Key Highlights:
- While China currently holds 60% of the world’s known deposits and satisfies 70% of global demand, Kazakhstan has the potential to rival China in harnessing value from essential rare earth elements
- According to data from the National Geological Service, Kazakhstan possesses substantial reserves of rare metals, including 2.2 million tons of tungsten
- The United States faces significant vulnerability due to its reliance on China for the processing of heavy rare earths, as China accounts for 99.9% of their separation
For decades, China has held sway over the rare earth elements (REEs) market, with nearly every analysis accentuating the world’s reliance on China for the raw materials crucial in crafting rare earth magnets and associated technologies. However, China’s near-total control has raised concerns globally.
The recent conflict sparked by Russia’s invasion of Ukraine has highlighted the risks inherent in monopolized supply chains and dealings with unpredictable regimes. Reliance on China for rare earth poses a significant supply risk for many nations. This has led to a growing demand for alternative sources in mining and extraction. Many eyes are turning to Kazakhstan as a potential major player in this arena.
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However, initially fascinated with China, governments and investors like the US and Europe overlooked Kazakhstan as a significant supplier in 2011. Now, given the critical implications, the duo must prioritize investing in extensive mining ventures with enduring capital needs due to critical implications.
While China currently holds 60% of the world’s known deposits and satisfies 70% of global demand, Kazakhstan has the potential to rival China in harnessing value from essential rare earth elements like scandium, yttrium, and the 15 lanthanides utilized in various technologies such as computers, turbines, and automobiles.
Why Kazakhstan the Main Choice?
Kazakhstan, a powerhouse in the region’s economy due to its abundant oil resources, boasts the world’s largest chromium reserves and the second-largest uranium stocks. Additionally, it holds 15 rare earth deposits, crucial for electronics and clean energy technology. The nation is keen on forging closer ties with international partners to leverage these resources fully.
According to data from the National Geological Service, Kazakhstan possesses substantial reserves of rare metals, including 2.2 million tons of tungsten, one million tons of molybdenum, 75,600 tons of lithium, 4,600 tons of tantalum, 28,100 tons of niobium, and 58,000 tons of beryllium, among others.
The government has devised a comprehensive growth plan for the industry spanning from 2024 to 2028. This plan prioritizes not only the extraction of these valuable elements but also the development of robust infrastructure to facilitate processing and distribution.
Nations worldwide, including the EU, are seeking alternative sources of rare earth minerals to reduce reliance on China. A key move in this effort was the 2022 strategic partnership agreement between Kazakhstan and the EU in raw materials, batteries, and renewable energy.
During the Kazakh-German Business Forum in June 2023, Kazakhstan’s Creada Corporation and Germany’s HMS Bergbau forged agreements for investment and the initiation of a project dedicated to the exploration, extraction, and processing of intricate rare metal ores located in eastern Kazakhstan. The envisioned project is estimated to incur a cost of $200 million.
India may also seek to secure REE assets through joint ventures with producers, possibly via “off-take contracts” where buyers purchase products in advance, aiding producers in obtaining financing.
These initiatives are part of the country’s broader strategy, led by President Kassym-Jomart Tokayev, to expand geological exploration efforts to cover a minimum of 2.2 million square kilometres by 2026. The nation aims to reach 2.01 million square kilometres in 2024, 2.038 million in 2025, and 2.21 million in 2026.
What’s China’s Monopoly Game?
China holds a dominant position, producing 60% of the world’s rare earths while processing nearly 90% of them. This situation grants China a virtual monopoly on the global rare earth market.
On December 21, 2023, China declared a prohibition on the extraction and refinement of rare earth elements, marking a significant development with far-reaching consequences for the US national security, economic stability, and rare earth resource access.
Notably, the United States faces significant vulnerability due to its reliance on China for the processing of heavy rare earths, as China accounts for 99.9% of their separation. Although the US has been aware of this susceptibility, substantial action has only been initiated in recent years to address this strategic concern.
Rethinking Rare Earth Element Sourcing
According to the USGS’ 2022 Commodity Report, the US solely imports its consumption of 2 crucial rare earth elements (REEs), yttrium and scandium, and over 90% of its consumption of the other 15. Europe also heavily relies on Chinese rare earth elements (REEs), with 98% of its rare earth minerals imported from China, particularly for producing magnets.
Mining REEs is a costly and risky endeavor due to high exploration and extraction expenses, low mineral concentrations, and extended production timelines, sometimes spanning up to ten years. Consequently, the Mountain Pass Rare Earth Facility in California stands as the sole active primary extraction mine in the United States.
Tensions Between China and the Western Nations
The escalating tensions between China and the Western nations have magnified the strategic significance of REEs. To mitigate potential supply disruptions and investor vulnerabilities, Western governments must seek alternative suppliers such as Kazakhstan.
In September 2023, a significant development occurred with the C5+1 Presidential Summit held in New York, involving Kazakhstan, the Kyrgyz Republic, Tajikistan, Turkmenistan, Uzbekistan, and the United States under the UN General Assembly’s auspices. This summit led to the establishment of the B5+1 Business Platform and the Critical Minerals Dialogue.
Efforts must now focus on collaborating with Kazakhstan and other Central Asian countries to dispel the outdated mining paradigm of exploitation, where host countries are left with minimal benefits. It’s imperative to communicate that such practices belong to the past and are no longer acceptable.
In conclusion, the global reliance on China for rare earth elements (REEs) has sparked widespread concerns, particularly in light of recent geopolitical tensions. As nations reassess their supply chains and seek to mitigate risks associated with monopolized sources, Kazakhstan emerges as a compelling alternative. With abundant reserves of rare metals and a proactive approach to industry development, Kazakhstan is positioned to play a pivotal role in diversifying the global REE market.
