House China Task Force Briefing

Remarks of ASFE Steven Winberg as prepared at the House China Task Force Briefing on July 24, 2020

Chairman McCaul and members of the task force, thank you for asking me to speak to you today.

The creation of this task force comes at a critically important time.  China represents an increasing challenge for the U.S., especially in the wake of the COVID pandemic.

President Trump deserves credit for taking on what has been called the “defining geopolitical issue of this century.”

Before diving into rare earths and critical minerals, I want to briefly update you on the China Phase One Trade Agreement.

This agreement held the promise of rebalancing our vital trade partnership with China.  China agreed to buy an additional $52.4B in energy products on top of 2017 baselines.  However, based on China’s own import data, as of May China has met a very small percentage of its total 2020 energy purchase commitments.  This, while China imported record volumes of energy goods from our allies and adversaries.

With respect to rare earth elements and critical minerals, it is one of our most important trade relationships with China, but sometimes overlooked in broader discussions.  There are 35 minerals, including rare earths, designated as critical by the Department of the Interior.  

According to recent figures, the U.S. is import reliant on 31 of the 35 critical minerals, meaning imports are greater than half of annual consumption.  What is more, there are 14 critical minerals that are 100% imports.  The U.S. does not have any domestic production for these 14 critical minerals.

Focusing for a moment on rare earths, currently, 100% of U.S. rare earth consumption is imported, and 80% of these imports are from China.  The U.S. relies almost exclusively on China for rare earth elements and many other critical minerals.  From 2015-2018, China supplied 78% of the U.S. needs for rare earth compounds.  

In one year, 2017, we imported 12,000 tons of rare earth elements. In small quantities, there are a few other international producers, but when it comes to our defense and industrial base, we must rely on China.

This task force has identified five key aspects of our strategic relationship with China.

First, our military superiority and homeland security. Rare earths are used to build satellites and important defense components like aircraft and guidance systems.  Those elements are essential for manufacturing the F-35 and for Virginia-Class submarines.

When it comes to the larger category of critical minerals, we are 80 percent dependent on China for gallium – a critical mineral that is essential for semiconductors and 5G technology as well as for a new type of radar, the Gallium Nitride Q-53 Radar. 

We are 100 percent dependent on other countries, including China, for natural graphite, a mineral that is essential for lithium-ion batteries, steelmaking and other parts of the defense supply chain, and more than 50 percent dependent on other countries including China for tungsten, an essential component for the super alloys required in jet engines, rocket parts and munitions.  From 2015-2018, China was the largest source of tungsten products imported into the U.S. - we imported approximately 2,000 tons.

Second, advanced technology.  Critical minerals and rare earths are absolutely essential to electronic products like smart phones, computer and TV screens, and LED lights, as well as for batteries, magnets and medical devices.

Third, economic strength. Here I would stress the role that these critical minerals play throughout the energy generation value chain.  They are used to refine crude oil and to generate power from renewable energy sources. They also provide key ingredients for the production of petrochemicals, as well as specialty alloys used in power generation, magnets, and advanced battery systems.

Fourth, increasing our competitiveness.  Rare earth elements are found in aerospace parts, high-efficiency lights, luminous paint, magnets, and many other products that we make or sell to other countries.  We utilize those products to create economic opportunity for the people of the U.S. 

Finally, the battle between democracy and authoritarianism.  The freedoms that we enjoy have made the U.S. a beacon to the rest of the world, despite recent challenges.  Those freedoms rest solidly on the availability of critical minerals and rare earth elements.

Why don’t we produce and process more of these materials here?  In part, because of high costs and lack of infrastructure.  The U.S. produced some rare earth mineral concentrates in 2019, but they were exported, as little or no commercial processing capacity is left in the U.S.

There are multiple sources of rare earths and critical minerals in the U.S.  The challenge is that they are not concentrated.  You can’t mine a seam of rare earths.  However, once concentrated, they need to be processed and here in the U.S., we have all but ceded this processing to other countries and, in particular, to China. 

So what are we doing about this?

President Trump has taken strong steps to safeguard American supply chains on critical minerals, including rare earths, through executive action. 

The Administration’s plan, entitled “A Federal Strategy to Ensure Secure and Reliable Supplies of Critical Minerals,” is designed to reduce the U.S. dependency on China for critical minerals and rare earths and the DOE is playing a leading role.

To implement this strategy, DOE has three pillars: diversifying supply, developing substitutes, and driving reuse, recycling, and more efficient use of critical minerals.

Total DOE spending on these activities in the FY20 is $191 million.

Coal, as a carbon ore, holds great potential for sourcing rare earth elements and other critical minerals.  The U.S. has the largest coal deposits in the world and the National Energy Technology Laboratory (NETL) estimates that U.S. coal deposits could hold nearly 11 million metric tonnes of REEs, which could sustain the U.S. market for more than 500 years.

DOE will spend $122 million to establish coal innovation centers through the new Carbon Ore, Rare Earths, and Critical Minerals (CORE-CM) Initiative.  These innovation centers will focus on manufacturing value-added, carbon-based products from coal and develop new methods to extract and process rare earths and critical minerals from coal.

The U.S. has demonstrated on numerous occasions that, when needed, we can succeed at turning around a major portion of our economy.  Innovation and a thriving private sector changed the U.S. from reliance on oil imports to becoming the largest oil producer in the world.  The DOE is taking this same approach on critical minerals and rare earth elements, to win this crucial supply chain battle against China.

DOE is committed to advancing energy research that will change the US-China relationship, which this Task Force has described as “the greatest challenge of our generation.”  

Thank you for this opportunity to discuss this vitally important topic. I look forward to answering your questions.