In the 1990s China decided to use Rare Earth Elements (REE) as the engine of its growth in the 21st century. Broad contours of the Chinese strategy of using REEs has been to become a major producer and then use raw material to capture large parts of manufacturing value chains using its dominance in this critical 21st-century raw material. REEs are critical to almost all electronic manufacturing and are essential components of miniature permanent magnets (Rare Earth Permanent Magnets or REPM). These REPM are critical to making high-performance electric motors that are the engine of modern electric vehicles. REPMs are also critical for almost all green energy applications and manufacture of critical defence equipment like missiles, rockets, guidance systems, and aircraft.
 
What
  1. Under its strategic plan China started producing REEs from its deposits at Bayan Obo in Inner Mongolia province using a cheap but ecologically destructive method. With financial and ecological subsidies, the Chinese REE industry was successful in knocking down the global prices and forced the closure of the Mountain Pass mine in the USA.
  2. Such tactics also prevented any non-Chinese mining to attain feasibility. Having secured the dominant producing status in the early 2000s, China imposed REE export quotas and started arm twisting downstream manufacturers to relocate to China for cheap and steady REE supplies. 
  3. Almost all global manufacturing was steadily forced to relocate creating massive industrialization and employment in China. The world woke up to this strategic lead when China demonstrated its capacity and intent of weaponizing REE supplies during the Senkaku showdown with Japan in 2010
  4. The indirect ecological subsidies of the Chinese state can only be matched if REE can be recovered as a by-product of an industrial activity. The largest such global opportunity exists in the Indian Ocean Region.
  5. Geologically the entire landmass around the Indian Ocean contains REEs in the surrounding rocks. Millions of years of natural concentrating process or weathering and natural gravity segregation have enriched heavy metals including REEs into the coastline if the Indian Ocean and almost the entire coastline of the Indian Ocean are enriched in “mineral sands”. 
  6. These are easily recognizable black colour sands and contain industrial minerals used in high-performance alloys, paint, abrasive, filtration, sandblasting etc.
  7. These black mineral sands are present in the entire arc of Australia, Indonesia, Thailand, Myanmar, India, Kenya, Tanzania, Madagascar all the way to South Africa. 
  8. These mineral sands also contain Rare Earth Elements. Producing REE from these mineral sands is cheap, as it comes as a by-product of industrial mineral mining and can easily compete with the subsidized Chinese REE production, even without any major subsidy. 
  9. There are several examples of profitable mineral sand projects in the Indian Ocean Region in Australia, Thailand, India, Tanzania, Madagascar and South Africa
Flashback
  1. Rare Earth Elements (REE) is the collective name for 17 chemically similar metallic elements (the lanthanides, Scandium and Yttrium) that occur in a wide range of REE bearing minerals and are mined collectively. 
  2. They are usually divided into the light REE (LREE) and the heavy REE (HREE); the latter are found in relatively lower concentrations in the Earth's crust. 
  3. Due to their chemical similarities, REE extraction is a technically complicated process, requiring intense processing.