Saltend BP Chemical Works – A.P.S. (UK) / Alamy Stock Photo
Rare earth metals are among the most sought-after substances on the planet, powering everything from smartphones to electric cars and wind turbines. Yet few people can name them, let alone explain what they are used for.
And perhaps even fewer know that western countries’ resources are almost entirely dependent on China, which processes around 90pc of supplies.
MPs and security officials say this leaves the UK and its allies potentially vulnerable, as Beijing becomes more assertive on the world stage.
At the vanguard of efforts to break our dependence on Beijing for supplies of rare earths is a British company that will start building a £125m rare earth minerals processing plant at the Port of Hull in Yorkshire this summer. It aims to have it up and running by next year.
London-listed Pensana, which raised £10m in late December in a share placing in which fund giant M&G took a 5pc stake, is one of only three major producers outside of China and the only in Europe.
Its minerals separation facility, to be built in Saltend Chemicals Plant, aims to produce enough refined metals to meet 5pc of global demand – it has the potential to be one of the world’s largest hubs of rare earths processing.
Paul Atherly, Pensana’s chairman and a mining industry veteran, argues the project will be at the forefront of demonstrating how the West could break its reliance on Chinese exports.
“We’re on the ground and we’ve got teams looking ready to go,” he says. “The UK could be a multi-billion dollar, world class producer of these rare metals and we want to establish the supply chain.
“It is incredibly exciting to be bringing back this kind of manufacturing to the UK, to be tapping into a chemical engineering DNA that exists in the Humber, in the northeast of England.”
To a layman, his optimism may be hard to digest. But it is based on the fact that while the 17 rare earth minerals are found in abundant quantities across the globe, the difficulty and expense of the refining process means it has been hard for countries to get a foot in the game.
Breaking China’s grip
China has become the dominant player in the refining process since the 1980s. Few worried about this until 2011 when Beijing suddenly halted exports amid a diplomatic row with Japan, sending prices soaring.
And just last month, China tightened its grip on the market by combining three of its huge state enterprises – Aluminum Corporation of China, China Minmetals Corporation, and Ganzhou Rare Earth Group – into a giant “super group”.
The new entity, called China Rare Earths, was likened to an “aircraft carrier”, with analysts warning it will give Beijing even stronger influence over pricing.
Chinese state media outlets have also hinted that its stranglehold could be weaponised as Beijing’s “ace in the hole” during tense US-China trade war flare-ups.
It has only added to the nervousness of western capitals in ever greater need of the essential minerals, as reliance on technology that contains them continues to grow.
One F-35 stealth fighter jet, dubbed by defence wonks as the “flying computer”, for instance, contains around 417kg of rare earths, according to a US congressional report.
The F-35 fighter jet’s computer system makes it especially reliant on rare earth metals – Cpl Lee ‘Matty’ Matthews/RAF
“There will be increased competition for scarce natural resources such as critical minerals, including rare earth elements, and control of supply may be used as leverage on other issues,” the UK Government’s integrated review of British defence and foreign policy warned last year.
Tory MP Alexander Stafford, who represents the former mining area of Rother Valley, Yorkshire, recently argued that “China holds the cards in many of the supply chains which form the foundation of the global economy”, blaming “decades of Western sleepwalking”.
Along with the environmental footprint of the rare earths industry in China, these concerns are prompting politicians in America and Europe to support efforts to diversify supply chains once more.
In the US, Joe Biden’s administration has funded the development of a new processing facility in Texas, set up via a joint venture between Blue Line and Australian mining giant Lynas. Rare earths will be shipped from Lynas’s mine in Western Australia for final processing in Texas.
The defence department has also funded the reopening of the Mountain Pass mine in California, previously closed in 2015 after its owners went bankrupt.
Britain’s manufacturing push
Meanwhile, the UK Government has given grants to firms such as Cornish Lithium – which is investigating supplies of lithium, used to make batteries for electric vehicles – and to UK Seabed Resources, which is sweeping the floor of the Pacific Ocean for metals.
Pensana too is benefiting from British policies by building its plant inside Hull’s new freeport, sparing it from import and export tariffs. It may also get grant funding, should an application prove successful.
Chairman Atherly says this, along with other factors such as the locally skilled workforce, is why the firm chose the site at Saltend Chemicals Park, where there is also existing infrastructure.
From next year, his company plans to begin refining rare earth minerals – neodymium and praseodymium – used in the production of magnets, vital to the green energy revolution.
Inside a single, 260-metre tall wind turbine, for instance, is roughly seven tonnes of powerful magnets. When the turbine’s rotor turns, it spins copper coils around the magnets to generate electricity.
It means that Pensana’s facility, which aims to produce about 4,500 tonnes of metal oxides per year, should have plenty of demand from giant wind farms being built off the coast of Yorkshire.
Further down the line, Pensana aims to ramp up production to 12,500 tonnes of rare metal oxides per year – equivalent to 5pc of global demand
It is also set to have a direct power feed from the Dogger Bank wind farm, making its power 100pc renewable, and could eventually recycle materials from old wind turbines – creating a so-called “circular economy”. The plant is expected to create 250 construction jobs and another 150 permanent jobs in Hull.
Atherly says Pensana will begin by refining minerals shipped from a mine in Longonjo, Angola, but he hopes to gain more customers globally. So far, he says, there has already been interest from potential partners in Europe, the US, Japan and Korea.
His aims could reduce shipments from China. Europe imports about 16,000 tonnes of rare earth permanent magnets from China every year, representing about 98pc of the market, according to a recent EU-backed report.
But Atherly believes the need for the West to build up these supply chains is not just related to security. China has its own environmental, technological and defence goals that it hopes to meet in the coming decades, he explains, which will require using up vast amounts of their own resources.
“They’re spending $11 trillion on exactly the same thing that the rest of the world is spending money on,” he adds, “and they’re going to need all the magnets they produce. The markets have woken up to that.”
This shift, he argues, is not so much a threat as an opportunity – one that will require the country to summon up its industrial heritage for a high-tech age.
“We are going back to what the UK used to be. We used to import raw materials from around the world, whether that was agricultural products, metal or cotton, and turn them into value-added products. Now we are doing it again.”