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Biden’s green revolution is missing some vital elements

Joe Biden’s green policies are ambitious and will change the direction of the global energy industry. But in the race to develop new technology, China hold a few good cards.

Joe Biden’s green policies are ambitious and will change the direction of the global energy industry. But in the race to develop new technology, China hold a few good cards.
Garry white employee

by
Garry White

in Features

16.10.2020

If Joe Biden win’s the White House in a few weeks’ time, the world’s tilt towards green energy will be unstoppable. The US will join and Europe and China in having “net-zero” emissions targets – and investment in renewable energy will soar. Unfortunately, Mr Biden’s ambitious plans may be missing some of the elements they need to be a success.

Meeting these tough climate goals will be achieved by technological innovation – and America undoubtedly has the brainpower to drive this. But the raw materials needed for this green revolution may be more difficult to come by than scientific talent. The most important raw materials in the high-tech sector are currently rare-earth metals. Unfortunately for Mr Biden, China is now holding most of the cards when it comes to these lesser-known members of the periodic table.

These metals are used in everything from solar cells and wind turbines to electric-car batteries. The 15 lanthanide elements – plus scandium and yttrium – are an integral part of many other modern products including lasers, wind turbines and MRI machines. As technology advances, their importance in manufacturing is growing significantly.

The Trump administration has been a standard-bearer for the US hydrocarbon industry for the last four years, but all that will change if the Democrats win next month. From his attempts to resuscitate America’s dying coal industry – to his encouragement of the old Republican mantra of ‘drill baby, drill’ – Trump’s ‘anti-green’ agenda was never hidden from view.

But a Biden win will turn US policy on its head. This seismic shift in energy policy direction towards a green future will significantly change global flows of capital. Trillions of dollars will flow into alternative-energy projects. But one of the main problems for Mr Biden’s enormous shift in US energy policy remains China’s monopoly in the processing of these rare-earth metals.

China in dominant position

China supplied 80% of the rare earths imported by the US between 2014 and 2017 and is home to at least 85% of the world’s capacity to process rare earth ores into material manufacturers can use, according to research firm Adamas Intelligence.

Donald Trump declared a week ago that was a national emergency in the mining industry because of the shortage of these metals, citing their military applications too. The declaration claimed it was “incentivizing the domestic production of rare-earth minerals critical for military technologies while reducing American dependence on China.”

Rare-earth metals are not rare – it’s just that the extraction techniques are highly polluting. China invested heavily in processing plants in the past few decades and kept them running through the cycle seen in the mining sector as strategic businesses. America’s last listed rare earths group, Molycorp, collapsed in 2015 under the weight of a massive pile of debt.

Now, as rare earths become strategically important in the technology battle with China, the US industry is reviving rapidly. The Mountain Pass Mine, an open-pit mine of rare-earth elements in California, once supplied most of the world's rare-earth elements. It is still operation, owned by a hedge fund but a special acquisition vehicle (what we in the UK could call a cash shell) has been established to buy it and bring it back to the market. The listing will be used to raise funds to take on China’s dominance.

US gears up its rare-earth business

Fortress Value Acquisition Corp (FVAC) was set up this year to buy the mine and float it on the New York Stock Exchange. The $500m raised from the stock market listing will then be used to build the facilities that process its ore on site. Currently, although there are a few rare-earth mines in the US, they must send their ore for processing in China. This floatation will be a major step in America’s tech war with China – as well as Mr Biden’. FVAC has even mooted the possibility it could build the magnets that are essential in electric car engines at the mountain site once established.

Rare earths are now as significant in Washington’s quest for technological supremacy over Beijing as any sanctions on technology leaders such as Huawei and SMIC. Right now, China is the leader in the race to develop the third-generation of semiconductors that will drive the 5G world – and it has a near-monopoly on the processing capacity of the metals needed in the components of the infrastructure of tomorrow.

Whoever wins the Presidential election in three weeks’ time, these related policies on metals and microchips are guaranteed to remain largely unchanged. To ensure the US’s continued superiority in communications and weapons – as well as underpinning the greening of the country’s infrastructure – both are as important as each other.  

Nothing on this website should be construed as personal advice based on your circumstances. No news or research item is a personal recommendation to deal.

A version of this article appeared in the Daily Telegraph.

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