Confusion around what China has officially agreed to in terms of pausing its rare earths and other critical mineral export controls persists — even as we are a week out from Donald Trump and Xi Jinping’s trade agreement in South Korea.
Significant discrepancies remain between official statements from the White House and China’s Ministry of Commerce on the issue.
Meanwhile, officials and commercial players on both sides of the Pacific are reporting significant differences around their expectations for how quickly, and abundantly, rare earths and other critical minerals will flow from China.
In this week’s Trivium China podcast, host Andrew Polk is joined by his colleague Cory Combs to lay out their latest understanding of the issue. The two discuss:
The key discrepancies between U.S. and Chinese statements on the export control pause
How political messaging from the White House is adding to the confusion for businesses
And whether the political will exists for both sides to fully align on the details – and to maintain the trade ceasefire for a full year
Andrew and Cory then move on to examine the growing debate in Washington around how quickly the U.S. can fully end its reliance on China for rare earth supplies. Cory gets into:
What a realistic timeline for ending reliance on China would look like
The reasons the US found itself in this situation in the first place
Benchmarking how quickly China can build new rare earths processing facilities – as a baseline for the potential U.S. build-out
The highly technical aspects of rare earths processing that will ultimately determine success or failure
It’s another fascinating discussion from the fine folks on the Trivium team – you won’t want to miss it!
Also, check out this excellent paper by Jessica DiCarlo, Cory Combs, and Raphael Deberdt that Cory mentions in the show: Fractured Extraction: Mining Firms, Provinces and Municipalities in the Decentralized Politics of China’s Rare Earth Production
Transcript:
Andrew Polk:
Hi everybody, and welcome to the latest Trivium China Podcast, a proud member of the Sinica Podcast Network. I’m your host, Trivium Co-Founder — Andrew Polk. And I am joined once again today by Trivium’s Head of Critical Minerals and Supply Chain Research, Cory Combs. Cory, how are you doing, man?
Cory Combs:
Very well, thank you. It’s always a pleasure to be back on.
Andrew:
Yeah. It’s great to have you. I think you vie with Kendra and Dinny for favorite podcast guest. So, you’ve got to really bring it, give the people what they want today. You ready?
Cory:
I think so. I’m not going to vibe with Kendra or Dinny, but I appreciate that. And yeah, absolutely excited to dive in today.
Andrew:
So, I’ve got Cory on today because we are going to talk again a little bit about last week’s U.S.-China trade deal. But specifically, we’re going to get into sort of the ongoing confusion around some of what was agreed in that deal. We’re laughing because I don’t know. As I said last week, it was sort of a crazy October, and the dust has started to settle in November. But it’s not settled by any means. The dust is still settling. And there’s still a lot of confusion about what this agreement actually entailed. Specifically, we’ll focus in on the export control piece from China’s side.
Like, we’ll leave the tariffs, we’ll leave fentanyl. All of that seems pretty straightforward. The confusion seems to be around what exactly China has agreed to when it comes to not rolling back but pausing its implementation of export controls for a year. It’s been characterized differently by the U.S. and China. We’ll get into that. China is seems to be kind of slow playing a little bit in terms of publicly acknowledging exactly what was agreed to, and we’ll get into sort of the reasons we think might be behind that. We’ll get a little wonky. We’ll talk about the issue of general licenses for export controls and why that’s really important, and what China may or may not do on that front, because that’s a real sticking point.
We’ll also touch on the issue of dual-use end users. So, how does this apply to items that are going to end up in military and defense technology. And then we’ll touch on the ongoing fragility of the trade ceasefire. Again, as we’ve talked about many times, and kind of look at why we think these misunderstandings keep happening. The second part of the pod, second half of the pod, we’re going to go a little bit outside of Trivium’s normal wheelhouse, but we’re going to have a discussion that’s very much in Cory’s personal wheelhouse, and that is to talk about how quickly the U.S. can alleviate China’s current chokepoints in rare earths and critical minerals.
The administration’s currently saying they can alleviate these choke points, alleviate dependance on China within 18 to 24 months. That strikes us as an exceedingly fast time frame and a time frame that we do not believe can’t come to fruition. But we’ll talk specifically about why we think that, and we’ll also talk about what we think a reasonable time frame is because that’s going to be really important. That’s an increasing conversation that people are having in Washington, D.C. There’s a ton of energy behind finally trying to solve this problem. But there’s big numbers in terms of money being thrown around. There’s sort of wildly optimistic time frames being thrown around. And we’ll just kind of try to level set to see like, what is realistic here. Does that sound good, Cory?
Cory:
That sounds perfect.
Andrew:
Awesome. Well, as you know, before we get into that, we have to start with the customary vibe check. So, how’s your vibe, Cory?
Cory:
Well, I’m actually excited this week — this Sunday I’ll be heading to D.C. I’m back and forth a lot, for those who don’t know, between West Coast and East Coast, and obviously to China and Europe elsewhere. But really excited in particular for this D.C. trip because it’s a chance to talk to both, obviously, a lot of folks in the policy-making apparatus as one in various parts of government, but also, more importantly, the private sector folks who are also on the ground trying to figure out what’s going on. And having these day-to-day conversations, interfacing with embassies, with the U.S. government, with other actors. So, it’s cool to be able to get back in that space with everyone.
Andrew:
Great. Well, I’m excited to have you out here. I will thankfully be in several of those meetings with you, will be talking about all these issues in real time with people who are trying to figure them out, solve the problems, and so that’s going to be exciting. In terms of my vibe, I’m just going to be honest with the people today. I am at the end of a long week, and there are just some days as both a father, a parent, and a business owner, that you have just a bunch of little things that are irritants in your life. And I am just straight up irritable and annoyed today. So, I’m going to try to not let that impact what’s happening on this podcast. But just for context, that’s where my brain space is at. I don’t know if that’s helpful for anybody, but that’s what the vibe checks for.
So, all right, before we get into the meat of the discussion, we also have to go through the usual housekeeping. First, a quick reminder, we’re not just a podcast here. Trivium China is a strategic advisory firm that helps businesses and investors navigate the China policy landscape. That, of course, includes domestic policy in a bunch of different areas, including tech, autos, climate, you name it, we do it, but it also includes policy towards China out of Western capitals like D.C., London, Brussels, and others. So, if you need help on that front, please reach out to us at hq@triviumchina.com. We’d love to have a conversation about how we can support your business or your fund.
Otherwise, if you are interested in receiving more Trivium content, check out our website triviumchina.com. We’ve got a bunch of different subscription options for China policy intel that you can check out, both free and paid options. You’ll definitely find the China policy intel option you need on our site. And finally, please do tell your friends and colleagues about Trivium and about the podcast. And also, while you’re at it, please subscribe and leave us a rating. You know, those small things, as people know, actually do help the podcast get more reach, helps more people know about us, grow our listenership, and also grow our business. So, do us a favor and subscribe and leave us a rating. That’d be great. All right, let’s get into it, Cory.
Let’s start here by level setting on what we see as the key differences between public official statements from China on what they have agreed to in the U.S.-China trade deal when it comes to rare earths export controls, and then official statements from the U.S., the white House in particular issued a readout on what was agreed to over the weekend. And there are some pretty significant differences between those. We will keep it to these kind of official channels for now. Like, there’s always questions on the U.S. side as to whether certain social media posts or statements in the press should reflect official statements, so we’ll keep it to that. Walk me through kind of the discrepancies as you see it today.
Cory:
Absolutely. And so, again, with the focus on the rare earths piece, rare elements piece, both sides have agreed very clearly that China will not implement the rare earth export controls announced October 9th for one year. Now, in a year, they can revisit and decide whether to suspend that for longer or to wait to implement. But for right now, those export controls which were going to come out mostly in December, a couple in November, there’s multiple restrictions that were in play at that time, all of those are suspended for now. So, that’s the point of agreement. That’s great news. Now there are three pieces that are questionable here. To start with, and these are all on the on the part of the U.S. statement, the white House released a statement, as you said, outlining all of the details that were extensively agreed to.
Now, the first issue in that document was that the US claimed that China was going to roll back export controls from October 2022. There were no new export controls in October 2022, and there were none until July of 2023.
Andrew:
There were no export controls from China in October 2022. There were export controls from the U.S. in October 2020.
Cory:
Exactly. So, the U.S. had actually controlled various high-end chips from exports to China, and that was really one of the major catalysts for what ended up becoming this broader export control and retaliation playbook. So, there’s certainly a linkage there. But there were no Chinese export controls at that time to be revoked or to be suspended. So, first of all, it’s not encouraging when the official readout starts with a very basic natural layer. So that was the first thing. In fact, and I think earlier today, they might have finally corrected that. Was that really today, or was that…?
Andrew:
I don’t know when it was, but the current version on the internet has updated the language, which I can read out. Yeah, so they changed it from previously saying the general license means the de facto removal of controls China imposed in April 2025 and October 2022. That was the original statement. Now, the statement says the general license means the de facto removal of controls China imposed since 2023. So, very different.
Cory:
A little more modest in scope and also more realistic. Setting aside the question of maybe they meant different controls, maybe they meant something in 2023 or 2024, it’s a typo or something. Even then, that was still kind of a surprising degree of scope.
Andrew:
Well, and I would just also just not to hammer this too hard, but this is a pretty important document. Typos aren’t ideal, right? For something like this. So even if we’re generous and we say it was a typo, it’s not really that generous, right? This is the kind of thing you want to get right. So, obviously, we’ll talk a bit about how this plays into the confusion and don’t want to be too heavy-handed on that point, but it’s something I think we should acknowledge.
Cory:
Oh, 100%. Once we get through the bullet point details here, that’s actually the main thing I want to hammer home as well. I think we should be very heavy-handed on it, actually, I agree entirely.
Andrew:
Okay. All right. So, point number two, your second discrepancy.
Cory:
Yeah. So, the second piece is that de facto removal of controls. No, that’s not what this means. To be very clear. What we’re talking about is, in one case, we’re talking about the postponement of new license requirements from October 9th. That’s great. Nice. The other piece is the idea that these general licenses to which China ostensibly had agreed, we’ll get to the second, that there should be general licenses valid for the exports of rare earths, gallium, germanium, antimony, and graphite, previously controlled substances, or rare earth materials, I should say.
The idea that those general licenses amount to a de facto removal of controls is a gross misunderstanding of the export control regime itself. The idea here is that the controls completely remain in place. It’s just that the barrier for getting those licenses is lower. And it is not splitting hairs. I know sometimes this kind of stuff sounds like, “Oh, well, you know, this is going to send things through freely,” but that’s not the case. And a case in point, most of the previous controls were specifically targeting the U.S. You know, who else got shafted by that? The entire European auto sector, which was not a target. And this is after they’d had discussions for months and months, are still having discussions around green channels, around streamlining, around recognizing that European automakers are not sending stuff to the U.S. military or other end users of concern
They’re still having problems. Why? Because there are frictions inherent in this export control regime. That’s just the way it is. So, the idea is to reduce those frictions. So, there’s less of an unwanted impact on the private sector, which is positive. We do want to see those barriers come down, but the requirement of licenses remains in place. There’s no question of that. That’s not under discussion right now. So, I just want to be very careful when the US is signaling things like de facto removal of controls. That is not an appropriate characterization. A reduction of the barrier to getting licenses, yes, but the costs, the delays and the uncertainty remain to a certain extent, hopefully a lesser extent.
Andrew:
Well, and maybe I can just jump in here quickly. On that piece, I 100% agree with you. Here’s where I will give a little leeway, which is, what’s the right way to put it? I’m actually fine if the White House wants to overhype what it got and say like just kind of, you know, make this assertion, we have de facto ended China’s export control regime, because that’s kind of what they were wanting to achieve. They didn’t achieve it if they want to put a heavy spin on the ball so that they make a claim that doesn’t quite reflect reality, then, you know, whatever. But I guess the problem in this instance is like businesses are trying to read this and figure out what is actually the case and what they can do. And when there’s that much spin on the ball, like if you’re a small company who can’t just like try to check in with MOFCOM and understand if you’re going to get the rare earths or critical minerals you need, then you’re just out kind of in the wilderness not understanding what’s happening.
Now, big companies, they’ve got government affairs teams in China and can go to the Chinese and say, “What can we actually get? What can we not get?” They could talk to people in the administration and get clarity. So I guess I land in a place where it’s like I sort of understand from a political standpoint how you might want to spin it. But this much spin on the ball makes it unhelpful and become even more confusing for businesses.
Cory:
Yeah, that’s exactly the point that I take issue with. Exactly right. And yeah, I do get your point especially on the political optics of it. This was a victory. I want to be very clear. The deal is positive. This is a very good situation, all things considered. Does it, you know, returns to previous status quo arguably? Yes. But that’s better than where we were headed. So, I’ll give it credit where it’s due. But it’s exactly that practical point of we’re getting questions of, oh, so we don’t have to have our suppliers apply for licenses anymore because the controls are removed. No, that’s not the situation. The idea of a general license, and we’ll get to that in a bit more detail here in this third point, which I’ll get into to now, is the idea of the general licenses is that they provide a streamlined path to export.
Basically, in general, for the export regime control regime as it is, an exporter, Chinese exporter obviously, has to apply for basically every export of a controlled material. What a general license says is there is a level of trust that can be established with the right documentation, the right compliance track record, the right understanding of the end use network, etc. That they will say, “Okay, this company is allowed to apply for multiple rounds of exports within a certain amount of time in a streamlined process because we know what they’re doing, we know who they are. We basically trust them and can verify their compliance much more easily.” So, it’s definitely a fast track. These general licenses, by statute, can only last a certain amount of time.
In this case, it’s most likely to be one year because that’s the cadence to which the two sides have agreed to talk about this issue. So that’s the kind of the big picture background on what are general licenses. it is not a rubber stamp. I want to be very clear about that. This does not mean that an exporter who is approved for a general license, who can now submit again for multiple rounds of exports more easily — this does not mean that they’re allowed to export to dual-use end users or for any dual use end use. This does not mean exports to any other sanctioned entity of any type, and there’s still various other restrictions. But that said, it is an improvement.
Now, the third issue that, and that’s the context for this, the third question we had with the U.S. statement, and this wasn’t a factual error. This was just a genuine gray area, a bit of uncertainty we had, which is still somewhat uncertain, China’s readout didn’t mention general licenses. And China, for about a week, didn’t really say anything to confirm that it was, in fact going to issue general licenses, which, again, are provided for under Chinese statute. So, it was certainly in the realm of possibility, both practically and policy-wise, and in terms of strategically what we thought Beijing might be willing to negotiate, but it just wasn’t given the Chinese readout.
Now, over the last day or so, we have gotten a little bit more information from Beijing. But I have to now, to your point earlier about sticking within official sources, this is now getting into reports from anonymous sources from MOFCOM. So, it’s a little bit of a bit here, but I take this credibly. It looks like industry insiders that Reuters is now reporting, as of today, are saying that there most likely will be one-year licenses, as we had kind of anticipated would be the most likely case. However, they’re the one going to take months. This is not an immediate thing. They’re still going to be months away. And two, that they specifically do not announce to a complete rollback of restrictions as hoped for by Washington. And I think that was a diplomatic way of saying, as the White House claimed, right? As hoped for is certainly true as well.
So, we are going to see more movement on this. But again, there is a bit of a question with this kind of thing, it’s very difficult to interpret when the White House says something like there will be general licenses, there’s a de facto rollback, China hasn’t made a statement on this issue. We don’t know when it’s coming, and it’s not a complete rollback. So, it gets difficult for companies that have to decide the procurement schedules now. You know, what are they facing next two months, six months? So, that’s the timeline. That’s where the stuff is very difficult. Now, more broadly, I would say overall, I’m with you 100% that a lot of the statement was political messaging. The way I see it, the U.S. statement was attempting to calm the private sector.
Certainly, the private sector had a lot of concerns. But if I may, if I were advising the White House, I’d say that effort might be a lot more effective if your statement doesn’t start with a basic factual error. Contrast with China’s own statements about what China itself will do, and evidence a very high likelihood of confusion about how the controls actually work.
Andrew:
Yeah. Well, and we don’t have to treat this with kid gloves. I mean, this is an effort, per the proclivity of the Trump administration, to say this was a huge win for the president. This is a huge win for the U.S.. Best deal ever. It marks the de facto in China’s export control regime. So, like I said, there’s a heavy spin on the ball, and there’s politics at play. And so this statement was partially meant to be explanatory and partially meant to be a victory lap is kind of how I read it. So, I also wanted to ask a couple of things. One is, why do you think the Chinese have been more proactive in trying to explain more about specifically what is happening? Why is it taken them a week?
Walk me through what you think of China’s perspective here. Is it they don’t want to outright contradict to the White House in public? So that’s one part of the question. And the second is like, it still seems like the two sides are really far apart on what was agreed to. What do you read as kind of the political will to…” So, there’s the messaging, public messaging around the bill, whatever. At some point, more working-level people are going to get in the room and going to actually have to put down details. Do you think there is still the political will behind this bill to sort of have a meeting of the minds, or are we just going to have another rollercoaster here soon?
Cory:
I’m fairly optimistic because, specifically, it’s going to sound a little bit ironic, because it is frustrating that Beijing hasn’t put out its own super clear statement of this is exactly what we agreed to, the timeline, etc., that would be practically very nice to have. But at the same time, I think it’s telling that I read this as Beijing doesn’t want to embarrass Washington. It’s not out to score political points on disputing the U.S. narrative. It’s just kind of letting it be. Now, of course, there is a limit. Beijing cannot let stand any, in its view, major mischaracterizations of what China itself has agreed to because obviously that sets the expectation on both of global businesses, but also its own companies who also navigating this.
So, they have to kind of draw a line at some point of what they’re going to correct. But I think the fact that they’ve been so unwilling to come out and say, “Yeah, this is wrong, here’s what really is happening,” I think it strikes me as they very much don’t want to blow up a deal. I mean, at the end of the day, they want this deal, too. And I think they’re just really trying to thread the needle if I had to guess.
Andrew:
And how do you think the Trump administration is going to react to when…? I mean, basically, all they want is they want these railroads to flow, but from what you just said, it seems like it’s still going to take months to get the licenses. So, I just don’t see how we get through that impasse.
Cory:
Oh, there’s some more consensus and less consensus ways to take this. I think, practically, the White House has one huge advantage, which is that the private sector is extremely capable. And the private sector has found ways to not be shut down by all this chaos over the last several years of export controls. So, no, I don’t think that rates are going to magically start flowing by December to an extent that they used to in years past. But also private sector has worked out ways to survive through various stockpiles with other countries, getting various less mature production chains at a higher cost, but they’re still able to get it.
And so, industry is not going to die as a result of a few extra months of fiddling around trying to sort out the details. So, at the same time, I think businesses have to be very, very practical and clear-eyed about the fact that tomorrow they’re not going to wake up to, hey, have all the rare earths you want tomorrow. That’s the reality. But they will survive. And I think that allows the White House, frankly, some space to be bombastic and overstate reality. And still life will go on to a certain extent as long as the private sector knows what’s really happening. And that’s the danger is when the only source of truth is not accurate. But I think companies really do know what’s going on and will manage to figure it out.
Andrew:
But that brings us to the dual-use piece, which you touched on, and the implication in the White House statement that general licenses will be issued invalid for the benefit of U.S. end users and their suppliers around the world. That implies you’re also getting dual use sales as well, like it’s in all end users. I can’t imagine that the Chinese are even toying with the idea of dismantling the dual-use aspect of these export controls, which, by the way, is kind of how and why you are supposed to use export controls in theory.
Cory:
That’s a valid basis.
Andrew:
Right. So what do you think about that?
Cory:
100% in some ways. The lack of a specific word in that sentence is doing a lot of work. So, it’s talking about flows to us end users. If they said all end users, they’ll be categorically wrong, I think. The fact that they’re just saying U.S. end users, you know, it’s a little gray area. But I agree, most people would read that, and most reasonable interpreters would be like, oh, that means all end users. And I agree, the U.S. military, defense contractors, they’re not getting these rare earths in any conceivable world. If there were a 0.1% chance of that happening, it would be the biggest policy shifts in Chinese trade in years. And so, it most certainly would not be kind of an offhand thing, and it certainly wouldn’t be announced by another country. Beijing would be messaging that if they were going to be a change, not only because of its importance in the abstract, but also that’s the central premise of the entire export control regime.
Now, of course, how they’ve used it has been to weaponize that in many cases, you know, argued a while back that the, for example, the earlier graphite controls a while back, they’re like, this is a dual-use concern and that justifies the export controls. That was just categorically not a realistic statement. Also, it goes against Chinese policy, where they themselves said that these types of graphite were not for use in a meeting. So, obviously, it was weaponized. But there are also legitimate, you know, uranium is also dual use control for very good reason. So, I don’t want to paint a black and white picture. But yeah, you don’t undercut the entire basis of your export control regime without it being a huge deal. And we’ve seen not only no reason, but certainly no evidence that that’s happening in China.
Andrew:
Well, and then the last piece on this kind of getting granular, as we’ve kind of been talking a little bit lazily, I guess, about just kind of rare earths and lumping all this stuff together and what’s happening with “the controls” is very clear, like the October 9th expansion of rare earth controls, that’s very clearly on pause. But do you think there’s like a difference between how they will treat the previous controls on rare earths specifically versus the earlier critical minerals controls which were on gallium, germanium, antimony and graphite, which kind of were a separate piece to all of this? Like do you see anything from the Chinese side on how those more subtle differences might play out?
Cory:
Yeah, there’s absolutely to say there’s daylight between them would be an understatement. We don’t know exactly. Beijing has not been super clear about this. What we have are anonymous sources, industry insiders in China, cited by a couple of different outlets, saying that they do not believe the pullback, or suspension is really the proper term, the suspension of the October 9th, they don’t believe that includes the wide ranging, rare earth and other export controls beforehand. And, certainly, they don’t seem to include the rare earth export controls issued in April. So, those were for seven of the 12 rare earths, mostly heavy samarium, which are used in key magnets. Those seem to be in place. And the suspension has been on the five additional export controls, or to the export controls on five additional rare earths. So, 12 of the 17, along with…
Andrew:
That took place in October. Those were the ones. Yeah.
Cory:
Yeah, exactly. Announced on October 9th, along with other restrictions, specifically around semiconductors and other production chains. So that is already a distinction. And then China doesn’t seem to have been super clear, frankly, at this point about all the other controls. So, I would be inclined to agree that with a statement as clear as the White House’s saying, this covers gallium, germanium, etc., one would think that was very clearly hammered out if you’re going to lay it out that clearly. Which, again, brings me back to the point of it’s really hard to take that at face value now solely because of the mistakes and issues with the rest of the statements, some of which have already been adjusted and some of which are yet to be adjusted. So, it’s just really difficult to say at this point.
Andrew:
Yeah, well, hopefully, we’ll get a little bit more clarity here soon. We will continue to try to dig into this work with our clients to figure it out. I mean, everybody, I was talking to somebody yesterday who said they basically sent their colleague in China to go to a rare earth company, sit down and use the MOFCOM portal to see what they could get approval to buy or sell. And so there even restrictions around the size of companies that can sell this. I think it’s just like there are so many moving parts. It’s very unclear. I think I agree with you that there’s political will to figure it out, but there’s still plenty of scope for this thing to fall apart. Talk to me about the fragility of not just the inking what was agreed to last week, but sustaining that for an entire year seems almost impossible.
By the way, Cory, this is me being optimistic. Like, I actually think like we’re in the best place we’ve been in a long time, and I still have these massive question marks. So anyway, sorry. Go ahead.
Cory:
No, no, it’s good. I wanted to make one additional clarification on the last point. I do think that it is likely we’ll see a rollback, specifically of some of the bans. Again, just a bit of context, everyone. Export controls in China can take two forms. One is a restriction, where you basically have to get a license to export something. The other is a prohibition where you’re just not allowed to export certain things or to certain end users. And so, the gallium, germanium, for example, were escalated, over the last year from restrictions. So, license requirements, to prohibitions where the U.S. was not allowed to get banned from China. I would not be surprised if that gets rolled back.
So that is also positive. Not super clearly confirmed, but I could imagine that. Now, whether they issued general licenses for those things is a separate and further question.
Andrew:
Wouldn’t that be an admission, though, by the Chinese of weaponization? Like, if you put something on the ban list, aren’t you basically saying like, under no circumstances do we want our chief global competitor to get this good or technology. And so, there is a full ban on sending it to the United States for that reason. And then if you say, “Actually, it’s not banned, we’ll sell it in some cases,” isn’t that an emissions of weaponization?
Cory:
Two thoughts. One, partially, but also only to the extent that this is obviously weaponized. I think for all of the form-focused rhetoric around maintaining the resilience and impropriety of the global trade order and all this stuff, right? That all come down to dual-use controls in a proper international sense, Beijing has not played coy about the fact that, like, you do something we don’t like, we impose export control. It produces exactly rare earths. To an extent, like the not saying that coy, but I think if they were to roll something back entirely and say there were no more licensing requirements, there’s no control whatsoever, that is the line I would draw in the sand and say, that’s not something we expect China to do. So, de-escalation from prohibition to restriction, I could see that. From restriction to nothing. I cannot see that for exactly what you’re saying. That’s a bridge too far.
Andrew:
Well, and I’m just sort of thinking out loud here. But you’re right. Like, China, actually, even though it says one thing in terms of like, oh, we don’t weaponize things, like, I think they very clearly like they’re not trying to hide the fact that they weaponize various policy tools. Kendra talked about this a little bit on the pod last week, which is like with sort of the rollback or the pause of the BIS rule, the 50% rule, China now thinks that the U.S. is also admitting that we weaponized. I think their stance is like, oh yeah, everybody weaponizes these tools. You know we weaponize. We know you weaponize. We’re not going to say it. But now I think they look at the U.S. adjustments to its export control regimes, and it confirms what they had long thought, which is that the U.S. uses these tools in the same way China does. Do you agree with that?
Cory:
100%?
Andrew:
Well, we’ll see. I think obviously tons and tons of uncertainty out there and we need a lot more information. And hopefully, the sort of working-level negotiators can get in a room and have the political will to sort of come to a clearer understanding. I think we will continue to get sort of spin on the ball from both sides. The spin will be loud and public from the U.S. side, and the spin will be basically just sort of lies of omission. I don’t know, maybe I’ve made too strong of a statement, but just more spin by what you don’t say, I think, on the Chinese side, for the most part. I think, for the most part, if something is publicly stated on the Chinese side, it is something they fully intend to do and stick behind.
So, that’s kind of a weird place to be in. Like, we now look for the Chinese documents to say, okay, we know this is a fact, but there may be other facts that aren’t in those Chinese documents that we can’t confirm. So, that’s, again, as an analyst of China, that’s like a weird place to be in where there are facts put forth by the U.S. government that we question. And then there are facts put forth by the Chinese that we basically accept. But then we also realize there may be other facts that either neither side is saying or one side is mischaracterizing. Anyway, you have thoughts here.
Cory:
Well, yeah, I was just saying, I think in this case it makes sense because what’s in question is what China has agreed to do. So, the authoritative source on what China will do is China, and that story really, you know.
Andrew:
Right. Okay. That’s a good way to put it. Yeah, good point. Good point. Okay. Let’s pivot now. We’ve just basically talked for half an hour about what we don’t know. But the big conversation as we pivot now in D.C. is, all right, how are we going to get ourselves off of dependance on Chinese rare earths? And there’s a lot of movement, big policy discussion, lots of money, and something like really seems to be happening in the U.S. government. Like, it’s actually pretty impressive that this challenge is being addressed, or at least considered and trying to be addressed in a very forceful way, like very strong movement, real money, real deals, real political will to make this change.
The U.S. administration is out there, as I said before, saying, we can do this in 18 to 24 months. So, let’s talk about what really is a realistic time frame here I want to kind of go through. And the goal is not to say to kind of quibble here or there, will be 25 months or whatever. It’s just a hopefully kind of level set because now people are all over the place here. Right? There’s the administration that says we can do it in 18 months, and there are people who believe them. And there’s like movement. Because there’s political will, we can do anything and we can make this happen. And then there’s people who say, “Probably not going to happen for a decade for a bunch of different reasons. And I think what we’d like to do is sort of get to what we really think a realistic time frame is.
So, maybe just start there, give us high-level kind of what you think a realistic time frame is and some just like the high-level points. And then we’ll get into the specifics just to set the tone here for the rest of the conversation.
Cory:
Perfect. Yeah. And to be clear, to do it, we’re talking about replacing Chinese rare earth supplies. And so, I want to first split up, this is not being wonky. I will get wonky, but this isn’t it yet. We have to again separate the light rare earths from the heavy rare earths for reasons I’ll get to later. Just keep that in mind. When we’re talking about replacing Chinese supplies, you can replace light rare earth processing a lot more quickly for a couple of reasons. One, technically, we can talk about this later, it’s easier. Two, the U.S. has done it before, and it has some existing capability. Rare earths, much more difficult. And the U.S. has basically no expertise whatsoever in heavy rare earths. Yes, there are products coming online, but I’m talking like the actual knowledge base to pull it off and any historical capability whatsoever.
Australia has a little bit, but it’s completely dominated by China on the heavy side. So, that’s just kind of a bit of scene setting. So, the real question about timeline can be parsed in a bunch of different ways. And I think the reason some people are like very optimistic and some are very pessimistic is because they’re looking for historical reference, which makes sense. They’re saying, “Okay, what have other projects looked like, how long has it taken?” And then being like, “Well, for example, one factor that’s really important in the historical evolution of the U.S.’s rare earth industry, which, again, was world leading at one point before 2000, and then just completely died. One of the big issues there was permitting and environmental policy, and various other kind of regulatory apparatuses.
And so a lot of people focus on that, saying, “Look, if we have a ton of money and cut all the regulation, we can get this done in like two years.” That’s not the right framework as far as I’m concerned. And so I want to present what I think is, and that I hope can, and not that I think I have the exact years, you know, do humility here. I know the actual number of how long it takes will depend on a lot of things. But I think the number one issue for me in the level setting, how long it’s likely to take, is technologically what is actually happening when you’re processing rare earths. Right?
Andrew:
Well, let’s get into that. But I wanted to nail you down here at the top. What do you think is a reasonable timeframe?
Cory:
For heavy rare earths, best case 3 to 5 years. And that’s to get a meaningful supply of rare earths by projects that don’t currently exist. So, I’m excluding the one project Lynas has Malaysia that is producing dysprosium oxide already. They’re going to start producing terbium hopefully soon. That’s very credible. They’re very capable, competent, and we believe them when they say they’re close and probably going to issue very, very soon. When we’re talking about new capacity elsewhere, and especially not by Lynas, we’re talking 3 to 5 years maybe, certainly not two years.
Andrew:
Okay, cool. Yeah, we’ll dig into that. Now, but before we go into the specifics, especially on the technical side, talk to me about the background, tell our listeners about why we are where we are in terms of the situation, where we are so reliant, we, as the United States, and the globe, but we’ll focus mostly on the United States. Why are we so reliant on China when we used to be world leaders in this industry?
Cory:
So, the full answer, a brief, selfish plug for anyone who’s actually interested in super detailed historical analysis, the political economy of rare earths, Jess DiCarlo, Raphael Deberdt and I recently published a paper in The China Quarterly on the development history of rare Earths.
Andrew:
We’ll drop the link to that paper in the show notes. That’s you and Jess DiCarlo at University of Utah, right?
Cory:
Yes. Yeah, and Ralph. Exactly. Perfect. And so deeper answer is there, but the short version, and starting with the U.S. side, we’ll come into how China came the picture in a kind of more podcast-friendly language. The U.S. dominated through much the latter half of the 20th century, ‘60s, the ‘80s certainly. China had a very nascent growth industry. It started really as soon as the PRC began, and certainly accelerated the Sino-Soviet split era. There was a lot of local level, not really big strategic work, but very localized development efforts in China. But they really took off really starting around the 1980s, and Deng Xiaoping really, really heavily invested in that industry as well. But up until that point, the U.S. was really leading the world’s and dominating the world supply of most rare earths that were used commercially out of Mountain Pass, which again is the epicenter of our discussion in the U.S. today as well.
It is one of the best mines of rare earths in the world. It’s one of the best deposits, biggest deposits, best grade or the other best deposit is in Baotou in Mongolia, which is now the world’s rare earth capital.
Andrew:
Where is Mountain Pass? I’m going to pretend like I don’t know on behalf of the listeners that actually I don’t know.
Cory:
It’s in the desert of California. Mountain Pass is in California, and it was run by Molycorp at the time, which has a long history there for anyone who knows that name. The U.S. had a full value chain, had mining, had separation of processing and downstream manufacturing, but again, I need to be very clear, of light rare earths. Mountain Pass doesn’t really have much in the way of dysprosium, terbium and other heavy rare earths. And so, U.S. dominance is really light rare earths. The heavies became more relevant and more important for applications later on. So, the shift starts to begin as, one, you see the rise of more stricter environmental policies in the U.S. because rare earth mining is, I mean, this is probably pretty well known at this point, incredibly environmentally and human health-wise hazardous, right?
Most mining is you end up with something called mine tailings, which are basically large slush piles of typically hazardous chemicals, just waste material that hang out ad infinitum and poisoned stuff. You have to take care very seriously. Rare earths are notoriously bad, even among the mining industry. And so there’s a lot of restriction around that. And this is the part where regulation really did play, I think, a sizable role. Now, I personally think that regulation is very important to not poison the landscape or people, but at the same time, it didn’t increase cost of radioactive waste. You have to manage that in a certain way. And frankly, in the beginning, China was really managing it nearly as effective as the U.S. So, you do see cost differentials etc. But this is kind of that early days, in the ‘80s, we’re seeing China start to pick up some more of this industry.
There were significant spills then in the U.S. in the ‘90s that really accelerated this trend, that really ramped up a lot of regulatory pressure. And then Chinese producers really took advantage of the situation, said, hey, we can go from these really, frankly, low value like low value add, and not particularly… you know, rare earths would not have shown up as a big item on their trade balance, for example, and saying, actually, this is like a very commoditized all product, these birds, these oxides of metals. And we can make this a strategic industry. And so there was suddenly, after 30 years of middling development of the industry, they’re like, “No, we’re going to become the big producers.” And so at that point, it did become a much more significant economic force. The critical era was 2000s. That was when the U.S. really started to lose, specifically the separation of processing capabilities.
And so just to paint a picture, the reason there are 17 elements that we call rare earth elements, we specifically group them together as a package, the reason is that they were incredibly chemically, magnetically, and otherwise similar. And so, typically, when you’re separating out materials, the easiest way is if one of them is ferrous and one of them is not ferrous, use magnets. Cool. Other ways you can use various chemical solvents and be like, oh, you know, gold and antimony react differently. And so you can apply some chemistry, and magic happens. And now you have two different things. Easy enough, right? Not rocket science. Rare earths, the whole point of rare earths is that they’re so damn similar, right? That we group them together.
And so, you’re trying to separate these things individually. That’s really, really difficult. And it’s even more difficult for heavy rare earths than for light records. And the other piece here is that every mine, every deposit has a different composition of a bunch of different rare earths. You do not have a lanthanum deposit and a dysprosium or neodymium deposit. What you have is Bastnaesite or monocyte that comes with like 7 or 10 different things, half of what you don’t even want sometimes, and you’re trying to separate these things out. So, the separation and processing capabilities or the differentiating factor between different industries. And in this case, China was able to basically, through the late ‘90s, early 2000, become completely dominant in heavy rare earth processing and almost completely dominant in light rare earth.
There was a brief resurgence in the U.S. ecosystem, Molycorp started up again, I believe it was around 2012. It was the early 2010s, I’ll fact check that later, but it didn’t last for long. And China basically completely undercut them on price, forced them out of the market. And the U.S. has had very little impact since until early 2020s when Mountain Pass came back online with MP materials, which now has a massive deal with the U.S. Pentagon, which is putting in money, guaranteeing a price, putting in a price floor to make sure that they have some level of competitiveness.
Andrew:
So, thanks for that background on kind of why we got here. We kind of had a big internal chat about this. And you say there are a bunch of different challenges, but fundamentally the reason that it’s difficult for the US to reestablish a light rare earths processing industry lies in structural financial incentives. Talk us through that. And then let’s go deeper into the technical pieces that are going to be really challenging for the U.S. to get online.
Cory:
Yeah, absolutely. Talking in very kind of big picture economic terms to start with, one of the issues here is that rare earths, despite their critical strategic value, are not financially very valuable at all. They’re incredibly capital, and the projects are incredibly capital-intensive. There’s a ton of costs, especially if you want to treat your waste, which, by the way, I should also add that China is now much, much better.
This narrative that China doesn’t, you know, deal with environmental hazards and that’s why they’re cost competitive, that’s just not true anymore. I want to be clear about that. But still, there is a lot of cost that goes into investing in these projects to developing the actual processing chains, which we’ll talk about in a minute, probably, and then to managing it all. And your reward is a very low return. So, you have to be comfortable with a very large CapEx with high operational challenges, and as well as waste management costs and other considerations. And you’re going to get very little profit in return. This is something that China has managed by having a lot of state supports. Right? So, we talk about subsidies in a lot of cases in China.
But this is actually one where it just kind of economically makes sense. And I think you’re seeing the U.S. realize that as well. Because for an investor, these projects will take decades to pay themselves off, if ever. And half the time, even if China didn’t exist as the world’s dominant force in rare earths, it would be hard to turn a meaningful profit in over a very long time horizon. So, the value of this processing is really in the downstream sectors where they require small quantities of these. It’s incredibly valuable for downstream value add. And the other kind of from a commodities perspective, one of the challenges is it’s true of a lot of minerals and metals that the value, the marginal value is not necessarily huge. And so, the way you make up with that is huge volumes.
So, like iron ore, absolutely incredibly huge market. Copper, huge market. You make a little money on each unit sold, but you sell a lot of units. That is not true of rare earths. There’s just not much volume required. We’re talking less than 100th of some of the other big commodities. And at best, I’m being generous there, add to that the margin issue, and you can see why most companies haven’t wanted to compete in this.
Andrew:
And what do you say to the people who say, “Well, if the government just throws enough money at the problem, that’ll fix it? Because if we’re willing to spend X amount of money to procure Y amount of critical minerals, then that addresses the structural financial issue.” What’s your kind of response to that?
Cory:
Yeah. Throwing money at it is part, it’s necessary, certainly. But it’s not sufficient. So, I will also give props. I said this before in other contexts, that one place where I give this administration, the U.S. administration credit is the structure of the DoD deal. Yes, there are quibbles that one can have about it, but the fundamental logic is that they’re not just giving supports for construction.
Andrew:
The DoD deal with MP materials, right?
Cory:
Correct. Correct. And so, DoD is not just saying, here’s a couple $100 billion to build something, then you’re on your own. They recognize that the issue is what you do with what you produce. You have to be able to sell it at some reasonable rate of return, and without support, they would be selling it at a loss, which obviously is not a viable project. So, what they said is we will have a price floor, and it’s reflecting basically the value, strategic value of having these natural resources, which the rest of the private sector is not willing to pay for. I can say I’ve talked to defense contractors who are like, yeah, if they don’t have a tolerance for a price premium to de-risk from Chinese supplies, you’re not going to see that happen at large scale across most of the private sector.
So, the government really did need to step in there. And it did. And it did so in a way that is commensurate with the actual problem, which is the offtake value basically. So, I give them a lot of credit there. Now that said, you can’t just spend enough money to suddenly have heavy reprocessing in particular in two years. Now, is now a good time to get into the technicals of why that’s the case?
Andrew:
Yeah, I want to get into the technicals, but first, I was going to say this to the end, but I actually think it’s such a good point, and it kind of preludes or as a prelude to the technicals is back to the timing piece, under the best case scenario, how quickly can China set up a new rare earths mine or processing center, either light or heavy? So, let’s use that kind of as a benchmark. So, they’re very good at this. They’re world-class. They have been doing it for decades.
Cory:
Absolutely.
Andrew:
What’s the best case that we’ve seen recently for China to do this. And then we could use that, I’d say, as a benchmark to understand what’s possible in the U.S. side.
Cory:
That’s exactly right. The fastest China can do it is certainly a floor for the fastest the U.S. can do it, and we should expect the U.S. to be slower than China, basically, and especially on heavies. With heavy rare earth processing, typically somewhere between a year and a half to two years, just specifically for the chemical processing pipeline, now that does not include construction of facilities, that does not include permitting, which, yes, is still significant in China. It does not include financial structuring. It doesn’t include any of that. That is literally just the baseline making the processing chain work once it’s funded, once all the stuff is built and once you have material to process. With all that said, we’re looking at obviously a few years in total, and that’s where my best case comes in 3 to 5 years.
Three is incredibly optimistic. But theoretically, if you strip down everything, you can ship out just the core, you know, processing timeline, I think, is going to take at least a couple of years to really mature in a way that the U.S. can produce at scale based on what we’ve seen in China.
Andrew:
So the best companies in the world can do this in two years, and that’s based on what we’re about to get into, which is the technological aspects of this, which you kind of have to… it’s like go into the gym. You have to build up that muscle. So, these companies that have been doing this for a long time, best case scenario, for them to set up two new facilities is two years. So, we should expect, I think, as you said, that’s a four. All right, let’s get into the technical piece of this and why this is so difficult to set up if you haven’t been doing it for years and years and years.
Cory:
Yeah. And frankly, even if you have.
Andrew:
Okay. Yeah. No, exactly. Great point. Yeah, exactly.
Cory:
So, first, to kind of separate a few variables, financial structuring comes before any of this stuff, picking your site, getting the permits, and then constructing the project. We’re excluding all of that, which obviously in reality that’s going to take a while. And that’s the point where there’s maybe you can make it faster, you can make it slower, and make it more costly or less. So, there’s some variability there that I wouldn’t necessarily just look at historical projects and map that. We could do it a bit faster if the U.S. administration is willing to cut corners, which it probably is. So, just on the technological front, that’s the only piece one focus on here. When we say processing, the main piece of what we’re talking about is what’s called solvent extraction cascades.
Basically, you cannot, as I mentioned before, it’s not like you can pour sulfuric acid or hydrochloric acid onto an ore and it magically separates into all the things you want. It doesn’t work that way. What ends up happening, and again, this is much more complex with heavy rare earths than light rare earths, reasons I won’t go into, you end up with dozens and dozens, in some cases hundreds of steps where you basically have different, I’m going say chemical baths, where you have some kind of accurate solution and you’re dumping ore into it, and you’re getting a slightly different output, and you put that into the next bath, and you put that into the next piece. So that’s literally a cascade of solvents. That’s the process. Now, a couple of issues there. They entail hundreds of incredibly carefully calibrated mixers at all these stages.
The purpose of those is to separate things that are very similar. The rare earths themselves have nearly identical atomic radii and other material and chemical behavior. And so, basically, you end up in a situation with a lot of experimentation to get the margins right, because you’re not just trying to eventually get some separated, you’re trying to get a certain purity and a certain amount of extraction from your ore. Now, the next wrinkle, and of course, it sounds like a lot of pieces, it’s because there are a lot of pieces. The next thing is, unlike many other ores, you know, you get Bastnaesite, monocyte, there are a couple of others. They’re ionic clays in the case of heavy rare earths, which China dominates, and Jiangsu and other southern provinces or southern rich provinces, as we call them.
And every one of those deposits is effectively unique in terms of the composition, in terms of, composition, in terms of what elements are included at what rates, and at what grades, meaning what concentrations you’re starting with. So, you end up processing these concentrates that are all different. And so, your entire incredibly complex solvent extraction cascade depends ,to a significant degree, on what your feedstock is. And so, if you’re using a different feedstock or a different mine, basically, your whole cascade hasn’t changed. Right? And so that’s where China also has an advantage when it’s setting up new facilities, a lot of time, it already has its heavy earth extraction sites up and running. So, it’s got a certain set of feedstocks it’s familiar with.
Even then, it takes them well over a year at best to historically at least get up and running new solvent extraction cascades for heavy rare earths. The U.S. is going to be dealing with feedstocks it has no experience with. It doesn’t even have experience dealing with other feedstocks for heavy rare earth processing. Right? There’s going to be a lot of trial and error. And that’s the piece that I’m really focused on is that… I mean, look, this isn’t secret science. There are textbooks you can download. Springer has a few I’ve reviewed on what cascades of an extraction process look like and how to design it. But it’s not the kind of thing where a textbook tells you what reality looks like.
And there are some analogies, other industries, I mean, for example, there’s a kind of a nuclear analogy here, if you’re interested later, but having the rules isn’t the same as actually putting it together. And I would emphasize that the issue here is not that the U.S. is technologically incapable of figuring this out. That’s not the issue. I mean, the U.S. has done a lot of light rare earth processing in the past. It’s totally typical. The problem is not that it can’t do it. The problem is that it hasn’t done it in recent memory and has never done it for heavies. That experience is a huge factor, especially when you’re dealing with something that necessarily requires this much trial and error to get right and to reach a stable point in your cascade.
Andrew:
Yeah. And I mean, scientifically speaking, trial and error is kind of one of the few things you can’t rush, right? You can sort of be better at trial and error if you’ve done it a few times, you know. Well, I kind of have my steps. First, I try this. If that doesn’t work, usually this is the next thing that’s most successful. Okay, that doesn’t work. So, I have my order.
Cory:
That’s the experience factor. Exactly.
Andrew:
Exactly right. Exactly right. Whereas most scientific technological processes are more predictable. Maybe not most, but when you’re talking about processing ores, processing jet fuels, industrial processes like this, typically you get better and better and better and better and better because it’s the same thing over and over and over. This is the same general concept over and over and over, but the specifics differ in each case. Is that right?
Cory:
That’s exactly right. Now, once the U.S. has some capacity online, it’ll probably have a really good outlook for scaling up. And that’s another distinction I really want to make is that this is the hardest part. And exactly, it’s like you can have… I mean, there’s also the talent question, which is real immaterial. I won’t go into too much detail, but like it’s true, like I don’t know the extent, honestly, to which the differential, how many engineers a country has. I honestly don’t know how that really plays out in terms of timelines. But at the same time, you certainly need enough. And the U.S. doesn’t have chemical engineering expertise with heavy rare earths of the type needed for super rapid startup. Now, it’ll get there eventually, and it’ll give a much faster because help from Lynas and from other global players who do have some experience.
So, that’s why it’s so essential that the U.S. is actually collaborating with other countries. Really, I cannot overstate how important that is. But at the same time, it is going to take time for them to figure it out. Now, once they figure it out, yeah, you can scale up much more quickly. This is not going to take the same amount of time every time unless you go into some completely new type of feedstock.
Andrew:
But to your entire point is that that scale is there for the Chinese because they do have the experience and so it’s going to take us a while to get that experience. I also note in our internal conversation in this that you noted on the talent piece that even most of the English language textbooks on how to do this are written by Chinese engineers, which also is just an irony. Okay, so you’ve mentioned, you flagged this idea about nuclear energy. We’ve kind of been through this before on sort of setting up traditional nuclear energy after not doing it for a while. Walk us through that kind of historical example, then we’ll have you give us your high-level final takeaways and we’ll wrap up.
Cory:
Yeah, absolutely. So I’m thinking specifically of Vogtle Units 3 and 4 nuclear project expansion in Georgia. It’s probably going to be the last traditional nuclear energy deal in the U.S., most likely I think at this point. it was a massive project. It was very contentious on many levels, and part of it was it was constantly running over budget and over time. Now, why? The U.S. has built plenty of nuclear, had the world leading nuclear energy and industry. It developed half the technologies the world uses. It’s certainly not a lack of confidence. It’s back to that same point of, I would say, 90% of the challenges with that project, they weren’t fuel cycles, right? They weren’t how the turbines work. They weren’t coolant system. It was the construction. It was the actual development of the system.
And the issue was that, in some ways, a lot of the stuff that took the longest and was hardest to build, it wasn’t necessarily as complex as something like rare earth’s and in chemical processing, but no one had done it to those specs in so long. You know, I know there was at least one engineer that was kept out of retirement because he was the only person in living memory who had actually worked on a similar project because it had been decades since one was built. And it was just a matter of actually building a complex system is not the same as reading about a complex system in a textbook. I mean, just to maybe be a little facetious, I know people with complex Lego sets who have the instructions and get lost. Right? And that’s valid, right?
Now, you’re talking about something a whole different level of complexity. Now, one of the questions is, is it worth having that expertise on hands? And there’s all that stuff. But I think this is, where to me, it makes sense with rare earths to not replicate that issue. Go to the people who do have the most expertise. I mean, it’s not just Lynas. They’re a kind of the poster child for now that’s the most proven. And one of the challenges we see now is there are a lot of companies that I think many are very well leading. Many have very technically capable people. Some of them just want that sweet government money. Right? I mean, realistically, right?
There’s a there’s a combination and probably a huge Venn diagram. But very few, if any of them, have any actual proven expertise, any proven ability. And so, I’m looking to the ones who either have management, have process engineers, design teams with actual expertise, whether they came from Australia, Malaysia, China, Japan, whatever, those are the ones I’m looking to, to say, okay, they have a real possibility. They’re going to bring that experience factor, which isn’t necessarily a guarantee of success, but it is certainly a strong foundation for a faster timeline than would otherwise be possible.
Andrew:
Well, and tell us even, I don’t want you to get yourself in trouble if you’re going to reveal any information that you don’t want to, but you said you were looking at some of the companies that were talking to the U.S. government about getting in on this effort, and one of them had like five engineers, none of whom had ever worked in a real world project before. Is that right?
Cory:
Yeah. Well, they worked on real-world projects, but there was one, probably the most notable case was former, I believe they were in Trump-one administration, you know, went to let’s just say that there was a company that was very good at one unrelated thing. There is technically, theoretically, a way to use a product of that actual system to recover rare earths. They had no ability to do that. But now they’re billing themselves as kind of the solution. They don’t know what they’re doing, as far as I can tell, with the actual technicals. There’s kind of a theoretical pathway that sounds really good and also has a lot of political support because there are political insiders who are not part of the management team.
So, when you look at a company like that, that’s seeking government money, my question is, well, can they actually do? It? And I have to say that I’ve talked behind the scenes with various entities who have asked outright, “How do we tell the great prospects, the innovators from the BS?” Because there’s so much money to be had. Because, again, to our earlier point, I mean, at the end of the day, yeah, you do, if you really want to do this, you need government money. And I think Molycorp’s experience from 2012 to 2016 was actually the project, I did double check while we’re talking, they were very capable. I mean, they were the leaders back in the day in some different management but they were no slouches. They were unable to compete with China.
They were unable to compete with China. China is now at a stronger position than then. You need government money in this ecosystem. As much as the kind of orthodoxy of private sector would love to prevail, it just won’t in this case. It’s just not set up for it. And so, it leads to a huge incentive to chase that money. And we just have to be careful with it.
Andrew:
Yeah. Well, and you need the price floors and you need the offtake agreements and all that stuff. Right? Let’s not be too pearl-clutchy. In anything like this, there is going to be some waste, some fraud, and some abuse. Right?
Cory:
Mm-hmm (affirmative).
Andrew:
It doesn’t mean you shouldn’t fight to keep that out. So, I guess we’re not being naive that like oh, that none of this is going to happen in a program this size with this much government money backing it. But my concern is if that’s widespread enough, it could actually undercut our capability to really get this done in a timely way. So, corruption’s one thing, corruption that then throws a major strategic policy initiative off course is a whole nother thing, right?
Cory:
That’s exactly right. The point is not some ideological position. Certainly, I hold those and hold values, of course, but it really is a practical issue. If you’re distracting, if you’re wasting resources basically at a large scale on pipe dreams, this is not a sector where you need 400 projects. You need like three.
Andrew:
But they all need to be really legit and really good.
Cory:
Yes, so we should invest in more than three but not 400. And so, somewhere between that has a big gray area because I’m being very cautious, CYA here, but yeah, but there is a middle ground. And it’s partly the other kind of political economy kind of question that, kind of when we talk about incentive structures, is to what extent does it need to be a U.S. entity versus can it be just procuring it from somewhere overseas? And there’s definitely that dynamic. Obviously, you want American taxpayer dollars, an American ecosystem. So, partnerships are good. But the equity… All this stuff becomes complicated. But I think it’s essential that with this kind of thing, this is not the semiconductor industry. This is not going to become like a pivotal piece of the U.S. GDP.
What it is, is the box you check to make sure the rest of your supply chains aren’t screwed. That’s what this is. And so, to me, the opportunity cost of having other players is not, well, they got all the GDP growth, they got all that industrial value add. It’s like, at the end of the day, as long as you’re covering your supply chain, frankly, I think we should downplay how important it is where it comes from if it’s not China. That’s the diversification push. And that’s in direct contrast to a host of other industries where obviously you want to capture the value. But again, the value is strategic more than financial.
Andrew:
Well, this has all been super instructive. Just wrap us up here. Take us home. What do you think the listeners key takeaway here from all of your thinking should be. Again, we’re trying to level set. I think I’ll say mine, which is I think we are going to do this, the U.S., like the political will is there. It will happen. It will happen quickly. But as the administration is saying, 18 to 24 months just still seems wildly optimistic. And because you’re more of an expert than me, I have to take your word for it and say 3 to 5 years sounds about right. What is your final point or takeaway you want to leave us with?
Cory:
Yeah, I think just distilling a few things, the U.S. is capable. Most countries, I think, are capable of doing a lot of the critical mineral diversification work in general. The question is, at what cost and over what time period, and with what opportunity costs? And I think that’s the big thing is the U.S. didn’t lose the rare earth ecosystem because someone stole it, right? They lost it because it wasn’t worth having at the time. And yes, regulatory costs went up. But also, we did that because it also wasn’t worth having untreated toxic waste everywhere. So, there was a balance of worth. And for China at the time, it was worth investing massively and scaling up. Now we’ve hit a point where it’s not worth having this degree of dependance.
And in no world do I think near 100% dependance on a single market is healthy, regardless of geopolitics, just in like a basic kind of supply diversification perspective, right? There should be a bit more diversity, I think, in general, and I’ll certainly add in the geopolitical and it’s certainly true. But what we have to be cognizant of, I think, is what the actual opportunity costs are. I don’t see it being necessary, for example, for the U.S. to be 100% self-reliant in rare earths. it just doesn’t seem worth it in the opportunity costs in any way. Less dependent? Sure. But then extrapolate that to other minerals. It certainly doesn’t need to become self-reliant in all the critical minerals. That would just be an extreme waste and kind of low, frankly, returns for labor, for shareholders. It’s worth collaborating.
And I think we do see an increasing number of global efforts. There’s a ton of different global partnerships around alliances emerging. And we’ll see how many of those actually move beyond memorandum of understanding. There’s a lot of political will, unclear how much practical will and financing will finally come out of that, what subset of finance deals will actually be useful? At the end of the day, we need to have a serious discussion about what degree of… the framing matters when we talk about dependance. The flip side is not having to do incredibly harmful and damaging, costly, low-return work, right? Versus dependance, where there’s different sides of it.
So, figuring out what we actually value strategically, economically and. more broadly, certainly environmentally too, there’s no clear principle and no clear vision that I’ve seen so far. It just seems to be react, react, react. And to the administration’s credit, some of that reaction has been effective. And I think they’re doing a good job of mobilizing capital. Certainly, there will be waste, etc. But, if that’s the mission, okay. The question I have is what should the mission be in the next 5 to 10 years?
Andrew:
Well, I will say, as a business owner, I always try to avoid harmful, costly, low-value-added work so I can understand why the private sector isn’t all that interested in getting involved, unless the government’s going to give them an incentive to do so. There’s also the question, we’ve talked about this before, and I don’t want to get into it because we’ve already gone long about not only how much should we do ourselves and then how much should we rely on other allied countries, but actually, how much is it okay to have China be a part of the market?
Because a lot of their power goes away if there’s diversification of other countries, and then it’s just fine that if some of the supply comes from China. But we’ll leave that discussion for another day. Cory, this was really great stuff as always. I really appreciate you joining me today. Thanks, everybody, for going on this somewhat of a longer journey down a somewhat unique discussion that we don’t always kind of, like I said, is not always exactly in our wheelhouse, but I thought it was important. Cory, thanks so much for the time today, man.
Cory:
Thank you so much.
Andrew:
And thank you, everybody, for listening. We’ll see you next time. Bye.
