April 9 (Bloomberg) -- The Defense Department would intervene in case of a shortage of rare earth materials for defense electronics and motors, Brett Lambert, the Pentagon official responsible for industrial policy, said.
“If we see restrictions, we would look to activate one of many measures, including contingency contracting” that lets U.S. defense contractors buy materials on behalf of the Pentagon, Lambert, the U.S. deputy assistant secretary of defense for manufacturing and industrial base policy, said today in an interview. “The tripwire” for such action is “if we are unable to meet requirements.”
Even at the height of export restrictions placed by China in 2010, there was no evidence that U.S. defense contractors faced such shortages, Lambert said. China, the world’s largest producer of rare earth materials accounting for at least 90 percent of the global supply, cut export quotas by 72% that year, sending prices of some materials up more than sixfold.
The global market responded to those restrictions as new producers such as Molycorp Inc. of the U.S. and Lynas Corp. of Australia emerged. “Prices of materials have fallen dramatically,” Lambert said.
The U.S. defense industry’s consumption of rare earth materials accounts for less than 5% of the nation’s annual use, Lambert said. A report prepared by his office and sent to Congress last month said domestic rare earth supplies will meet defense needs by 2013. To prepare the report, the Pentagon created a database of which materials went into what components and of available alternatives, he said.
The 17 materials include elements such as neodymium, samarium and dysprosium that also go into commercial products, including hybrid batteries, mobile phones and computer hard drives.
Congress required the Pentagon last year to examine the use of rare earth materials in defense applications, determine if non-U.S. supplies might be disrupted, and suggest ways to ensure long-term availability, as well as secure an assured source of supply by 2015.
Rare earth materials go into making high-powered magnets that are used in defense electronics and are usually ordered 24 months to 36 months in advance of weapons systems being delivered to the Pentagon, Lambert said.
The Pentagon is “continuously monitoring” the market for rare earth materials and if it notices an emerging shortage the Defense Department may also seek additional approval from Congress to stockpile the material, Lambert said.