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- [00:00]
Jordan Schneider
Rare Earths. What is to be done? To discuss, we have A winner of ChinaTalk's Economic Security Essay Competition, Farrell Gregory of FAI, as well as for the
- [00:12]
Joris Dier
European perspective, we have Joris Dier, who
- [00:16]
Jordan Schneider
is a policy analyst at the EU Institute for Security Studies and has written a recent paper entitled Beijing's Critical Raw Material Weapon and How to Dismantle It. We will link both Farrell's essay as well as yours's in the show Notes. AKB of China Talk will be co hosting. Welcome, everyone.
- [00:39]
Joris Dier
Great to be here. Jordan.
- [00:41]
Farrell Gregory
Yeah, thank you for having us.
- [00:42]
Jordan Schneider
All right, so we're going to spend most of this show talking about solutions, but I think it is important to define the problem statement. Joris, why don't you open with what happened over the last 12 months and why it requires liberal democracies to do something about it?
- [01:03]
Joris Dier
Yeah. So after foreshadowing for a very long time that China might use this critical raw material weapon, so squeezing the supply of really all of the key materials that we need for our defense industries, for our energy grid, for our communication systems, et cetera, et cetera, it finally did so in April. And it didn't just do so against the United States in response to the tariffs and in response to what appear to be far more extreme curbs on asml semiconductor manufacturing equipment exports to China looming in May. No, it didn't just curb it to the United States. It curbed these supplies very sharply to almost all countries. So we were in a bind. And at the time, it really seemed like we might enter rare earth Armageddon, which the International Energy Agency sort of defines as 1.5 trillion in terms of cost just for the EU alone. If we just don't get our permanent magnets anymore. While China reversed the dial, it then increased exports again of not just rare earths, but other critical raw materials, but at artificially low levels under strict conditions that are completely averse to our interests and completely in China's interest. And it's now very aggressively playing out that leverage.
- [02:17]
Jordan Schneider
Farrell, anything you want to add to the press either?
- [02:21]
Farrell Gregory
Yeah, sure. So on the US Side, I'd say the one main difference is that we saw export controls, particularly for gallium germanium, utilized for the first time in 2023, whereas the rare earth export controls that particularly Europe has found so troubling were in 2025. So on the US side, our concern and our direct exposure to these export controls stretches back to 2023.
- [02:52]
Jordan Schneider
And so what? Let's start on the Brussels and European capital side. What's been done so far? Or what's the, what's the response? What's the response been and what's been done so far?
- [03:03]
Joris Dier
Yeah, Brussels has been thinking about this for a long time and already in the context of the energy transition, the, the topic of critical raw materials became quite prominent because everyone realized, well, without the materials, you can't do your wind turbines, especially rare earth intensive. You can't do your EVs. Also we are earth intensive. The batteries need to come from cobalt, of course. So a lot of reports were written. Then in 2023, there was a Critical Raw Material act, so setting specific goals for domestic production in terms of both refining and mining and recycling, and a max dependency of 65% on one country. And more recently, Brussels identified 60 strategic projects. This is good. There's a lot of analytical work, and that analytical work always has to precede the actual policy action. However, where I think Brussels has not taken the required actions and European capitals have neither. We haven't formulated a good answer on how to make critical raw material production outside of China financially viable, despite Chinese state support and the threats of always being able to flood the market. And quite frankly, Chinese export bans on key rare earth production technology that go back to 2008.
- [04:18]
Jordan Schneider
And Farrell, how about on the US side? What steps have been taken?
- [04:22]
Farrell Gregory
So that's why I bring up this, this direct exposure that we've had since 2023, because that's kind of the accelerant for what pushes government policy. It seems like some people have been worried about critical minerals. In a more indefinite sense. You can pull this back to several decades, to the initial opening of the US economy to China. But more narrowly, you're talking about post Chinese export controls over materials to Japan. It becomes a bit more definite. But really on our end, towards the end of the Biden administration and into the Trump administration, it's become tangible, it's become concrete, and policy has as well. And in the Biden administration, you had these very, very broad subsidies for a very broad list of materials, an idea I'm going to hopefully talk about later. And in the Trump administration, we've seen a lot more concerted effort over a few high priority, high China exposure materials. And my thesis is that this subsequent approach is a lot more likely to yield real results. And it's also focused on the much more pertinent set of materials as opposed to the much broader list of, that a lot of the US Government runs off of. Great.
- [05:50]
Jordan Schneider
So let's, let's go to that then. What are some different ways that folks have been prioritizing what to spend money in. And why don't we have Farrell and Joris both, both give their preferred frameworks of what to put first and what to put last on the list.
- [06:09]
Farrell Gregory
So my framework is basically this. The US if we want to reduce the particular materials that are most exposed to China, meaning China is most able to use these as leverage in trade negotiations in broader geopolitical competition, we have to focus on those materials. In particular, there's a kind of power law dynamic across the now 60 material long U.S. geological Survey list, which, which is in a lot of cases the list used for reference in the US Government, the federal level, in some cases at the state level. At 60 items right now you have dozens where China has no meaningful leverage over those supply chains. You have a few in the middle that are slightly more edge cases. And then you have, as I identify in the essay, 25 or so, the majority of which are the rare earths, especially the heavy rare earths, but a few others that we've seen China tangibly in the past put in place, export controls over, Those are the 25. I think we ought to have much more targeted policy on and you know, not, not just a white paper with no connection to what's happening at present. I also argue that the Trump policy on critical minerals follows something like this. They're moving away from these very broad based tax benefits, say the 45x tax credit that, you know, for whatever its merits is, you know, x amount of money spread over a very wide list of minerals, many of which are not nearly as essential. And what that ends up doing is taking away money attention from the materials, not just that we think are important for one reason or another, but that have actually been subject to export controls restrictions from the Chinese. They want to use their leverage. They're telling us what it is. My radical position is that the US Government should respond by focusing its attention and capital on alleviating our reliance for these materials that China's indicated it wants to use to extract concessions from us.
- [08:35]
Jordan Schneider
Okay, so let's, let's play a little, let's play some overrated and underrated feral. What, what mineral? Let's, let's start on the overrated side. What mineral has gotten way too much attention, which like actually isn't a big deal and folks shouldn't be spending taxpayer dollars on lithium.
- [08:54]
Farrell Gregory
I think lithium somewhat overrated. It gets a lot of attention for, you know, some good reasons necessary for all sorts of hardware. Most high profile thing in a lot of cases being ev's and when it comes to the domestic re industrialization conversation, lithium also gets a lot of attention because in the American south and now the American Northeast, you have these geological findings that make for great headlines. The US has enough domestic supply of lithium in this deposit where we'll never have to rely on a foreign country again. And it kind of stops at the headlines for all sorts of reasons. It's very difficult to go ahead with some of these projects. Lithium is an enormous market. So if you have benefits, spread equal access to every item on the list. Lithium is just naturally going to suck up a lot of capital by virtue of how large it is. How many different projects could be here are currently ongoing. So I think lithium's kind of overrated.
- [10:04]
Jordan Schneider
Joris, do you have an overrated one or do you disagree on lithium?
- [10:09]
Joris Dier
It's very, I find it personally very difficult to untangle out of this because if you look at some of the key materials like gallium or they're systemic, they're in everything. So gallium it is used to produce both gallium arsenide, gallium nitride wafers for semiconductors. Well, they are in all of our radio frequency, a lot of infrared products, they're used to make a lot of things more energy efficient. And as a result of that, they are pretty much ubiquitous throughout guided ammunitions, they are ubiquitous throughout jet fighters, through drones, everything you need for your national security. They are very broad use as well within the medical sectors because you're basically talking about general purpose chips. And on the rare earth side you see something similar. So those are. There is definitely a core group of materials that I think feral catches very well that are systemically important. Whatever you're trying to build in this digital age, good luck doing it without it. When you specifically look at some of the other materials like lithium and cobalt, et cetera, I know a little bit less of them, but still you'd be surprised how many of these key platforms that we have. Think of a fighter jet, think of a drone, think of a AI data center which you need for your command and control nowadays to train the algorithms, in the end make use of tons of batteries as well. So maybe you don't need the volumes that you need for all of the EVs. But throughout everything we hold dear, to protect ourselves, to keep ourselves prosperous, etc. I think in the end you with a lot of the materials, at least on the critical raw material list here in Europe, you find out they have some sort of systemic applications. And then one other example I can name Antimony. Antimony is a hard material. Yes, it's used for producing bullets, but it's also a flame, a fire retardant, which is pretty important as well, of course, if you're trying to build anything military, but also if you build general objects like tables and all sorts of other things that we don't want to catch on fire in our houses.
- [12:13]
AKB
So Joris, the list that Farrell spelled out in terms of priority, is it basically one to one for the European context as well, or are we fighting somewhat different battles?
- [12:24]
Joris Dier
I mean, I can't dispute any key emphasis on rare earths or gallium. I think it's hyper important for sort of the systemic applic that I just talked about. One thing that I do worry about is that the US and Japan have admittedly been a lot more successful, especially Japan, but now also more and more the US in really what I would call plugging holes in the supply chain. So bringing online in the US case, rare earth mining already in the mid 2010s, bringing that back online in the Japanese case, bringing back mining and refining in Australia and Malaysia. But my hesitation, if we look at broader systemic competition with China, it really is that China has now such a dominant percentage of production in battery cells in permanent magnets, its weight in chemicals is really growing according to some estimates, now above 50% of global production. And if you look at that and you compare that to the gallium development in the post Cold war gallium, famously last year, According to the US Geological Survey, still 100% produced in China in, in 1990. This was still majority produced in the EU and Japan throughout the 2000 and tens. You then had Chinese overproduction, mass stockpiling, sinking of international markets and prices. The rest goes out of business and overproduction becomes overdependence, becomes economic coercion in the end. So that's to say I see that development, we've seen it in a lot of critical raw materials. 17 out of 34 on the European critical raw material list are now either 70% plus mined or refined in China. But on top of that, we're starting to see these dynamics already in battery cells, but increasingly in chemicals. And really, if critical raw materials are sort of the skeleton of global manufacturing, you pull that out, nothing works. Well then chemicals is sort of the connective tissue and semiconductors are the central nervous system. You need all of them outside of China and a connection to them to actually produce your vital end products. So I struggle with sort of the plugging holes approach just through subsidies, state equity investment Without a more holistic solutions.
- [14:35]
Farrell Gregory
Great.
- [14:35]
Jordan Schneider
Well, let's, let's jump to that then. Farrell. What, what is, you know, people talk about price floors. What are the various tools that are potentially on offer to address the things in the red bar of the minerals you're most, you guys both agree are the most worrisome. And how do you, how do you think about the various ones?
- [14:59]
Farrell Gregory
Yeah, well, I suppose the good news on the US side is that we seem to have more and more tools that the US government is willing to use to. I like the way you put it, plug holes, because in some cases I think that's actually the ideal approach. It's individual deals, whether that's equity in companies or specific assistance on accelerated permitting capital. There are a lot of different tools in this much more targeted, concerted intervention. You also have these much broader, I think, more traditional tools that have been used over the last couple years, like tax credits. For instance, the 45x tax credit was applied to the 45x tax credit applied to the previous version of the list. It wasn't updated. I mean, this is kind of a point that doesn't need to be included. You have more traditional tools like price floors, like tax credits that are helpful around the margin and around the margin can make a big difference, but they're not as direct, they're not as capital intensive as some of the things that we've seen over the last year or so. My argument, even within this kind of high priority list, these 25 materials, is that you're going to need to use different tools for different materials. You are talking about very different scales between say the rare earth market compared to copper. But the point is, in terms of the market dynamics for even the highest priority materials, you have substantial differences in what tool might be best. And I think when you're plugging holes, you have to be open to using a wide variety of different tools to address different materials. I think all the way from these very targeted interventions that we've seen for rare earths to maybe less direct but still less capital intensive, but still direct policies for whether it's larger materials, larger markets or the like.
- [17:41]
Jordan Schneider
Can we talk about the principal agent problem or the coordination problem in this? I mean, we have lots of different tools, lots of different markets, presumably lots of different and also like lots of different bureaucracies who are touching on this. You know, from all the way from permanent permitting to like deal Team six investing in like a particular mine. And then we have the whole global coordination angle of you don't want to sort of be redoing stuff if all you're trying to get at is like a billion dollar market. I don't know, Joris. And then you've got like the EU versus individual country perspective, like how big a, how big a mess is it? And is there any path forward to do this in a less emergent, somewhat or centralized way? Or is the answer just to have it kind of like manifest?
- [18:31]
Joris Dier
Yeah, I mean, we almost start missing our market economies, right, where there's just demand for a particular material and a company jumps in and acts on that so we don't all have to centrally plan it. And of course, if you take China out of the picture, that would be exactly what you'd have, because market actors are not moving by themselves because they know that at any moment China can just flood global markets again. And in a way it kind of is. Even what it did last year, it first very sharply curtailed supply. It showed the pain that it could inflict. Then it used the licensing procedure to gather all sorts of IP knowledge from defense industrial networks. But what it then did is bring back supply for quite a few of materials, but just at lower, strictly controlled levels. So basically in the best case scenario, the general licenses, which I've been told only a dozen of European companies have received so far, even in that case, China only supplies the volumes throughout 2026 based on the averages of 2025, 2024 and 2023 to a particular company. So in short, yes, you still give supply, yes, you even still bring that supply online at not incredibly high prices, but you depress any mining firm who might say, well, if the Chinese are not supplying anymore, I'm going to make this investment for the next three decades because they know China has still drip feeding supply and it might just turn around and kill all of our nascent projects. So that is what we're now trying to solve. And this is where your coordination question comes up. Suddenly we're thrown back into a who new reality where it is no longer just firms figuring out what they need, generating demand for a particular material and then firms acting on that by creating the material. No, we are dealing with a monopolist, quite frankly, and we have to intervene politically on our side, which is I think overall is a nightmare because in the EU's case, you'll have to do that for 17 out of 34 materials that China either mines or refines over 70% of. But if the EU's deindustrialization continues and larger parts of the world as well, at the cost of China My question is really, are we going to do this plugging holes approach as well for chemicals? Are we going to support those companies? Are we going to do state support for semiconductor, legacy semiconductor producers, for semiconductor wafer manufacturers? So I personally think this is unsustainable. The only thing we really can do is build a sectoral tariff wall around China to artificially make their products far more expensive on our markets.
- [21:17]
Jordan Schneider
I guess we're kind of, you know, bleeding into the broader theme that we explored in the economic security essay contest is like, to what extent is all of this feasible? Because as you just mentioned, Joris, it's not like there isn't other lever, there aren't other leverage points to be squeezed even if we, you know, find a ton of antimony and like figure out how to process it and go down all the way through the list of ferals, you know, 24 minerals that are in the red zone. So apparently I hear you're doing a PhD on this very question. What is the, you know, what are the different ways to approach kind of both the defensive and I guess the offensive side of, you know, regaining escalatory dominance in an economic domain mean.
- [22:10]
Joris Dier
Yeah, so unfortunately the PhD is still early days, but I'll pull a bit from my, my work here as an analyst at the EU iss. What we put central in our paper is we can't just dismantle the critical raw material weapon. We can. I'm very skeptical of a Europe alone approach. And the reason I'm skeptical is because of our high energy costs. We have a lot of not in my backyard movements permitting timelines are very long. We're not making the same kind of money available that the US and the Japanese have made available. But I am very optimistic about an approach where in the end we align demand side incentives with the United States, with Japan, with Korea and Australia. And by creating that buyers club, we should have an open invitation to specific mineral rich countries like Malaysia, an important producer, the DRC, Brazil, etc. To join, provided that they put up the same tariff and public procurement wall against China. So I think if you don't have the skill even for the us I think it will be very difficult to plug all the holes because China's industrialization is ongoing. According to the UN, it's slated to have 45% of global manufacturing by 2030, where it already stands over 30%. And I think we're going to find out that there's tons of levers in there that they haven't pulled yet, but they can pull in the future. So I think you need allied skill to dismantle the critical raw material weapon. But a very large part of this is, of course, deterrence. And we need to understand economic deterrence in the trade domain. And we need to make sure that we're able to make a credible threat to the Chinese. And I think if there's a lesson from last year, it's that for some reason for the Chinese, the threat of terrorists at 120% isn't as convincing as their own threat to just pull out building blocks, namely the critical raw materials from US and allied critical sectors. They see that the pain you can inflict in that way, it's much sharper, it's immediate. Whereas the tariffs, of course, you bleed over time. And China likely has a far higher pain tolerance than any of our societies have.
- [24:18]
AKB
How do the US and the EU sort of collaborate on these things? I think at the US a lot of it is a debate of friendshoring versus reshoring, especially if we're going to do things like, you know, stimulate production for minerals and spend money on this. I think in the United States, it's like we might as well spend it on American projects. Why would I want to spend it on a European or Australian project, even though in some sense it might be better if we're working together? So how do you sort of balance those two things?
- [24:44]
Joris Dier
Well, that's a great question. I mean, a first answer to that will be in many critical raw materials, not that fun to invest in it, because it's debatable whether you're going to make back your investment or whether it's going to be endless subsidies and endless supports, given the problem that we have that China can always flood global markets. And this is, in a way what you see on the US and the Japanese side, where both have put in place quite a extensive price floor, the Japanese one running until 2038 of ongoing subsidies just to keep the heavy rare earth supply alive. And the Japanese, they, of course, they go through the same dilemmas. They'd love Europe to come on board and they'd love us to change our public procurement and say European plus partner will now be central with all these wind turbines that we're building and that we all need all the permanent magnets and the rare earth for, and we're going to generate European plus partner supply. And Europe has a lot to offer in that way in terms of demand. Demand coming from EVs, demand coming from wind turbines, demand coming from our rearmament push. However, until that's the case, the Japanese now say, well, we're spending all this public money. 75% of all the heavy rare earths we produce are earmarked for Japanese industry only. And this is how you see sort of the second order effects that come from the Chinese side. They curb supply, they create scarcity, some de risk faster than others. But at the same time, Toyota and Volkswagen still need to compete, whereas Toyota will likely have its magnets and Volkswagen won't. And you see these dynamics, of course, on the other side as well, with Project Volt making enormous amounts of money available in terms of a 10 billion direct loan. But the Chinese policy is focused on not allowing anyone to stockpile. So there is global scarcity. And now suddenly huge volumes, huge money comes online on the US side to purchase a lot of not just rare earth, but other critical raw materials around the world to support and stockpile them. So in short, I think the Chinese sort of brilliantly introduced a wedge in the G7 in all sorts of different stages. And I see the only way to mitigate that is to give priority to a large block of materials, a large group of partner suppliers, where we say, well, if we're going to DO Public Procurement, G7 plus other key partner permanent magnets, for instance, in our wind turbines, 12,000 kilograms of permanent magnets per one offshore wind turbine. We're going to prioritize this because the US is desperately looking for offtake for people to scale, and we see the same on the Japanese side. And on top of that, there is quite some collaboration already. Europe has a lot of chemical and refining expertise. Of course, it's, it's more latent now, now that a lot has gone to China over the last 10 years. But if you at some of the U.S. investment, you have Novion Magnetics, who basically with U.S. state support, is now paying Solvay, a Belgium company, to do the heavy rare earth refining to actually get the magnets. And it's the same is true for USA rare earths in a pipeline with less common metals in the UK and sulfur in Belgium. So underneath the government level, there are all sorts of collaborations already because globalization is real and we all have our niche capabilities throughout the pipeline.
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AKB
And.
- [28:08]
Joris Dier
But I think quite prospectively and happily, we even see movement in the US and the eu. They don't agree on much at the moment, but on the critical raw materials, we at least had the memorandum of understanding that IFAW was saying all the right things about making sure there's access to each other's stockpiles, making sure that we drive demand to the proper places, making sure that we put together a buyer's club that's big enough. The only problem with the MOU is it's an MOU and it says we intend to, we explore, etc. Etc. Still early days to get to these measures, but I think those are the kind of measures that are in the end going to solve the problem.
- [28:44]
AKB
Farrell, what's your perspective on this?
- [28:47]
Farrell Gregory
Yeah, so if the question is about the competing interest between investing in domestic industry and working with our valued international partners, I actually don't think there's such a simple and satisfying answer. My broader idea is that we're in the return of history. National interest, I think, has always mattered. We just happened to ignore it for a little while. But national interest in policy, especially economic policy, is reasserting itself. And I think the domestic interest and the access to specific materials questions are not necessarily always clashing because in a lot of cases, and this is something that I've written about for ChinaTalk before, in some cases geology doesn't care about national borders and as much money as you might want to invest in, say, Extracting heavy rare earths. The name's not a misnomer. Feasible deposits of heavy rare earths are actually quite rare. And if you can't find them domestically, your only option is to work with other countries internationally. I think that's what's been quite interesting about some of this Paxilica stuff coming out of the State Department, which I think seems quite promising, especially on this buyers club idea that international cooperation and especially leveraging American access to other countries for specific materials that we can't find here. That makes sense. At the same time, I think part of the reason that we got into this whole problem of supply chain reliance for essential essential consumer and for all sorts of military supply chains is because we were solely very econ brained for a while. And I don't think econ brain alone is going to get us out of this problem. There's a tangible benefit to domestic industry that goes well beyond the question of China. I think there are particular goods, social goods to manufacturing that are not really accounted for. As we analyze, how reliant are we on China for gallium? My short attitude on this is that obviously you work with other countries where necessary for material access. And on the question of efficiency versus the social imperatives of investing in domestic industry, I do kind of lean on the side of more investment in domestic industry, possibly to the expense of overall hyper efficient global markets. For instance, I expect on the European side, this is an Even more potent question, because I'm sure we have competition between states in the U.S. but the competition between states in Europe, especially around these national interest questions, must be even more heightened. I imagine there's a lot of competition between these different countries for spending German funds on German companies, French funds on French companies in rearmament. I imagine there are similar dynamics at play in whatever nascent European reindustrialization is occurring.
- [32:44]
Joris Dier
I think the main problem on the European side so far is a lack of money. So no one in pulling the purse to really pay for this. We have now a French action plan that came out a couple of weeks ago that makes me a bit more optimistic, really focusing on heavy rare earth refining and neodymium iron boron magnet production and really trying to solve that demand issue by 2030. But I think a real problem that we faced is that in the end we are strictly regulated and for good reason. Environmentally, societies who'd like clean air. In Europe as well, of course, we're still committed to the emissions and energy targets, et cetera. These are all very energy intensive industries. And on top of that, these industries are no economic winners by themselves because you'll need to keep supporting them to make sure that they're not flooded by China and China doesn't kill sort of nascent production. So I think so far we've had the opposite problem. Not that European states are clamoring to all be the next producer of the rare earths, but that not enough is done because not that much public money is available. And policymakers genuinely struggle with the question. Everyone can see the logic. Without the permanent magnet, there's no drone. But the logic is also without the gallium, there's no drone. And the logic is also without the particular legacy chip inside, there's no drone. So where to start? How to make sure that you actually create security of supply? I think that's been a key issue and in terms of working together with partners. So we have this really complicated supply chains running all across the world. Of course there's a degree of overdependence on China because in many fields, China is not a market actor. If you look at gallium, China spent so much money on it that between 2005 and 2020, a state sponsor, a state producer, just put 31% of all the gallium they produced in a stockpile, which gave them sort of complete confidence that you could kill global prices at any point. But if you look at the gallium pipeline, the US now gets 7 billion in terms of investments combined from the Koreans and The US to build this gallium smelter. Oh, sorry, the smelter in Tennessee, which also will produce gallium, among other resources. But if we look at what gallium is used for, gallium is then shipped to either Europe or Japan, or a little bit to China as well to make gallium arsenide wafers which are shipped back to either the US and Taiwan to make all sorts of radio frequency chips that in turn we need for our guided ammunitions. So if the logic is we want to onshore the gallium because we want to make sure that we're able to build drones in the US alone, well, you're still going to be dependent on that gallium arsenide wafer production in Europe and in Japan. And this is quite worrying to me. What we see right now is because of Prime Minister Takechi's comments that Japan could intervene if there would be a military confrontation over Taiwan, we see gallium exports to Japan have again been reduced, reduced to zero, putting massive, massive pressure on the Japanese to still produce their gallium arsenide wafers with really the risk that that production capacity is now going to China. So we're spending all this money on the upstream. We want to produce gallium. But now China's opening a new front really in the midstream, which I don't think we can solve by just doing the US alone or the EU alone, and definitely not Japan alone because it's obviously too small for this.
- [36:19]
Jordan Schneider
There's this debate about all this kind of like bottom up pushback around data centers. They're too loud, they use too much water, they raise the energy price. Is any of the refining, can we make it pleasant? Like the air smell nice, like, I don't know, just like start. Yeah, maybe. This is another tier list feral. You should make as like, like the quietest. Like where can we put the playgrounds on top of the. You know, because you have all these like industrial ruins that like get turned into, you know, art installations and playgrounds.
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AKB
Right.
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Jordan Schneider
Or something.
- [36:59]
Farrell Gregory
Yeah. So in terms of, yeah, environmental cleanliness, it's worth reading about, especially in like southern China and Myanmar. How rare earth extraction is actually done involves injecting a bunch of chemicals into land formations and subsequently draining out this slush that ends up being the basic rare earths that go into magnets subsequently. And for whatever hesitancy we have in the US around building new infrastructure, and to whatever extent that's true in Europe to a greater degree, I think people would find, for instance, this method of rare earth production, especially intolerable There are better, cleaner ways to do it. But yeah, when we talk about reshoring, friendshoring a lot of our expectations about the world society, especially in the consumption based post industrial economy, you don't really have to see how any of these things, these consumer goods, materials that we value so much, you don't have to see how they're made. You don't have to bear I think a lot of necessary costs because they can do it halfway around the world. And I happen to think there are many moral elements to opposing this kind of hyper efficient global supply chain, global markets. I believe there's a moral element to it and part of it is more accurate reckoning with the costs and dependencies that we actually have. In a lot of cases it's easy to be out of sight, out of mind and I think maybe some social problems might be made somewhat better if these things weren't so out of mind.
- [39:06]
Jordan Schneider
So once we have our metal taste in the air back over New Jersey and New York City, I can tell my kids this is in fact the taste of economic independence and you should be thankful this is progress.
- [39:24]
Farrell Gregory
I think you can make a. I think the gut feeling is you can do a lot, you can do these things a lot cleaner in the U.S. yeah.
- [39:32]
Joris Dier
So I think you're completely right. Feral. And this is sort of the dilemma as well. Right. Because we don't like the over dependence, we definitely don't like the economic coercion, we don't like how it's used now to really isolate Japan and really make the costs a lot higher for anyone to speak up in Taiwan's favor. We don't like all of that. But at the same time it is of course true that a lot of the environmental burden for what we are using has been borne by China. And this is probably not the people in Inner Mongolia that live next to the sludge lake. They haven't elected to do that. But this is true. But it has a real consequence because if you want to do this cleaner and if you want to do this without of the massive state support that the Chinese are doing, you're going to make the inputs for our end industries more expensive. You're going to have to say the Volkswagens of the world, the BMWs of the world, the GMs of the world, we want you to use American magnets or European magnets with particular standards but you're going to drive up their costs. So in a way these companies, they face sort of a geo economic pincer movement coming from the Chinese Side, on the one hand, the building blocks for their production are pulled out by China by not giving the critical raw materials anymore, which leads to more expensive critical raw materials and intermediate products that they need to buy domestically. But on the other hand, we still have the large scale Chinese subsidies overproduction in end industries as well. So I don't think you're going to get around this without also looking at end industries. And if you're going to, if you're going to ask from our medical producers, our car producers, our defense industries to use more expensive inputs, we'll have to find a way to better protect them in the end user industries as well against Chinese competition, which I think a tariff approach, a replacement for the Supreme Court struck down tariffs on the US side is incredibly important. And at the same time, what we see right now in the eu, the Industrial Accelerator act, really a move towards greater protections as well against these floodings of Chinese products. It really needs to move forward quite fast to make this a reality.
- [41:47]
AKB
I'm hopeful that we can find ways to be innovative about this in a way that's not horrible for the environment and also solves the problem at the same time.
- [41:53]
Joris Dier
Yeah, I completely agree, but exactly all of that is what's going to raise the cost for us in comparison to the Chinese refiner and miner, which by one estimate received between 9 and 10 billion in terms of subsidies between 2010 and 2019 alone. So if you're faced globally with two state owned enterprises who don't have to stick to the same rules, who get massive state support, don't even publish their production quota anymore, you're going to see that the rare earths and the permanent magnets that we produce, hopefully a lot more sustainably are going to hike up the cost for our end users. And we need to protect our end users in a way as well, because otherwise you're just going to have the exact same problem in the mid and then the downstream.
- [42:37]
AKB
Yeah, I think there's always going to be that cost of sort of trade off right between more economic security or lower prices. I wonder where, you know, we think of rare earth processing as sort of like a Neolithic thing. If you're just picking earth out of the ground and then smelting it or something, you know, refining it. But you know, Joris, you were talking earlier about how China's even export controlled a lot of the technology for refining rare earths. So I wonder what the technology ceiling is here. Is it, is there like a lithography level moat in refining as there is, you know, in the semiconductors. And is there a lot of room for, you know, American and European innovation to make a lot of this refining, a lot more efficient, a lot more clean in a way that perhaps lets us compete even against Chinese subsidies or at least lower this cost?
- [43:22]
Joris Dier
I mean, it's an incredibly pertinent question to which I've got a wide variety of answers from industry that are very contradictory. So I'll, I'll, I'll tell you about a couple of data points that we do have. We have the Financial Times article coming out a couple of days back saying that US Defense companies are, quote, unquote, clamoring to make sure that we delay, that the United States delays the defense ban of Chinese permanent magnet use in the US So apparently even for defense, we're still far short because this ban was supposed to be in place January 2027. A second data point that came out of the Trump Xi meeting is in the US Rideout. It says, and I think the wording is the Chinese side will address the concerns of the US Side of not shipping out key rare earth production technologies. So in short, even the US Pleads, can we please have these technologies, which many of them, quite a lot of them, have been banned really since 2008. And this is of course, long before the lithography control. So this is not an encouraging sign either. And then for where industry actually stands, it's very difficult for me to ascertain. We know as well that as of April 2025, when China squeezed really hard the heavyweight earth controls, there was no commercial skill refining outside of China. It was really 100% dependencies by all accounts. We hear bits and pieces. We hear that Linus has, for the heavyweight earth side really progressed a lot in Malaysia. And we hear other examples. There's the CEO Solvay again, a famous Belgian company, who gave a very extensive interview to a Dutch newspaper saying we can refine all 17 rare earths. You guys just haven't created a business case for us. And again, the Chinese can just turn on the tap again, kill anything that we're trying to do. So I'm not going to make the long term investment. So I think the picture is super mixed and it's a key question that needs to be answered and I don't have a definitive answer to it and
- [45:29]
Jordan Schneider
anything else we should cover, guys?
- [45:31]
Joris Dier
I mean, we haven't talked a lot about the deterrent side because one thing that really worries me is if you put this all together, I mean, we hear different things. The International Energy Agency Just came out and said, we're nowhere near fixing even just a permanent magnet problem before 2035. You see some more hopeful signs. But in any way, I think it's going to be for many materials. 28, 29 later, and then still in small volumes. A lot of bombs are being thrown on Iran. Those things need to be replaced. It's not just the US Defense industrial base. We're also buying a lot of defense system. And you did very extensive podcasting, Jordan, on what is it again? No ammo for Taiwan. This undergirds all of that. So how are you going to make sure in the short term that you put enough pressure on China to at least get the materials that you're still getting, knowing that in the Chinese export control clause there is an automatic denial. If you write in, I'm buying this critical raw material for X, Y and Z defense industrial user, what does it mean for the actual defense replenishment that needs to happen in the US and the rearmament in Europe? And this is really a key question I'm struggling with. If you listen to interviews with the CEO of Rheinmetall, he says, well, we have rare earth stock for about a year and I insist on being updated weekly on this. I'm not sure how this is affecting the many shortages that we already seem to face and the 32 billion arms delivery backlog to Taiwan already. So, yeah, how to deter China to make sure that at least for the time being, we're getting part of the critical raw material supply that they don't give us all the Japan treatment of limiting exports again to zero, which they have done to Japan for the last four months. I think it's a pertinent question because if, if you don't ask the question, you might find yourself sort of in China's endgame where they are confident they can put a lot more pressure on Taiwan, perhaps even a quarantine, because of all sorts of production issues in terms of our defense industrial value chains.
- [47:37]
Jordan Schneider
And Farrell, on your side, why don't you talk a little bit about how kind of various emerging technologies are changing the appetite. I mean, the Joris missile stuff is like relatively fixed and predictable. But what are robots and the data center buildout kind of doing to change the chessboard here?
- [47:58]
Farrell Gregory
Yeah, so I think the change that novel technologies are producing is almost to make our reliance on China less of the problem. Obviously, still a problem. We can record a podcast on how much of a problem the American and European overreliance on China for key materials is. But if you look at projections for how much copper we're going to need, how many basic or at least foundational materials and building supplies we're going to need for, say the AI build out what kind of increase you're going to see in rare earth consumption. Already a pretty tight supply chain, pretty tight on supply and demand. How much of an increase you're going to see for rare earths, for different robotics? I think in the future we'll see how things go in Europe, in the US in cultivating these supply chains. I think in the future, almost regardless of how that goes, if you're not going to see less about reliance on China as an issue, at the very least you're going to see more on scarcity for a lot of these materials as an issue. Obviously you don't want to get Malthusian about drawing straight line projections that we're not going to be able to come up with novel efficiencies. We probably will. But it's worth acknowledging that we'll need either new materials, new efficiencies, or at the very least something because we have this huge wave of demand consumption coming towards us and we're all still fighting about who has access to which supply chain.
- [49:49]
Joris Dier
Thanks.
- [49:51]
AKB
I think it helps put it in good perspective that this is not just an isolated problem. One sort of dynamic that I've been hearing about, at least in the American context and also yours, I'm interested how this works in the European context is energy refining is a pretty energy intensive process. And it's not just that we're trying to get refineries online. It's also that data centers are kind of choking the grid or you're having to compete with demand with all these other sort of factors in the American economy. So I guess if this is an industry that we're really caring about, how do we sort of balance the funding and production of rare earths versus the things that we need the rare earths for.
- [50:32]
Joris Dier
Yeah, I think you're completely right. And I think one underappreciated bottleneck is really skilled labor. I mean, Even in the JD, Vance and Rubio announcements of Project Forge, the US government had to admit, while we're graduating around 200 mining engineers per year, which is probably not ideal if you're trying to not just onshore, but hopefully French or so many different critical raw materials. So there's a lot of constraints and I think this is another push really. Why? Allied skills. The only way to do this you'll have to make use of comparative advantage between allies because I mean as said here, we have a lot of heavy rare earth refining expertise. In Europe, we have the gallium arsenide wafers, the key link in the value chain to all these essential semiconductors. In Europe, you and the United States were smart enough to already, within the 2000 and tens, reopen the Mountain Pass mine in California and actually start producing rare earths again. So this is within those constraints, how you can sort of make all the puzzle pieces fit together. And I think one key thing that we should keep in mind is we should. What we're promoting is basically allied autonomy, European indispensability. Allied autonomy means these key strategic bottlenecks need to be moved out of China, from a European perspective, very clearly, because China is the decisive enabler of Russia. This is a direct threat to many of our member states. But not just that, it's also because of what has happened last year in terms of the export controls. The indispensability bit is hyper important, not just from the European perspective, because indispensability, having the ASMLs of the world, having the. The still quite sizable production of memory chips in Korea and Japan, having the photoresists being produced in Japan, will at least give us levers towards China to make sure that we keep its coercion relatively in check. And I think this has been probably a bigger failure than the de risking part, in spite of everything that China has done over the last year. And the Busan deal was really only a partial victory because China kept spying via the export licenses, it kept capping the exports of rare earths, et cetera, et cetera. Despite everything that China has done, we have not been able to make a credible counter threat to, at least for the short term, bring this back online. And I think this is really a point of failure that we've run into and that hopefully is going to change throughout the next years.
- [53:06]
Farrell Gregory
So with what Doris was saying kind of reminded me of a phrase that we've heard particularly out of the State Department and their substack, which is the idea of the US and Europe as civilizational allies. And it seems like we're in the process of defining what that looks like in concrete terms. I think this industrial relationship between the US and Europe is actually a pretty good example of what that might look like, because with what you were describing earlier, some of the redundancies between having your US specific supply chains for all these materials, is it really desirable or even feasible to have, in addition to the Chinese ecosystem and the US ecosystem, is there even enough money in Europe or will to have your Europe specific ecosystem for all these things. My gut feeling is that it's probably not feasible, it's probably not even desirable.
- [54:08]
Joris Dier
So I mean, in Europe, as you may understand, we've become quite allergic to these civilizational terms because the National Security Strategy of the United States says, and I think the words that were used were civilizational erasure. That is what we're currently undergoing in Europe. And of course there's all sorts of disagreements and pain points in the US EU relationship. I mean, my ideas for Allied skill and for allied autonomy, European indispensability were very difficult to solve here in Brussels when the threat of annexation about Greenland was on the table last January and of course during the trade pacts as well. So I see it more as other rhetoric that we also seen from the US side, namely an interest based approach. How do we make sure that we have the key building blocks that we need for the MRI technologies, the pacemakers, the fighter jets, the energy grids, et cetera, et cetera? I'm convinced that the European alone approach will not work and I'm even convinced that a slightly larger G6 plus key partner approach will be very difficult to work without the U.S. given how ingrained the U.S. is in many of these productions. So I think on an interest based perspective, we just need to move forward. And also within defence industrial value chains, I mean, the Finnish Prime Minister has just announced he's buying I think 50 plus additional F35 fighter jets. So the idea that we're going to disentangle all of this and the dependencies that are also there on the US side of particular parts being produced in Europe or European refining technologies for rare earths is not going to disappear anytime soon. I like the Allied alignment. I think it's necessary. I feel very sorry that the US EU relationship is in such a poor state. But my assessment is more. I don't think we need a sort of grand ideological narrative. I don't think it will go over well very here. I think we need sort of cold interest based cooperation on this because we both know we're a lot better off if China doesn't hold these choke points and these kill switches over our economies.
- [56:16]
Farrell Gregory
So I agree that there's a lot of complementarity between the dependencies the US has on Europe and likewise. And to revive my stand against econ brained analysis, I do actually think the ideological argument, whether or not the argument has sway in Europe, I think it is true. And I think the civilizational descriptions do identify something real and something that Matters well beyond the industrial compatibility on this material or that mineral.
- [56:59]
Joris Dier
Yeah, I mean that might very well be right. I'm in the game very practically recently trying to bring across my critical raw material belief. So I've chosen rhetoric that's a bit further removed from all of that
- [57:15]
Farrell Gregory
and
- [57:15]
Jordan Schneider
I think we'll end it there. Thank you two so much for being a part of chinatalk.
- [57:21]
Joris Dier
I grew up in Walre, which is a tiny village just south of Veldhoven Eindhoven. So I live a mere bike ride away from asml key production sites basically producing the systems that make all of our digital life move. Which is kind of surrealistic because if you'd write sort of a sci fi novel saying, well, there's some sort of not really central property province, there's a province quite rural still, but not anymore now by now in the south of the Netherlands and they produce a machine that then makes 90% by and large or co produces 90% of all of the chips worldwide that are not just essential for all of our weapon systems, but also AI and everything. It's a weird realization, but this is more on a personal non job related note.
- [58:11]
AKB
Do they take you there as, you know, like first graders? It's like let's take the first graders to see the duv machines.
- [58:19]
Joris Dier
I think it was a little bit too early still when I was there. I do remember being taken to Philips at the time, which is of course the mothership out of which asml, but even parts of TSMC and NXP came. So my family actually I have my grandfather, he. After the second World War he was recruited from the technical university to move to the south of the Netherlands because they had a brilliant physics lab where you could run all sorts of experience and there was money to play around and find out new things, which is then sort of, well, maybe not a straight line, but a line starting from there. And all the work that he did in the end to us now being this incredible node in the international production system of basically all technology.