By David Olive
On April 4, China stopped exporting seven kinds of rare earth elements (REEs) on which the U.S. is heavily reliant.
REEs and the magnets produced from them are essential in automaking, semiconductors, smartphones, elevators, fighter jets and submarines — a short list.
The U.S. is in negotiations with China to restore a free flow of REEs. But U.S. officials expect that China’s export controls regime is here to stay. It gives China leverage in the trade war the U.S. is waging against it.
The U.S. would not be hostage to a China that supplies most of the world’s REEs and many other critical minerals if it had strengthened rather than weakened its relationship with Canada.
For its part, Canada needs to spend about $30 billion by 2040 to bring its critical minerals endowment into production just to meet domestic demand, according to a report this month by the Canadian Climate Institute.
Investment in the sector averaged only $2 billion a year between 2018 and 2023.
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Canada is the U.S.’s largest external supplier of steel, aluminum, nickel, uranium, potash, and zinc, and is the second-largest U.S. supplier of imported copper. Canada also has an abundance of “niche” critical minerals such as indium, graphite, germanium and gallium.
And it has potential to become an important source of REEs.
That could be the centrepiece of negotiations to end America’s tariff assault on Canada.
Canada and the U.S. would benefit from increased government investment in a robust supply chain for REEs and other critical elements. Private investors avoid the sector because of volatile commodity prices and thin profit margins.
Canada and the U.S. are already in the early stages of partnering on critical minerals production.
The provincially owned Saskatchewan Research Council (SRC) has held talks with the U.S. Department of Defense about supplying the DOD with REEs converted to metals.
Canadian uranium is increasingly enriched by new U.S. facilities to break Russia’s hold on about half of global refined-uranium supply. Canada is a natural ally, with 10 times the uranium reserves as the U.S.
And Canadian companies refine U.S. zinc, creating the critical mineral germanium, widely used in U.S. manufacturing.
In recent years, the U.S. has invested about $95 million in Canadian critical minerals development, including a tungsten project in New Brunswick.
But Trump’s trade war has disrupted the Canada-U.S. collaboration in critical minerals supply.
“Instead of working with Canada on critical minerals trade, the president has targeted Canadian imports with truly reckless tariffs while making concessions to the Chinese government to try to access their mineral reserves,” U.S. Sen. Maggie Hassan (D-NH) told a U.S. Senate hearing on critical supply chains last month.
The Trump administration has struck critical minerals supply agreements with Ukraine and the Democratic Republic of Congo. And it has cast a covetous eye on mineral-rich Greenland.
But the Washington, D.C.-based Center for Strategic and International Studies (CSIS) said in a report this month that “it will be years, if not decades, before these agreements bear fruit.”
The CSIS report, titled “Canada may be the United States’ best hope for minerals security,” cites SRC and two REEs facilities in Quebec.
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David Olive: Yes, let’s Buy Canadian. But if we can’t, let’s buy anything but American
RBC Economics says the U.S. “is 100 per cent import reliant for almost a quarter of its identified 50 critical minerals, and over 50 per cent reliant on 29 minerals. In many instances, that reliance is on China.”
“Canada must be at the centre of this sphere,” RBC says of the race to develop critical minerals. Canada “can de-risk critical mineral supply chains — reducing reliance on China,” RBC said, and “also providing additional capacity to markets dominated by a handful of suppliers.”
“Defence procurement is an underutilized source of financing for key defence critical minerals, particularly graphite, tungsten, scandium and gallium,” RBC said. That dovetails with Ottawa’s shift to more domestic procurement of military supplies.
And Ottawa could create a fund that would buy critical minerals at times when China and Russia flood the market to drive down prices and force competitors out of business. That new fund would create a floor price to attract private investors to the mining sector.
CSIS calls on Canada and the U.S. to create strategic stockpiles of critical minerals to protect supply chains from Chinese or Russian export bans. It also recommends that the two countries create a joint venture to produce REEs, whose output would be shared by Canada and the U.S.
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But as things stand, “tensions between the two countries risk unravelling (Canada-U.S.) collaboration at a time when it is most needed,” says CSIS, referring to the current military buildup in Canada and other Western countries.
Given China’s huge lead critical minerals production, the U.S. needs to partner with Canada.
Gracelin Baskaran, director of critical minerals security at CSIS, was blunt in her Senate testimony.
“We will not be able to do it without strengthening our relationship with Canada.”