British Prime Minister Rishi Sunak with US President Joe Biden in the Oval Office of the White House in Washington on June 8. One of the aims of the “Atlantic Declaration” is to kick-start negotiations between the two countries on rare and critical mineral supply chains. Photo: AFP
Opinion
Imran Khalid
Imran Khalid
The critical minerals supply chain is the new front line of US-China rivalry
The ‘Atlantic Declaration’ with the UK is just the latest US move to disrupt China’s dominance in the production and supply of critical minerals
As Washington looks for mineral alliances and Beijing doubles down on boosting its mining and reserves, expect a fresh bout of intense global politicking
On British Prime Minister Rishi Sunak’s recent visit to the United States, he and US President Joe Biden announced an “Atlantic Declaration” for enhanced cooperation, which covered three important areas: clean energy, critical minerals and artificial intelligence (AI).
The declaration aims to kick-start negotiations between the two countries on rare and critical mineral supply chains. At the heart of this deal lies the proposal to extend tax benefits under Biden’s Inflation Reduction Act to minerals essential to the electric vehicle industry that are mined or processed in the United Kingdom.
In the declaration, Biden said he would urge Congress to add the UK as a “domestic source” in the US Defence Production Act. This would give British suppliers better profit margins and terms, strengthening their position in the global marketplace.
The declaration’s provisions also highlight the shift in the global political landscape to take account of the increasing role of AI and its allied apparatus. In recent months, deliberations on the far-reaching implications of AI and its impact on global power dynamics have become a fixture on the agenda of international diplomatic gatherings.
Not surprisingly, the discourse is coloured by the US-China polarisation, largely stoked by a Washington increasingly fixated on what it sees as China’s hegemonic inclinations. There are distinct dimensions to the debate: the global AI regulatory framework, and the intricacies of AI supply chains. In particular, the US and its allies fear China’s potential supply-chain dominance over semiconductors, as well as critical minerals.
These essential components form the bedrock of pivotal industries, enabling the production of electric vehicles, batteries, computers and myriad household electronic devices, all interwoven into the realms of AI and green energy.
The US has ramped up efforts to disrupt China’s supply chains for these essential elements and secure its own supplies. For instance, it is setting up semiconductor fabrication plants in Arizona with Taiwan Semiconductor Manufacturing Company (TSMC), offering huge incentives for American semiconductor manufacturing and applying pressure on Taiwanese and South Korean manufacturers to squeeze their supplies to China. These moves indicate the US intention to assert its dominance and impede China’s technological advancement.
Meanwhile, China’s systematic approach to rare earths has built it an advantageous position in the global market. Despite possessing just 36 per cent of the world’s known reserves, Beijing controls over 70 per cent of global extraction capabilities and has around 85 per cent of the world’s processing capacity.
This not only underscores China’s adeptness in resource management but also solidifies its position as a key player in the production and distribution of rare earths.
Beijing’s industrial policy skilfully manoeuvred Western companies out of China’s rare earth mining and processing sector, and this was not just for profit. The strategic significance of China’s rare earth deposits was recognised at least as early as in 1992, when Deng Xiaoping compared them to oil in the Middle East.
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Amid US-China trade war, China aims to elevate its domestic rare earth industry
Amid US-China trade war, China aims to elevate its domestic rare earth industry
China’s foresight in consolidating three Chinese state-owned enterprises into China Rare Earth Group years ago has enabled the conglomerate to command up to 25 per cent of global mineral-bearing rare earth elements. Coupled with China accounting for around 60 per cent of world production, this merger imparts considerable pricing power and exerts significant influence over the global supply chain. Western policymakers are concerned about this Chinese advantage.
The 2022 US Geological Survey data highlights the glaring reality: the US is almost wholly reliant on imports for 12 critical minerals and heavily dependent on imports for an additional 31 minerals. China stands as the primary source of imports for 26 of the 50 minerals the US government classifies as critical, raising national security concerns.
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Push for green energy ravaging Myanmar’s northern reaches as rare earth mining takes a toll
Push for green energy ravaging Myanmar’s northern reaches as rare earth mining takes a toll
To counter China’s dominance in critical mineral supply chains, the US and its allies have adopted a two-pronged strategy – seeking to bolster cooperation among themselves to facilitate increased mining efforts while simultaneously expediting the construction of processing units.
Through the Quadrilateral Security Dialogue, the US has formed minilateral alliances in the Indo-Pacific. In March last year, a group of US senators introduced the Quad Critical Minerals Partnership Act while Australia, India and Japan formed the Supply Chain Resilience Initiative. Then in July, Australia and India launched a Critical Minerals Investment Partnership. In a similar vein, Japan and India as well as South Korea and Australia have established separate collaborations.
Beyond the Quad, the Indo-Pacific Economic Framework for Prosperity championed by the White House has prioritised the securing of access to critical minerals to counterbalance China’s dominance. The Biden administration has also initiated the Minerals Security Partnership, a comprehensive multilateral endeavour to strengthen critical mineral supply chains through strategic partnerships.
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Push for green energy ravaging Myanmar’s northern reaches as rare earth mining takes a toll
Push for green energy ravaging Myanmar’s northern reaches as rare earth mining takes a toll
Such US-led initiatives invariably collide with China’s interests in securing mineral resources for its own industrial advancement.
Beijing has not pursued a dedicated alliance for critical mineral supply chains but it is aware of its own dependence on mineral imports and security vulnerabilities. Natural resources minister Wang Guanghua recently said the country was launching a new round of domestic strategic mineral mining operations while investing in efforts to bolster reserves to enhance long-term security.
While the US and its allies seek to diversify supply chains and reduce their reliance on China, Beijing remains determined to protect its interests and maintain its dominance. The inevitable result is a new area of US-China tensions and as the battle for control over the critical mineral supply chains unfolds, expect bouts of intense global politicking.
Dr Imran Khalid is a freelance contributor based in Karachi, Pakistan
