HOW DID CHINA GET ON TOP?
How Did China Establish Its Global Monopoly?
Even the most transitory review of history shows that it was the misapplication of regulations that sparked China’s monopoly. With this fact as a starting point, Molycorp was a most improbable solution because it was never a key player in the historical supply chain for the most critical technology resources: heavy rare earths. Molycorp’s primary business was selling low value and abundant Lanthanum to W.R. Grace, to be used by the petroleum industry.
The critical resources, the rare earths with higher atomic numbers, came from many other suppliers. In fact, rare earth resource production was never a problem for the U.S. Most of our nation’s rare earth resources were, and continue to be, a byproduct of some other mined commodity.
Today the U.S. mining industry extracts rare earths at a rate equal to 85% of global demand. Unfortunately these resources are intentionally discarded due to a misguided U.S. & international regulatory snafu that took hold in the 1980s when the Nuclear Regulatory Commission (NRC) and the International Atomic Energy Agency (IAEA) began to enforce regulations specific to the nuclear fuel industry across all areas of mining.
By misapplying these regulations the NRC effectively classified all of our nation’s historical heavy rare earth resources as “source material due to the companion element thorium. Historical byproduct rare earth producers found it more expedient to discard these resources than face the regulatory and economic burdens of becoming a “source material” producer.
Without the flow of high-value heavy rare earths from the byproduct producers, China gained control over the flow of these critical materials. Once in control, China instituted onerous export taxes on these heavy rare earth resources - thus restricting the competitiveness of non-Chinese producers of metallurgical and other value-added rare earth products. As these U.S. (Japanese and French) rare earth value chain firms struggled to compete, China began a generous, state sponsored program of acquisition and relocation.
The Chinese government referred to this state sanctioned technology acquisition in the historical military context of “Treasure Hunting Ships".