US Faces Rare Earth Shortage as China Tightens Export Controls

The United States is increasingly vulnerable to shortages of key rare earth elements, yttrium and scandium, due to China’s strategic control over their supply, despite a temporary trade truce. While relations between the two countries have seen some improvement, the flow of these critical materials to the US remains restricted, raising concerns for the defense, technology, and manufacturing sectors.

China’s Dominance in Rare Earths

China currently controls approximately 90% of the global production of both yttrium and scandium.¹ This dominance allows China to exert significant influence over industries reliant on these materials. In April 2023, China implemented export controls on rare earths, which were eased following a “one-year trade and tariff truce” agreed upon during the US-China summit in Busan in October 2023. However, the actual issuance of export licenses has been deliberately delayed, effectively limiting supply to the US.^{Source Article}

Critical Applications and Rising Prices

Yttrium is a crucial component in high-tech industrial applications, including displays, lasers, and superconductors. It’s particularly vital as a coating material that prevents engines and turbines from melting at high temperatures. The price of yttrium in the United States has surged, increasing 69-fold compared to the previous year.^{Source Article} This price increase has already led to production suspensions at US paint companies.

Scandium, used in lightweight, high-strength aerospace aluminum alloys and fuel cells, is as well essential for the production of 5G semiconductor chips. The US currently has no domestic production of scandium, making it entirely reliant on imports, primarily from China.²

Impact on US Industries

China’s export controls are directly impacting the US aerospace industry, including the defense sector, as well as artificial intelligence (AI) data centers.^{Source Article} American semiconductor manufacturers are facing shortages of both yttrium and scandium, potentially causing setbacks in the production of next-generation 5G chips.^{Source Article}

US semiconductor companies typically procure scandium from third-country suppliers, but Chinese authorities now require applicants for scandium use permits to specify the ultimate conclude-user, effectively targeting the US semiconductor industry.^{Source Article}

The Broader Context of Strategic Interdependence

The situation highlights the growing strategic interdependence between the US and China in the realm of critical materials. As the demand for clean energy technologies and advanced electronics increases, securing a stable and diversified supply of rare earth elements is becoming a national security imperative.³ The US administration is attempting to diversify import sources, but currently, no viable alternatives to China exist.¹

US President Donald Trump is expected to discuss this issue during his upcoming visit to China in April.^{Source Article}