices and component parts). A major issue for REE development
in the United States is the lack of refining, alloying, and fabricating capacity that could process
any future rare earth production. One U.S. company, Electron Energy Corporation (EEC) in
Landisville, PA, produces samarium cobalt (SmCo) permanent magnets, while there are no U.S.
producers of the more desirable neodymium iron-boron (NdFeB) magnets needed for numerous
consumer electronics, energy, and defense applications. EEC, in its production of its SmCo
permanent magnet, uses small amounts of gadolinium—an REE of which there is no U.S.
production. Even the REEs needed for these magnets that operate at the highest temperatures
include small amounts of dysprosium and terbium, both available only from China at the moment.
EEC imports magnet alloys used for its magnet production from China.
Prior to multimillion dollar investments in mining, separation, and alloying facilities by
Molycorp, and other exploration and development projects in the United States, there was a
significant underinvestment in U.S. supply chain capacity (including processing, workforce
development, R&D) which has left the United States nearly 100% import dependent on all
aspects of the REE supply chain and dependent on a sole source for much of the material. An
April 2010 Government Accountability Office (GAO) report illustrates the lack of U.S. presence
in the REE global supply chain at each of the five stages of mining, separation, refining oxides

34 Jack Lifton, “Is The Rare Earth Supply Crisis Due to Peak Production Capability or Capacity,”
michaelperelman.worldpress.com, September 6, 2009.
35 U.S. Department of Energy, Critical Materials Strategy, December 2010.
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into metal, fabrication of alloys and the manufacturing of magnets and other components.
According to the GAO report, China produces about 95% of the REE raw materials, about 97%
of rare earth oxides, and is the only exporter of commercial quantities of rare earth metals (Japan
produces some metal for its own use for alloys and magnet production). About 90% of the metal
alloys are produced in China (small production in the United States) and China manufactures
75% of the NeFeB magnets and 60% of the SmCo magnets. A small number of SmCo magnets
are produced in the United States. Thus, even if U.S. rare earth production ramps up, much of the
processing/alloying and metal fabrication would occur in China.
According to investor analyst Jack Lifton, the rare earth metals are imported from China, then
manufactured into military components in the United States or by an allied country. Lifton states
that many investors believe that for financing purposes, it is not enough to develop REE mining
operations alone without building the value-added refining, metal production, and alloying
capacity that would be needed to manufacture component parts for end-use products. According
to Lifton, vertically integrated companies may be more desirable. It may be the only way to
secure investor financing for REE production projects.36 Joint ventures and consortiums could be
formed to support production at various stages of the supply chain at optimal locations around the
world. Each investor or producer could have equity and offtake commitments. Where U.S. firms
and U.S. allies invest is important in meeting the goal of providing a secure and stable supply of
REEs, intermediate products, and component parts needed for the assembly of end-use products.
Most experts have predicted where new mining capacity for rare earths is likely to come on-
stream, but it is just as important to know where new downstream capacity (processing, refining,
and metals alloying) is being built or likely to be built in the world as well as the likely investors
in downstream capacity for rare earths. Additional questions that could be addressed by Congress
include how long would it take to develop the skill set in the United States for downstream
production activities? Would an international educational exchange program with those countries
already involved in rare earth refining and recycling be appropriate?
Molycorp’s “Mine to Magnet” Vertical Integration Approach for Rebuilding
the U.S. Rare Earth Supply Chain
From the mid-1960s through the 1980s, Molycorp’s Mountain Pass mine was the world’s
dominant source of rare earth oxides. The ramp up in production had been driven primarily by
Molycorp’s higher grade, its relatively low cost, and a rapid rise in the demand for the LREEs,
particularly europium used for red phosphors in television and computer monitors, and cerium for
glass polishing.37 However, by 2000, nearly all of the separated rare earth oxides were imported,
primarily from China. Because of China’s oversupply, lower cost production, and a number of
environmental (e.g., a pipeline spill carrying contaminated water) and regulatory issues at
Mountain Pass, Molycorp ceased production at its mine in 2002. Since then, the United States has
lost nearly all of its capacity in the rare earth supply chain, including intellectual capacity.
However, under new ownership since 2008, Molycorp has embarked upon a campaign to change
the rare earth position in the United States with its “mine to magnet” (vertical integration)
business model.

36 Op. cit., Lifton Interview by The Gold Report, December 14, 2009.
37 DOI/USGS, Rare Earth Elements—Critical Resources for High Technology, Fact Sheet, 087-02.
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After major energy producer Chevron purchased Union Oil Company of California (UNOCAL),
which included the rare earth mine at Mountain Pass, Chevron wanted to focus on its energy
business. They were willing to sell-off its non energy Molycorp Mountain Pass asset.
When investor groups purchased Molycorp from Chevron in 2008, they did not inherit the
environmental liability that resulted from the pipeline spill. Chevron continued the cleanup that
resulted from an earlier ruptured water disposal pipeline carrying some chemical contaminants
from the oxide separation facility. Since its purchase by the new owners, Molycorp CEO and
engineers have been adamant about minimizing their environmental footprint during the
separation phase of the process. Molycorp designed a proprietary oxide separation process that
would use fewer reagents and recycle the waste water, thus doing without a disposal pond.
Molycorp recently broke ground for their new separation facility at the Mountain Pass mine. This
complex process separates out the individual elements which follows the mining of the raw
material. Molycorp is in the process of reopening the mine in 2012 as the lowest-cost operator,
according to their calculation. They expect production costs at around $2.77/kg versus an
estimated $5.58/kg in China and a potentially much higher cost operation at Lynas at about
$10.11/kg. Molycorp engineers suggest that they will use one-half the amount of ore to get the
same amount of usable end product. In addition, they will use fewer reagents, use “full loop”
recycling, and no evaporation ponds.38
All permits are in place to commence mining with the exception of a permit to transport natural
gas that will be used to power the separation facility. The rights of way for a pipeline must be
approved by the Bureau of Land Management (BLM) and the pipeline permit by Federal Energy
Regulatory Commission (FERC). In the meantime, Molycorp will truck in liquid natural gas for
its energy source until the pipeline is approved.39
Molycorp recently acquired the Japanese subsidiary Santoku America in Tolleson, AZ, and
renamed it Molycorp Metals and Alloys (MMA). This acquisition is part of the firm’s strategy to
become a vertically integrated company. It produces both NdFeB and SmCo alloys used in the
production of permanent magnets. Molycorp Metals and Alloys is the sole U.S. producer of the
NdFeB alloy. Their intention is to modernize the facility and expand metals and metal alloy
production.40 Molycorp also recently purchased a majority interest in AS Silmet, an Estonian-
based rare earth element and rare metals processor, which will double its capacity for rare earth
oxide and metal production (separation) in the near-term, according to Molycorp officials.
The management at MMA is also examining ways to improve metal recycling. Much of their
recycling research is focused on the magnets and the highly valued HREEs. They want to probe
into the commercial feasibility of recycling materials contained in permanent magnets used in
consumer goods. Sourcing sufficient quantities of end-use materials and understanding the
metallurgical processes for extracting the heavy rare earth elements such as the dysprosium and
terbium is an important part of the research. Testing the quality of the recyclable material and
evaluating the economics will determine the project’s success. Molycorp is also evaluating near-
term opportunities to recycle energy efficient light bulbs for the phosphors.41

38 Briefing at Mountain Pass mine site by various Molycorp Engineers, August 8, 2011.
39 Ibid.
40 Briefing at Molycorp Metals and Alloys by Managing Director Randall Ice, on August 9, 2011.
41 Ibid.
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Molycorp has entered into a cooperative research and development agreement (CRADA) with
U.S. Department of Energy’s Ames Laboratory to study new methods to create commercial-grade
permanent magnets used in commercial applications. Development of downstream activities such
as refining, rare earth metals alloying, and permanent magnet manufacturing will require a large
amount of financing, a skilled workforce, and a sizeable U.S. market, all of which could be more
completely developed in the long term. Keeping and recruiting top talent (in engineering, science,
and finance) that can help Molycorp achieve its mine-to-magnet mission is one of the company’s
top priorities, according to company officials. Their aim is to consistently invest in the right
people and the right training to accomplish its goal.
Recent supply chain developments by Molycorp include the announcement of plans to acquire
Neo Materials Technology, Inc.—a Toronto-based firm with rare earth processing and permanent
magnet powder facilities in China. According to Molycorp CEO Mark Smith, 18% of Neo
Materials production volume goes to domestic Chinese companies and 33% is directly exported
to Japan plus an additional 11% goes to Japanese companies operating within China. One concern
voiced by critics of this deal is that some of these highly valued materials could potentially
become subject to Chinese export restrictions. When the deal is finalized, Molycorp plans to ship
7%-12% of its total 2013 production capacity (known as Phase 2 capacity) of 40,000 mt to its
Neo Materials facility in China. Molycorp also entered a joint venture with Daido Steel and
Mitsubishi Corporation of Japan with plans to produce sintered permanent rare earth (NdFeB)
magnets by 2013 in Japan.
Other Recent Supply Chain Developments
The Great Western Mineral Group will form a joint venture with China’s Ganzhau Qiandong Rare
Earth Group to build an oxide separation facility in South Africa. The raw material for the
separation facility will be produced at GWMG’s Steenkampskraal mine in South Africa.
Construction of the processing plant is expected to begin in 2012.
Frontier Rare Earths, based in Luxemburg, along with Korea Resources Corp. formed a joint
venture to build a separation facility also in South Africa. Frontier Rare Earths owns the
nonproducing rare earth Zondkopsdrift mine in South Africa.
Lynas and Siemens have entered into a joint venture for the manufacturing of magnets used in
wind turbine generators. Lynas (45% stake) will provide raw material to Siemens (55% stake)
from their Mt. Weld mine in Australia, which is expected to begin production sometime in 2011.
Lynas expects to process the raw material at its Malaysian processing facility after receiving
approval from the Malaysian government. There are concerns in Malaysia over the proper
disposal of thorium, which is contained in the mineral deposit and produced alongside the rare
earth elements.
Role of China
State-run (“State-Key”) labs in China have consistently been involved in research and
development of REEs for over fifty years. There are two State-Key labs: (1) Rare Earth Materials
Chemistry and Applications, which has focused on rare earth separation techniques and is
affiliated with Peking University, and (2) Rare Earth Resource Utilization, which is associated
with the Changchun Institute of Applied Chemistry. Additional labs concentrating on rare earth
elements include the Baotou Research Institute of Rare Earths, the largest rare earth research
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institution in the world, established in 1963, and the General Research Institute for Nonferrous
Metals established in 1952.42 This long term outlook and investment has yielded significant
results for China’s rare earth industry.
Major iron deposits at Bayan Obo in Inner Mongolia contain significant rare earth elements
recovered as a byproduct or co-product of iron ore mining. China has pursued policies that would
use Bayan Obo as the center of rare earth production and R&D. REEs are produced in the
following provinces of China: Baotao (Inner Mongolia) Shangdong, Jiangxi, Guangdong, Hunan,
Guangxi, Fujian, and Sichuan. Between 1978 and 1989, China’s annual production of rare earth
elements increased by 40%. Exports rose in the 1990s, driving down prices. In 2007, China had
130 neodymium-iron boron magnet producers with a total capacity of 80,000 tons. Output grew
from 2,600 tons in 1996 to 39,000 tons in 2006.
Spurred by economic growth and increased consumer demand, China is ramping up for increased
production of wind turbines, consumer electronics, and other sectors, which would require more
of its domestic rare earth elements. Safety and environmental issues may eventually increase the
costs of operations in China’s rare earth industry as domestic consumption is becoming a priority
for China. REE manufacturing is set to power China’s surging demand for consumer
electronics—cell phones, laptops and green energy technologies. According to the report by
Hurst, China is anticipating going from 12 gigawatts (GW) of wind energy in 2009 to 100 GW in
2020. Neodymium magnets are needed for this growth.43
China’s policy initiatives restrict the exports of rare earth raw materials, especially dysprosium,
terbium, thulium, lutetium, yttrium, and other heavy rare earths. It is unclear how much the export
restrictions affect exports of downstream metal and magnets. According to Hurst, China wants an
expanded and fully integrated REE industry where exports of value-added materials are preferred
(including consumer products). It is common for a country to want to develop more value-added
production and exports if it is possible.44 China’s goal is to build-out and serve its domestic
manufacturing industry and attract foreign investors to participate by locating foreign-owned
facilities in China in exchange for access to rare earths and other raw materials, metals and alloys,
as well as access to the emerging Chinese market.45
Some foreign investors are hesitant to invest in China because of the concerns related to
technology sharing. Also, the September 2010 maritime conflict between China and Japan in
which Japanese officials claimed that China held up rare earth shipments to Japan (denied by
Chinese officials) has heightened the urgency among many buyers to seek diversity in its sources
of rare earth materials.
Some have urged the U.S. Trade Representative to bring a dispute resolution case against China
in the WTO, similar to a case the United States brought against China in 2009 over its export
restrictions (such as export quotas and taxes) on certain raw materials (including, bauxite, coke,

42 China’s Rare Earth Elements Industry: What Can the West Learn? by Cindy Hurst, Institute for the Analysis of
Global Security, March 2010.
43 Ibid.
44 Ibid.
45 For an in-depth discussion on China’s rare earth industry and trade policies, see CRS Report R42510, China’s Rare
Earth Industry and Export Regime: Economic and Trade Implications for the United States, by Wayne M. Morrison
and Rachel Tang.
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fluorspar, magnesium, manganese, silicon metal, silicon carbide, yellow phosphorus, and zinc).
The United States charges that such policies are intended to lower prices for Chinese firms
(especially the steel, aluminum, and chemical sectors) in order to help them obtain an unfair
competitive advantage. China claims that these restraints are intended to conserve the
environment and exhaustible natural resources. According to some press reports, a WTO panel in
April 2011 ruled that China’s export restraints on raw materials violated WTO rules.
On March 13, 2012, President Obama made an announcement that the United States “had asked
the World Trade Organization to facilitate formal consultations with China over its limits on rare
earth exports, in a case filed jointly with Japan and the European Union (EU).”46
In earlier Congressional action, according to a press account, a letter written by four U.S.
Senators in March 2011 urged the Obama Administration to instruct the U.S. Executive Director
at each multilateral bank, including the World Bank, to oppose the approval of any new financing
to the Chinese government for rare earth projects in China.47 The letter also urged the
Administration to impose the same types of restrictions on Chinese investment in mineral
exploration and purchases in the United States as China imposes on foreign investment in rare
earth in China.48
The Chinese government announced in 2010 that it intends to restructure the rare earth mining
industry under the umbrella of a few world-class mining and metal conglomerates for greater
efficiencies and to reduce environmental degradation. In addition to the consolidation of the
industry and environmental cleanup efforts, investor analyst Jack Lifton reports that China is
building strategic stockpiles of rare earths and other critical materials that could meet domestic
demand for several years. South Korea and Japan are also building strategic stockpiles.49 The
level of stockpiling could have a dramatic impact on the market, particularly for HREEs.50

46 Wan, William, Keith B. Richard, and David Nakamura, “U.S. Challenges China’s Curbs on Mineral Exports; China
Vows to Strike Back.” Washington Post, March 13, 2012; and “Obama Announces WTO Case Against China Over
Rare Earths,” CNN Online March 13, 2012, http://www.cnn.com/2012/03/13/world/asia/china-rare-earths-case/
index.html.
47 Letter to Secretary of Treasury Timothy Geitner and Secretary of the Interior Ken Salazar from Senators: Hon.
Charles Schumer; Hon. Debbie Stabenow; Hon. Bob Casey and; Hon. Sheldon Whitehouse, March 15, 2011,
http://insidetrade.com//index.php?option=comiwpfile&amp:file=mar2011/wto2011.0620.pdf.
48 For more details on U.S. trade with China see CRS Report RL33536, China-U.S. Trade Issues, by Wayne M.
Morrison.
49 “Implications for Investors of the Dramatically Increasing Chinese Demand for Rare Earths,” Jack Lifton,
Technology Metals Research, June 15, 2011, http://www.techmetalsresearch.com.
50 Op. cit, Technology Metals Research June 15, 2011.
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Table 3. China’s Rare Earth Production and Exports, 2006-2011
2006 2007 2008 2009 2010 2011
Official
86,520 87,020 87,620 82,320 89,200 93,800
Chinese
production
quota
USGS
119,000 120,000 120,000 129,000 130,000 112,500
reported
(estimated by
production
IMCOA)
Chinese
61,560 60,173 47,449 50,145 30,259 30,246
export
quota
Source: China Ministry of Land and Resources. U.S. Geological Survey. Ministry of Commerce of China.
Note: USGS production data exceeded Chinese quotas, some of which is attributed to illegal mining.
The value of U.S. rare earth imports from China rose from $42 million in 2005 to $129 million in
2010, an increase of 207.1%. However, the quantity of rare earth imports from China fell from a
high of 24,239 metric tons in 2006 to 13,907 metric tons in 2010, a 42.6% decline.
Japan’s Interests
Japan has expressed a sense of urgency to secure new non-Chinese supplies of REEs since the
September 2010 maritime incident with China and the claim of a Chinese supply embargo of
REEs and other materials. Japan’s primary end use application of REEs include polishing (20%),
metal alloys (18%), magnets (14%), and catalysts (12%)—much different than that of the United
States. Japan receives 82% of its REEs from China. Forty percent of China’s REE exports go to
Japan and 18% to the United States.
Japan-based firms and the Japanese government are making a number of joint venture agreements
and potential partnerships around the world to secure supplies of REEs, particularly at the raw
material stage. Sumitomo Corp. and the Kazakhstan National Mining Co. – Kazatomprom –
formed a joint venture to produce LREEs. Toyota Tsusho and Sojitz are partnering with Vietnam’s
Dong Pao project to produce LREEs. Japan’s JOGMEC is partnering with India to explore for
REEs and establish a processing facility. JOGMEC also had decided to seek investments in
Australia’s Lynas Corporation.
The Japanese government had expressed an interest in making investments in the United States as
well as the potential investment by Sumitomo into Molycorp’s Mountain Pass mining operation.
The Sumitomo/Molycorp deal did not occur. The role of the Japanese government is to reduce
exploration risk of the Japanese mining industry by becoming an exploration partner in potential
mining projects around the world, while increasing R&D investments into material use
efficiencies and finding substitutes for HREEs in magnets. The Japanese government is also
establishing a “recycling-based society” with major efforts in urban mining (i.e., the recovery of
materials from end use applications, such as laptops and cell phones).
The Japanese government and the private sector have expressed concerns over the export controls
Chinese have placed on ferroalloys that contain dysprosium and other HREEs and mining quotas
for the southern region where most of the HREEs are mined. A number of meetings have been
held between Chinese and Japanese government officials to address the rare earth situation.
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Japan’s access to REEs is vital to their vast manufacturing industry which produces a variety of
parts and consumer goods imported by the United States.
The Hitachi Metals of Japan announced plans to build a rare earth permanent magnet facility at
the company’s site in China Grove, NC.
Selected Possible Policy Options
This section provides a discussion of selected policy options that are included in legislation that
has been introduced in the 112th Congress. The Appendix section of this report summarizes much
of the rare earth related legislation.
Research and Development
Investment in R&D is considered by many experts (e.g., DOE, MIT, and elsewhere) to play a
critical role in the support for and development of new technologies that would address three
areas primarily: greater efficiencies in materials use; substitutes or alternatives for rare earths; and
recycling of rare earth elements. While a small investment is underway at DOE (described
below), larger investments in R&D are being discussed.
Authorize and Appropriate Funding for a USGS Assessment
Congress could authorize and appropriate funding for a USGS comprehensive global assessment
to identify economically exploitable REE deposits (as a main product or co-product), and where
REE could be exploited as a byproduct. Additionally, R&D may be necessary on how to proceed
in the exploitation of high-thorium monazite deposits where REE could be produced as a
byproduct.
Support and Encourage Greater Exploration for REE
Supporting/encouraging greater exploration for REE efforts in the United States, Australia,
Africa, and Canada could be part of a broad international strategy. There are only a few
companies in the world that can provide the exploration and development skills and technology
for REE development. These few companies are located primarily in Canada, Australia, China,
South Africa, and the United States, and may form joint ventures or other types of alliances for
R&D, and for exploration and development of REE deposits worldwide, including those in the
United States. Whether there should be restrictions on these efforts in the United States is a
question that Congress may ultimately choose to address.
Challenge China on Its Export Policy
Challenging China on its export restrictions through the WTO would involve filing a dispute
based on WTO rules that generally prohibit members from imposing restrictions (i.e., quotas) or
other restraints (e.g., minimum prices or licensing) on exports. In June 2009, the United States
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filed a dispute over raw material exports from China, which included bauxite, coke, fluorspar,
magnesium, manganese, silicon carbide, silicon metal, yellow phosphorus and zinc.51 Some REE
analysts assert that China sets export restrictions to meet growing Chinese demand for raw
materials and to force the manufacturing of end-use products in China.52
Establish a Stockpile
Establishing a government-run non-defense economic stockpile and/or private-sector stockpiles
that would contain supplies of specific REE broadly needed for “green initiatives” and defense
applications is a policy advocated by some in industry and government. Generally, stockpiles and
stockpile releases could have an impact on prices and supply but would also help ensure supplies
of REE materials (oxides, metals, etc.) during times of normal supply bottlenecks. However, an
economic stockpile could be costly and risky, as prices and technology may change the
composition of REEs that are needed in the economy.
According to USGS,53 DOD along with USGS is examining which of the REEs might be
necessary in the National Defense Stockpile (NDS). In the recent past, NDS materials were stored
for wartime use based on a three-year war scenario. Some of the rare earth elements contained in
the National Defense Stockpile were sold off by 1998. However, rare earth elements were never
classified as strategic minerals.54 DOD had stockpiled some yttrium but has since sold it off, and
none of the REEs have been classified as strategic materials. Critical questions for stockpile
development would be: What materials along the supply chain should be stockpiled? For
example, should the stockpile contain rare earth oxides or alloyed magnets which contain the
REEs, or some combination of products?
The National Research Council (NRC) has produced a report on minerals critical to the U.S.
economy and states: “... most critical minerals are both essential in use (difficult to substitute for)
and prone to supply restrictions.”55 While the NRC report is based on several availability criteria
used to rank minerals for criticality (geological, technical, environmental and social, political, and
economic), REEs were determined to be critical materials assessed at a high supply risk and the
possibility of severe impacts if supplies were restricted. Some of the REE applications are viewed
as more important than others and some are at greater risk than others, namely the HREEs, as
substitutes are unavailable or not as effective.56

51 Office of the U.S. Trade Representative, Press Release, “WTO Case Challenging China’s Export Restraints on Raw
Material Inputs,” June 23, 2009.
52 Irma Venter, “Investors take closer look at rare earth elements as technology, green revolution pick up pace,” Mining
Weekly Online, http://www.miningweekly.com, September 18, 2009.
53 Phone interview with Jim Hedrick, Rare Earth Specialist, USGS, October 1, 2009.
54 For a discussion of the strategic materials for defense uses, see CRS Report RL33751, The Specialty Metal Clause:
Oversight Issues and Options for Congress, by Valerie Bailey Grasso.
55 National Research Council, Minerals, Critical Minerals, and the U.S. Economy, National Academies Press, 2008.
56 DOI/USGS, Minerals Yearbook, Volume 1, 2007.
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Hearings on Rare Earths and Related Legislation in
the 112th Congress
Four hearings were held on rare earth elements and critical materials in the spring of 2011.57
Hearings were held to address potential supply risk associated with REEs, rare metals, and other
critical materials. The witness testimony covered themes such as the potential impacts of supply
disruption, the need for a more efficient regulatory and permitting framework for domestic
minerals and downstream processing development, more complete information and analysis of
the global REE space, and the role of the U.S. government. The House Committee on Natural
Resources marked up and reported out H.R. 2011 on July 20, 2011. H.R. 2011 is the bill that has
moved the furthest this session.
Discussion of the U. S. government role focused on investment in R& D that would examine
more efficient use of raw materials, possible substitutes, and recycling. There was attention
placed on the government’s need to examine and support a vertically integrated rare earth supply
chain in the United States. There was also some concern over whether the private sector should
establish some buffer inventory and if DOD needed to establish a small-scale stockpile for
defense and national security purposes. Much of the testimony concluded that there is a sense of
urgency to expand education and training to achieve any build-out of a rare earth supply chain in
the United States. Much of the world’s expertise is now in China and Japan.
Executive Branch Activities
Below is a summary of selected current research, development, information, and analysis
activities on rare earth elements at federal agencies.
Department of Energy58
The Office of Science conducts a Materials Science and Engineering Program (FY2010 enacted,
$5 million) at the Ames National Laboratory, and funds its Energy Innovation Hub Program to
conduct R&D on critical materials (FY2012 enacted, $19.4 million; FY2013 request $24.2
million).
Within the Office of Energy Efficiency and Renewable Energy there is an Applied Magnet
Research Program (FY2010, $2 million) at Ames Laboratory and an Alternative Motor Design
Program designing motors without rare earth permanent magnets (FY2010, $1.4 million) at Oak
Ridge National Laboratory.

57 House Subcommittee on Energy and Mineral Resources, Oversight hearings on Strategic and Critical Minerals
Policy, May 24 2011; House Subcommittee on Energy and Mineral Resources, Hearing on H.R. 2011 and H.R. 1314,
June 3, 2011; House Committee on Science, Subcommittee on Investigations and Oversight hearing on a National
Critical Materials Strategy, June 14, 2011. Senate Committee on Energy and Natural Resources, Hearing on Energy
Efficiency and rare earth minerals (S. 383, S. 1113, and S. 421), June 9, 2011.
58 Budget information on DOE programs obtained from DOE Budget Highlights, FY2010-FY2012 Congressional
Budget Request.
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The Advanced Research Projects Agency – Energy (ARPA-E) (FY2011 enacted $179.6 million;
FY2012 enacted, $275 million) is conducting research on Batteries for Electric Energy Storage
(FY2010, $35 million) and Substitutes for Rare Earth Magnets (FY2009, $6.6 million).
In December 2010 and December 2011, the Department of Energy issued its Critical Materials
Strategy report. These reports examine and provide demand forecasts for rare earths and other
elements required for numerous energy and electronic applications.59
Department of the Interior
The National Minerals Information Center housed within the USGS provides an annual summary
of rare earth activity in its Mineral Commodities Summaries report and Minerals Yearbook.60 The
USGS also provides mineral resource assessments and has recently published a study on
recycling of rare earths.61 Its most recent resource assessment of rare earth potential in the United
States was published in a November 2010 USGS report.62
Department of Defense
The Office of Industrial Policy is currently reviewing the rare earth mineral supply chain. The
Office of the Secretary of Defense reviewed its National Defense Stockpile and issued a report in
2009: Reconfiguration of the National Defense Stockpile Report to Congress, Washington DC,
U.S. Department of Defense.
As part of the National Defense Authorization Act for FY2011b(Section 843 of P.L. 111-383), the
DOD was required by Congress to prepare an “Assessment and Plan for Critical Rare Earth
Materials in Defense Applications” to a number of congressional committees by July 6, 2011.
Because the report was not yet available to Congress, several members of the House Armed
Services Committee sent a letter on August 5, 2011, requesting an interim report from DOD by
August 19, 2011.63
In March 2012, DOD released a seven-page report. The report stated that “Seven of the 17 rare
earth elements were found to meet the criteria established in Section 843.”64 They are
dysprosium, erbium, europium, gadolinium, neodymium, praseodymium, and yttrium. DOD’s
assessment of the forecast for a domestic supply for key rare earths concluded: “by 2012 U.S.
production (for seven rare earths used in military applications) could satisfy the level of
consumption required to meet defense procurement needs, with the exception of yttrium.”65

59 U.S. Department of Energy, Critical Materials Report, December 2010.
60 http://minerals.usgs.gov/minerals/pubs/mcs2011.pdf
61 U.S. Department of the Interior, USGS, Rare Earth Elements- End Use and Recyclability, Scientific Investigations
Report 2011-5094.
62 U.S. Department of the Interior, USGS, The Principal Rare Earth Elements Deposits of the United States—A
Summary of Deposits and a Global Perspective. USGS Scientific Investigations Report 2010-5220.
63 Letter from the Congress of the United States, directed to The Honorable Leon E. Panetta, U.S. Department of
Defense, August 5, 2011.
64 U.S. Department of Defense. Report to Congress—Rare Earth Materials in Defense Applications. Frank Kendall,
Acting Under Secretary of Defense for Acquisition, Technology and Logistics, March 12, 2012, p. 4.
65 Ibid, p. 4.
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In an April 2012 interview with Bloomberg News, the DOD head of industrial policy confirmed
that DOD uses less than 5% of rare earths used in the United States, and that DOD was closely
monitoring the rare earth materials market for any projected shortfalls or failures to meet mission
requirements. Brett Lambert, Deputy Assistant Secretary of Defense for Manufacturing and
Industrial Base Policy, suggested that if material shortages were projected, DOD would seek
congressional approval to stockpile materials. Other measures could include the use of
contingency contracting to meet DOD requirements.66
Other Federal Agencies
Other Executive Branch agencies involved with rare earths and critical materials include the
Department of Commerce and Office of the U.S. Trade Representative, which reviews global
trade policy (e.g., China’s rare earth export policy) and did initiate action (March 2012) under
World Trade Organization (WTO) rules; the Department of State, which reports on host
government policies, private sector activities, and domestic markets; and the Environmental
Protection Agency, which establishes federal environmental standards for numerous activities,
including mining.
White House Office of Science and Technology Policy
The White House Office of Science and Technology Policy (OSTP) has formed an Interagency
Working Group on Critical and Strategic Minerals Supply Chains. Its participants include
representatives from Department of Energy, Department of Defense, Department of the Interior,
Department of Commerce, Environmental Protection Agency, Department of State, Department
of Justice, and the Office of the U.S. Trade Representative. The group’s focus is to establish
critical mineral prioritization and early warning mechanism for shortfalls, to establish federal
R&D priorities, to review domestic and global policies related to critical and strategic minerals
(e.g., stockpiling, recycling, trade, etc.), and to ensure the transparency of information.

66 Ratnam, Gopal, “Rare Earth Shortage Would Spur Pentagon to Action,” Bloomberg News, April 9, 2012,
http://www.bloomberg.com/news/2012-04-09/rare-earths-shortage-would-spur-pentagon-to-action.html.
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Appendix. Rare Earth-Related Legislation in the
112th Congress
H.R. 1388, the Rare Earths Supply Chain Technology and Resources
Transformation Act of 2011
Introduced by Representative Mike Coffman on May 6, 2011, and referred to the House
Committee on Science, Space, and Technology, Subcommittee on Energy and the Environment,
and the Committees of Natural Resources and Armed Services. The bill is also referred to as the
Restart Act of 2011. The bill seeks to reestablish a competitive domestic rare earths supply chain
within DOD’s Defense Logistics Agency (DLA).
H.R. 1540, the National Defense Authorization Act for FY2012
Introduced by Representative Howard McKeon on April 14, 2011. Section 835 would require the
Defense Logistics Agency Administrator for Strategic Materials to develop an inventory for rare
earths materials to support defense requirements, as identified by the report required by Section
843 of the National Defense Authorization Act for FY2011 (P.L. 111-383).
H.R. 1314, the Resource Assessment of Rare Earths (RARE) Act of 2011
Introduced by Representative Hank Johnson on April 1, 2011; referred on April 6 to the House
Natural Resources Committee’s Subcommittee on Energy and Mineral Resources. The bill would
direct the Director of the U.S. Geological Survey through the Secretary of the Interior to examine
the need for future geological research on rare earth elements and other minerals and determine
the criticality and impact of a potential supply restriction or vulnerability.
H.R. 952, the Energy Critical Elements Renewal Act of 2011
Introduced by Representative Brad Miller on March 8, 2011; referred to the Committee on
Science, Space, and Technology. The bill would develop an energy critical elements program,
amend the National Materials and Minerals Policy Research and Development Act of 1980,
establish a temporary program for rare earth material revitalization, and serve other purposes.
S. 383, the Critical Minerals and Materials Promotion Act of 2011
Introduced by Senator Mark Udall on February 17, 2011; referred to the Committee on Energy
and Natural Resources. The bill would require the Secretary of the Interior to establish a scientific
research and analysis program to assess current and future critical mineral and materials supply
chains, strengthen the domestic critical minerals and materials supply chain for clean energy
technologies, strengthen education and training in mineral and material science and engineering
for critical minerals and materials production, and establish a domestic policy to promote an
adequate and stable supply of critical minerals and materials necessary to maintain national
security, economic well-being, and industrial production with appropriate attention to a long-term
balance between resource production, energy use, a healthy environment, natural resources
conservation, and social needs.
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H.R. 618, the Rare Earths and Critical Materials Revitalization Act of 2011
Introduced by Representative Leonard Boswell on February 10, 2011; referred to the Committee
on Science, Space, and Technology. The bill seeks to develop a rare earth materials program and
amend the National Materials and Minerals Policy, Research and Development Act of 1980. If
enacted, it would provide for loan guarantees to revitalize domestic production of rare earths in
the United States.
S. 1113, the Critical Minerals Policy Act of 2011
Introduced by Senator Lisa Murkowski on May 26, 2011; referred to the Committee on Energy
and Natural Resources. The bill would define what critical minerals are, but would request that
the Secretary of the Interior establish a methodology (in consultation with the National Academy
of Sciences, the National Academy of Engineering and various Department Secretaries) that
would identify which minerals qualify as critical. The Secretary of the Interior would direct a
comprehensive resource assessment of critical mineral potential in the United States, including
details on the critical mineral potential on federal lands. S. 1113 would establish a Critical
Minerals Working Group to examine the permitting process for mineral development in the
United States and facilitate a more efficient process; specifically, that would require a
performance metric for permitting mineral development and report on the timeline of each phase
of the process. The Department of the Interior (DOI) would produce an Annual Critical Minerals
Outlook report that would provide forecasts of domestic supply, demand, and price for up to ten
years. The proposed Annual Critical Minerals Outlook would also assess critical mineral
requirements for national security, energy, and economic well-being, and provide analyses of the
implications of potential supply shortfalls. It would provide projections for recycling and market
penetration of alternatives and international trends associated with critical minerals. Section 109
proposes greater international cooperation with allies on critical minerals and supply chain issues.
If it was determined that there is no viable production capacity in the United States, a series of
activities may occur with allies, led by the Secretary of State and Secretary of the Interior.
DOE would lead research and development on critical minerals and workforce development that
would support a fully integrated supply chain in the United States. Title II of the bill recommends
mineral-specific action (led by DOE) for cobalt, helium, lead, lithium, low-btu gas, phosphate,
potash rare earth elements, and thorium. For example, there would be R&D for the novel use of
cobalt, grants for domestic lithium production R&D, and a study on issues associated with
establishing a licensing pathway for the complete thorium nuclear fuel cycle. Title III would
repeal 1980 Minerals Policy Act and Critical Minerals Act of 1984 and would authorize for
appropriation, $106 million.
H.R. 2011, the National Strategic and Critical Minerals Policy Act of 2011
Introduced by Representative Doug Lamborn on May 26, 2011; referred to the Committee on
Natural Resources. The bill would direct the Secretary of the Interior to prepare a report on public
lands that have been withdrawn or are otherwise unavailable for mineral exploration and
development, mineral requirements of the United States, the nation’s import reliance on those
minerals, a timeline for permitting mineral-related activities on public lands, and the impacts of
litigation on issuing mineral permits, among other things. The bill provides an authorization for
appropriation, to the Secretary of the Interior, of $1 million for fiscal years 2012 and 2013. The
House Committee on Natural Resources marked up and reported out H.R. 2011 on July 20, 2011.
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H.R. 2090, the Energy Critical Elements Advancement Act of 2011
Introduced by Representative Randy Hultgreen on June 2, 2011. The bill would require
collaboration between the Secretary of the Interior and Secretary of Energy to improve
assessments of “energy critical elements throughout the supply chain, supply, demand, disposal
and recycling.” Additionally it calls for more R&D on materials use substitution, recycling, and
life-cycle analysis. The bill provides a list of energy critical elements.
H.R. 2184, the Rare Earth Policy Task Force and Materials Act
Introduced by Representative Mike Coffman on June 15, 2011. The bill would create a Rare Earth
Task Force within the DOI and be composed of the Secretary or designees from DOE, DOC,
DOS, DOD, USDA, OMB, and CEQ, chaired by the Secretary of the Interior. The task force
would examine impediments to domestic development of a REE supply chain. The Secretary of
the Interior would prepare a Materials Program Plan of R&D that would support and help ensure
long-term viability of a domestic rare earth industry. The plan would support numerous activities
related to improved assessment and development technology, processing technology, and end-use
applications. The bill would encourage expanding opportunities for higher education in that it
would support the build-out of the rare earth supply chain.

Author Contact Information

Marc Humphries

Specialist in Energy Policy
mhumphries@crs.loc.gov, 7-7264


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