Rare earth materials at risk in the supply chain

Congressman Don Manzullo (R-IL), Chairman of the House Foreign Affairs Subcommittee on Asia & the Pacific, will hold a hearing Wednesday afternoon examining the consequences of China’s monopoly on rare earth materials for U.S. manufacturing.

The hearing, entitled “China’s Monopoly on Rare Earths: Implications for U.S. Foreign and Security Policy,” will begin at 1 p.m. ET Wednesday, September 21, 2011 in Room 2172 of the Rayburn House Office Building. China’s dominance of rare earths, and its willingness to use exports of these critical minerals as diplomatic tools, threatens America’s manufacturing sector and ability to create jobs.

Rare earth metals are vital to the production of automobile electronic systems, wind turbines, defense guidance systems, water treatment systems, and many advanced manufacturing processes in the United States.

The following witnesses will testify during the hearing:
• Mark Smith, President and CEO of Molycorp Minerals, Greenwood Village, CO.
• John Galyen, President of Danfoss North America, Baltimore, MD (Danfoss has a plant in Loves Park, IL)
• Robert Strahs, Vice President and General Manager of Arnold Magnetic Technologies, Rochester, NY (Arnold Magnetics has a plant in Marengo, IL)
• Christine Parthemore, Fellow, Center for a New American Security

“China controls 97 percent of global rare earth production and has imposed stringent rare earth export restrictions, which leaves the U.S. relying on the whims of China to maintain production of critical American defense products. China’s actions are hurting American manufacturers by driving up component costs beyond natural market prices and will ultimately hurt the American consumer,” Manzullo said. “We need to produce rare earths domestically and end our reliance on China, and we will be exploring these issues during our hearing.”

In an interview with SCMR, supply chain analysts made similar observations:

“Heightened risks and outright disruptions are coming at us at a furious pace and it is absolutely critical that firms be prepared with detailed contingency plans,” said Dr. Jeff Karrenbauer, president of Insight, Inc. “For example, over the past year we have witnessed significant crop failures which roiled commodity futures. We now have strong evidence that the Chinese are stockpiling rare earth metals, substances critical to a host of industries. They have also put into place or proposed onerous local content and ownership restrictions, such as those in the automobile industry.”

Karrenbauer, who also teaches at the University of Notre Dame, told Supply Chain Management Review that the United States is unprepared for a national security emergency that would transfigure procurement and distribution models.

“At Notre Dame, we ‘war game’ this scenario, determining how many DCs we should have, and where they should be located,” he said.

For those unable to attend the hearing, it can be viewed via live video through the Committee’s website at: http://www.foreignaffairs.house.gov/

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