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U.S. Ramps Up the Race for Rare Earth Metals, but It May Be Too Late

The U.S. government has suddenly noticed that not only does China have a stranglehold on the production of the 17 rare earth metals that are a vital part of making electric and hybrid cars, but the industrial giant has gotten reluctant to export them. And that means jump-starting an American industry.

But as with the concurrent ideas of reviving nuclear power and outpacing Asia with lithium-ion batteries, the effort might be too little, too late. I don't think you can fix our loss of technical dominance with white papers and feel-good bills. It's like an "Energy Independence Now!" bumper sticker on a Hummer that guzzles foreign oil.

As the Financial Times reports, the Department of Energy plans to release a new strategy within weeks to "increase U.S. production, find substitute materials, and use rare earths more efficiently." Votes are pending on bills that would require the U.S. to be self-sufficient in rare-earth materials within five years. But, in a sobering account, the federal Government Accountability Office says it will take 15 years to rebuild a rare earth supply chain. And many key patents are now held by foreign companies.

Japan has also been tussling with China over a sudden lack of access to rare earth metals, but Japan Times reported Wednesday that those exports are now back on track.

Rare earth minerals aren't really all that rare -- it's just the mining and refining of them that is. We could produce our own (America was once the largest source), but the last U.S. mine closed in 2002. The value of these magnetic metals (which include europium and lanthanium) are only going up. We could also find other sources outside China, but it's becoming plain that the U.S. has lost the leadership role in basic industrial processes like this, which is a critical issue as the essential raw materials for transportation start to shift in the marketplace. As TV host Jay Leno recently told me, "Brazil could become the new Saudi Arabia, because of its lithium deposits."

We once had the global lead in nuclear power technology, too, but it's been 40 years since an American nuke was built, and our trained nuclear engineers are headed for retirement. Even with the fast-track licensing pushed through under President Bush, it could take 20 years to get a nuke online -- far too late to address the demand for clean power created by the specter of global warming.

The battery issue is similar. Asian countries, particularly China and Korea, have quietly built up dominance in the lithium-ion batteries that power our consumer products without anyone getting too exercised. But now that versions of those same batteries are going into electric cars, it has become a political issue. The Obama Administration plowed $2.4 billion in Department of Energy funding to bring EV battery production back home to the U.S. Most of that funding went to companies in economically struggling Michigan, which now has 16 battery makers.

Despite all that, many EVs (including the Coda and the Wheego) are sallying forth with Chinese-made batteries, and will continue to locate supply there unless their plans for U.S. production are federally funded. Why? U.S. suppliers aren't price competitive without subsidies, and expensive batteries are a big reason early EVs cost so much. Another grim truth is that the Chinese government is willing to pour more money into subsidies than we are, especially now that Congress has soured on the stimulus spending.

I'm all for trying to rebuilt our rare earth industry, but we shouldn't be under any illusions that it will quickly reverse our current dependency on foreign sources.