Two US senators have introduced a bipartisan bill that could block defence contractors using rare earth metals imported from China amid rising fears over the communist superpower’s near monopoly.

Republican Tom Cotton and Democrat Mark Kelly – from Arkansas and Arizona respectively – sponsored the bill, which would force contractors to source new rare earth supplies from outside China by 2026.

The bill also aims to create a permanent stockpile of the metals, which are vital for the construction of green energy systems, most modern technology, and some weapons.

“The Chinese Communist Party has a chokehold on global rare earth element supplies, which are used in everything from batteries to fighter jets,” Senator Cotton said.

“Ending America’s dependence on the CCP for extraction and processing of these elements is critical to winning the strategic competition against China and protecting our national security.”

China controls roughly 40% of the global rare earth reserves currently in use, but accounts for more than 95% of production and is additionally a major importer of the raw materials and filing more than 80% of the global patents related to these materials.

Additionally, China has used subsidies and other strategies to shape the industry’s development over the past 30 years to give itself a long-term strategic advantage over would-be competitors.

Even MP Materials – North America’s only integrated rare earth mining and processing site and producer of 15% global supply – ships its entire output to Chinese processing plants.

China’s almost total control over rare earth metals has become a major concern in the West, with some fearing the country could squeeze supplies to push its policy agenda overseas, as it reportedly did in 2010 amid a spat with Japan over fishing operations.

The two US senators backing this latest bill hope forcing US defence contractors to purchase from other countries by 2026 will reinvigorate domestic production.

On markets, the bill’s effects were felt immediately. American Rare Earths – an Australia-based explorer looking for rare earths in the deserts of Arizona – rallied more than 120% in the week after the bill was released.

• The company’s shares subsequently took a 9% hit on Friday after investors baulked at its quarterly update, but even then the business remains up more than 300% year-on-year, as of Tuesday 1st February.

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Sources

• Aljazeera, US bill would block defence firms from using Chinese rare earths
• Executive Gov, Senate Bill Seeks to Encourage Domestic Rare Earth Elements Production
• The Diplomat, Rare Earths: Fighting for the Fuel of the Future
• The National Interest, Senate Mulls Banning Contractors From Buying Chinese Rare Earths
• American Rare Earths, Home Page
• Stockhead, US defence Bill puts rocket under American Rare Earths share price
• The Motley Fool, American Rare Earths (ASX:ARR) share price slumps 9% on quarterly update