The Peter Zeihan Podcast Series - Are Rare Earths Really That Rare? || Peter Zeihan

Episode Date: March 3, 2025

Rare earths are back in the headlines, but is all the hype worth it? Let's breakdown what these are and how "rare" they actually are.Join the Patreon here: https://www.patreon.com/PeterZeihanFull Newsletter: https://mailchi.mp/zeihan/are-rare-earths-really-that-rare

Hey, Al, Peter Zine, coming to you from a very, very chilly Colorado. Today, we're taking a question from the Patreon page that's been popping up a lot in the news without rare earths. There's a lot of angles to this, but basically it seems that the Trump administration is really interested in getting some production of the stuff. And the question is, how does it work? What do we need? Where do we go? You may recall recently Trump falling to Russian propaganda again. said that Ukraine owes the United States $500 billion, and it should pay for it with rare earth and not get a security guarantee in exchange.

By the way, total USA to Ukraine at this point, according to U.S. government sources, is less than $100 billion, of which two-thirds is weapons that were just sitting in the warehouses that we were going to blow up. Anyway, rare earths. Unlike the name, rare earths are not rare. They are produced as a byproduct of mine. mining when you're doing nickel or copper, platinum, uranium, palladium.

That's a platinum group. Coalash, phosphates, sometimes lead. I said iron ore already, aluminum, bauxite. Anyway, there's like 20 different macro metals that you mine for, plus coal ash, that produce REEs as a small side of product. And so what usually happens is you produce the primary thing that you're after. And then with the waste from your refining process, you maybe do another run of that in order to concentrate their air earth a little bit more. But then that next stage of taking that kind of slag that's been partially refined and turning it into useful rare earth metals is very dirty.

It's very pollutive. And it takes a lot of time. So usually what happens is you take that slag and you just ship it off to China. Because back in the 1980s and 90s, the Chinese were a little bit of. looking for industries that they could corner. And their technology was not very good. And they settled on rare earths because it was expensive and it was dirty, but they have a very capital flush system where they basically print currency and confiscate everybody's bank deposits to pay for whatever to open them plan. They want. So what they do is they build a couple hundred vats of acid and you

dissolve everything in the first vat and then you get the remnants. You put that in the second bat and then you're remnants from that, put it in the third vat, remnant between the fourth bat, and do-d-d-d-d-d-d-d-d-d-d. And over the course of months, starting with tons of slag material, you might end up with an ounce of a rare earth metal. Anyway, the Chinese cornered this market because it was something that no one else was like,

ooh, I want to do that. And so they ended up supersaturating the market because Chinese economics are about throughput rather than efficiency. And they continue to subsidize the industry today, which is why, based on the rare or somewhere between, 50% and 95% of it comes out of China, the refined metal. And then, of course, in the last 10, 15 years, they tried to go downstream

into processing and building product out of those things. It's been less successful in that. Anyway, this technology is based in the 1920s. So there's nothing that's difficult about this. And it doesn't really take a long time to set up. It's just that once you actually start putting your slag into the acid, it's going to be months before you get any material. So the problem is not rare.

per se. The problem isn't even production. Rare earths are a byproduct of any number of industrial mining and purification processes. The problem is building out that processing capacity. Now, how long does that take? I would argue that in Australia, Malaysia, France, and the United States, most of that work has already been done. But nobody wants to turn it on because you've got several months where you're not getting any product. And the Chinese continue to supersaturate the market and provide the world with below-cost rare earths. So at some point, a switch is going to be flipped. And everyone's mind, when they realize either that the Chinese are overplaying their hand

with their control of the processing capacity, or China just breaks. And everyone realizes that if they still want this stuff, they're going to have to make it themselves. Once that happens, all of this spare refining capacity around the world will spring up. and the problem we solved in six months to a year. Until then, we are in the unfortunate position that the U.S. government seems to be beholden to Chinese and Russian propaganda on the rareness of rare earths. And that, unfortunately, is shaping policy at a number of places.

It's like, if you want to be paranoid about things that the Chinese dominate, this isn't where you go. You should be concerned of other types of processing, such as turning bauxite into aluminum, turning iron ore into steel, turning lithium concentrate into lithium metal. Because those are places we're setting up the replacement infrastructure in the United States hasn't really started its scale yet.

And if the Chinese break before that's done, we will then have to build out that infrastructure in an environment when we can't get the intermediate product. And that will generate the mother of all inflation pulses. So you know, one miracle at a time, I'd argue that this specific problem errors is not all that much of a problem. There's plenty of streams coming from plenty of places. We just have to turn on a few things to solve it.