In Indiana, Clinton plays the China card

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Since the U.S. weapons industry cannot currently get the magnets it needs for precision-guided weapons from a company in the United States, how much risk is there in it relying on foreign suppliers of the components?

Clinton’s chief Indiana ally, Sen. Evan Bayh, who tried to stop the Magnequench plant closure in 2003, said, “The key question is: Are these components vitally important to a weapons system that is significant to our nation’s security? If the answer to that is yes, it seems to me we should retain a significant production capacity in our country and not be solely dependent or largely dependent on another power.”

National security concern
“The real value is in the production process and the real risk to national security is the ability to turn rare earth materials into high performance magnets,” said former House Armed Services Committee staff member Jeff Green, who now represents firms that make up the U.S. Magnet Materials Association.

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But a former Magnequench executive played down the significance of the supply issue: "Our product was an 85-cent part that you could make in your kitchen if your oven ran hot enough."

Neo magnet production capability could be re-launched in the United States, if a U.S. firm were willing and able to obtain a license from Hitachi, which owns patents connected to the manufacturing process, and able to hire the Americans with the expertise to do the work.

Another geostrategic angle: most of the rare earth elements now used in manufacturing come from China.

"The Chinese government controls the volume of rare earths that are mined (perhaps much like OPEC controls oil)," said one American magnet industry executive.

"Prices have increased greatly in the last year and the underlying feeling by Westerners is that this is due to the control by the Chinese and the fact that they ran the other producers in the U.S. out of business so they can do what they want."

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But there may be some reassuring news for those worried about potential risks to national security. There is a U.S. source for neodymium, an open-pit mine in Mountain Pass, Calif. owned by a subsidiary of Chevron. The Mountain Pass facility was shut in 2000 when rare earth prices were falling.

Chevron re-started operations last fall and is now selling some neodymium from the mine. The demand for the rare earth material has picked up partly due to its use in batteries for hybrid cars.

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