[Living Economy] Rare Earth vs. Helium Resource War in the U.S., Why China has to win by a landslide

- China vs U.S. conflicts in 2020 cause key minerals "second round of resource war, again?"
- China increases imports of Russian helium to reduce dependence on U.S.
- China, which owns 90% of rare earth-related patents, has diversified supply chains
- On the other hand, U.S. failed to come up with a special alternative to Chinese rare earths
- South Korea depends more than 60% on China-China conflict 'bursts of shrimp'

■ Broadcast: YTN Radio FM 94.5 (09:00-10:00)
■ Host: Reporter Cho Tae-hyun
■ Air date: October 24, 2024 (Thursday)
■ Talk: Cha Young-joo, Director of the Institute for i-Asset Economics,

- Targeting Russia or North Korea, the second-largest rare earth reserves? Political engineering is difficult

* The text below may differ from the actual broadcast content, so please check the broadcast for more accurate information.
◆ Reporter Cho Tae-hyun (hereinafter referred to as Cho Tae-hyun): Let's continue with Cho Tae-hyun's vivid economy part 2. The Story of the Economy That Moves the World We're going to continue with the second part of the World Economy, which will expand your economic outlook to the world. Today, we will be with Cha Young-joo, director of the Ai Asset Economic Research Institute. Please come in.

◇ Cha Young-joo, Director of the Ai Asset Economic Research Institute (hereinafter referred to as Cha Young-joo): Yes, hello.

◆ Cho Tae-hyun: As expected, the biggest variable now is the U.S. presidential election. There's really not much time left. Which part of the U.S. presidential election are you paying attention to?

◇ Cha Young-joo: Will Vice President Harris win now or former President Trump? There is a huge gap between research institutes. So, in terms of the actual gap between this gap and this gap, it depends on which institution leads and which region. So, on the other hand, we have no choice but to shout that we are winning because it's a super-contest. So for me, it's quite an adventure to bet on who wins right now. I really don't know who will win, and all the parliamentary structures can change depending on one seat in the House and Senate, so for now, I'm in Jungjung-dong. from the standpoint of investors or wait-and-see positions The most important thing now is that when there is such a sharp confrontation, it is more sensitive to bad news than good news.

◆ Cho Tae-hyun: That's right.

◇ Cha Young-joo: Even if there's a real good news here, people don't react, but our reporter Cho is also back from the military, but as men know, the sergeant in his later years has to be careful of falling leaves, and something really happens here. It's really surprising. Local warfare takes place somewhere. Let's keep our distance from betting on the presidential election because it can vary depending on the occurrence of these things. I'll organize it like this.

◆ Cho Tae-hyun: You said that you always have to watch the situation carefully. That's why early voting is getting heated now. That's why we're in an advantageous position. What we said seems to directly reflect such a close relationship, but regardless of who is, the pressure on China will inevitably intensify after the presidential election. So what we're seeing today is going to talk about key minerals. If the U.S.-China conflict intensifies again this time, this resource war could break out again. There's a story like this. This story has happened before, but it was in 2020. What was the situation at that time?

◇ Cha Young-joo: As you said, if you say one more word in the U.S. presidential election, whether it's a Democrat or a Republican, the U.S. has no ruling or opposition in the national interest. I think you should see that part. Of course, if you become Trump, you will be able to see your country's priority, and then Harris, you will be able to solve it a little bit, but I will tell you that there is no separation between the ruling and opposition parties when it comes to sharply and against national interests.

◆ Cho Tae-hyun: He's speaking in one voice to hit China.

◇ Cha Young-joo: He's hitting China with one voice right now. The reporter's question now is, if we look at it as 2020, China and the United States first joined with helium. It has a mineral called helium, and most of it is produced in the United States. In the case of helium, it was generated from radiation and was trapped in the rock. few on earth Helium, in a way, is also a rare earth. So, the concept of rare earths is a mineral that exists on Earth, but because it is so small, it is a rare earth. You can think of it as a rare mineral. There was simply one of those things. So the reason why helium is important is because we've been paying a lot of attention to quantum, but quantum exists theoretically. Theoretically, the temperature needs to be lowered to minus 270 degrees Celsius or less to exist.

◆ -270 degrees below zero.

◇ Cha Young-joo: We have to lower it to minus 270 degrees, but helium drops to almost 269 degrees. So you can meet those conditions. So, we need helium to do things about the future, such as MRI, particle accelerators, and so on, but the U.S. said it would not export it to China. So it was embarrassing for China, which has imported almost 95% of it from the United States. It's not that China is staying put. "Really? Then we won't give you rare earths. " When it comes to rare earths, we talk about a variety of minerals, and 80% of them are from China. As a result, in a way, if Trump broke the free trade parts we talked about in the past, it is a historical event in a way that they left the trade parts and became the starting point of a new resource war. After that, Indonesia said it wouldn't give cooking oil, so if you look back, you'll think of everything. In a way, helium was the starting point of the resource war.

◆ Cho Tae-hyun: There are 17 types of rare earths because we keep talking about rare earths in 2020 from 57 to 71, and atomic number from 21 to 39. In fact, the name is rare earth, but it is not uncommon on the surface, but extracting it takes a lot of environmental pollution and money.

◇ Cha Young-joo: What's very important is environmental pollution, but there are countries that have applied for patents on how to extract these rare earths.

◆ Where are you? Is it China?

◇ Cha Young-joo: China has more than 90% patents on these rare earths.

◆ Cho Tae-hyun: So this is the center of the supply chain.

◇ Cha Young-joo: Even the United States digs rare earth stones and moves this development to China for development in China. So, in our opinion, China is a little comfortable with environmental pollution, so some people say that even if you cut a mountain, you can cut it to get 1g, but of course, it's not wrong, but since the patent is owned by China and even if you remove a mountain from the United States, it can only be extracted in China. So, in a way, only about 50% of the world mines in China. Unexpectedly. But you can think of it as accounting for most of the world's exports.

◆ Cho Tae-hyun: The country that can bring gemstones and process them and sell them is probably China.

◇ Cha Young-joo: That's right.

◆ Cho Tae-hyun: There are problems such as environmental pollution and low labor costs, but I understand technologies that go beyond that. So it's been four years now. What is the situation like in the two countries now after four years?

◇ Cha Young-joo: Four years. So 2020, it's already been four years. After a while, it's going to be five years.

◆ Cho Tae-hyun: You get a year older and you're like this.

◇ Cha Young-joo: First of all, on the helium issue that started earlier, this was recently declared by China. It is said that the United States changed it because we broke away from it. The countries that can make helium now are the United States, Qatar, Algeria, and Russia. However, China has increased its imports from Russia. Then, a large-scale factory was built in Qatar, and China itself started building a factory in Yantz in 2020, and it is said that the factory has recently been operating. So in the case of helium, as I mentioned earlier that it exists in nature, it can be extracted from natural gas. But if we look at the characteristics of natural gas and crude oil, not all of them are the same. The U.S. became another helium powerhouse because it exports helium well from natural gas from the U.S. That's why, and China also has natural gas. However, helium hardly comes out of Chinese natural gas. As I said last time, Iranian oil is good for extracting various chemical products from there, and U.S. crude oil is gasoline. I once told you that it's good for moving cars. That's why it depends on where the natural gas comes from, but anyway, China is a country that feels a little close to China, not only Russia but also Algeria. Here, it can be seen as diversifying the source of income, but from the perspective of the United States, we still have not yet come up with an alternative to this rare earth. The patent part for this is very important. Also, there is a rare earth mine in Korea just by looking at the mine. They say that there are many in North Korea, but there are about 36 in Korea and about 130 in Japan. How many are there in China?

◆ I don't know.

◇ Cha Young-joo: Almost 2,000. There are 1992. Therefore, in terms of quality, the U.S. is currently making efforts in terms of quantity, but from the perspective of private companies, there are many products that are imported by bypassing in their own way. Therefore, I have to say that creating these things does not mean that the will of the government alone is not enough.

◆ Cho Tae-hyun: As expected, China has a tight supply chain and this key mineral, and I don't think there's anything we can do about it. But the problem is that China does not control the supply chain, but there are many other key minerals, such as lithium, which we have dealt with. What else is there?

◇ Cha Young-joo: So at first, he said he wouldn't give these rare earths, but not just the United States, but there's something that China tasted once. First of all, China did not specifically export gallium and germanium. In a way, this is a rare earth, but the rare earths we're talking about are used in military and semiconductors. What I threw gallium at once is that it has very strong thermal conductivity, but it is also resistant to heat and moisture. That's why it's used in TVs, electric cars, and mobile phones. In a way, the importance is relatively lower than that of semiconductors, but I just threw this at you. And I threw germanium once. In the case of germanium, the parts that go into optical fiber cables or solar cells of satellites, and when I threw this, the whole world was shocked. That's why I showed it to you. See? This is about it. If we are truly rare earths, shouldn't semiconductors become AI only when we have semiconductors as we enter the nano process? However, if you look at all semiconductor processes, there are processes called etching and deposition, and etching is cutting silicon wafers, and deposition is attaching various electrical circuits to silicon wafers. The exposure equipment is to take pictures with this. But if we see a thin film, we attach it to a 1-micrometer disk and sharpen it. One micrometer is one-millionth of a meter. You have to attach a circuit diagram and lay a wire on it, so you do it with gaseous liquid. I sharpened the driver and it didn't make sense. That's why it's all the parts that come out of rare earths. We only talk about China, but one more thing we need to look at is Russia. There is a rare earth called scandium in Russia. If it is alloyed with aluminum, it becomes an essential consumer of aerospace aircraft, and without it, stealth aircraft cannot be made. So, it's connected again like this, and I'll also tell you that rare earths are not simply about giving cement or not giving urea, but they are Achilles tendons that can fill each other's leashes.

◆ Cho Tae-hyun: But the big problem is that when two countries and two giants fight, small countries like us underneath them are very sick. This is a problem, but we are also almost dependent on rare earths in China. How is the situation now?

◇ Cha Young-joo: That's right. We also have China or Japan together, which is quite difficult. In the case of silicon, wafers for making semiconductors were previously used. There are talks about glass substrates, but silicon is still the trend. About 75% of them are coming from China. Next, I can tell you that there is no special measure because more than 60% of tungsten and all rare earths are coming from China now. The author wrote, "The back of a shrimp explodes in a whale fight," and the more appropriate metaphor for me is that if you look at the American cartoon fable, a stork eats a frog, but the frog catches the stork's throat before it enters its mouth. What happens then? Storks can't swallow frogs. Then the stork had to open its mouth, but if it wanted to eat the frog, it didn't open its mouth. Frogs are holding their necks in a deadly manner. So in a way, the stork was more awesome, but Eul grabbed it by the neck. So I'm in a situation where the stork is the U.S. and China is holding its neck. I'm thinking of a certain allegorical part. For now, we know this seriousness, but it is not easy to come up with an alternative.

◆ Cho Tae-hyun: It's not easy.

◇ Cha Young-joo: I don't know if we can see this as an alternative. China is known to have the largest rare earth reserves in the world with 44 million tons, followed by Russia with 12 million tons. But in terms of production, China produced 140,000 tons and Russia produced 8,000 tons. It's based on 2022. If so, there are many rare earths in North Korea, such as improving relations with Russia, and in a way, there are some detours in theory, but this is also not easy in terms of political engineering in reality.

◆ Cho Tae-hyun: Then I don't think it's going to be easy. Maybe that's why we've talked about supply chain diversification so many times, but I don't think the situation has changed much. It should be considered that those things have an effect, right?

◇ Cha Young-joo: That's right. In particular, in the case of China, there are Russia that they put forward while leaving the United States to diversify this supply chain, but there are also things that the African side has put considerable effort into. So it seems a bit unfortunate that we are working hard but there is no tangible result yet, but this is not a political issue, but an essential item for us to create various industries, so I would like to tell you that we should constantly set this as an agenda of some information and establish mid- to long-term plans for this part.

◆ Cho Tae-hyun: But is there a way to make a mid- to long-term plan or something like this? I don't think there'll be much to come out.

◇ Cha Young-joo: But that doesn't necessarily mean that there's no way out. So, rare earths are mostly produced in China, but there are parts produced in various countries. After doing those things one by one, and as you mentioned earlier, isn't lithium mining developed greatly in the United States? But there are many things called lithium all over the world. So even when POSCO went to Argentina, they said there was Europe and everything. So, like that, from the perspective of existing fast-paced companies, we make a lot of effort to preempt this. In particular, general companies in our country. It was called a general trading company in the past. These companies still maintain their status as listed companies, and most of their businesses used to be buying and selling goods, but now they are focusing more on buying and selling resources. It is an important task for these general managers to save semiconductors under the Special Semiconductor Act, but if we develop resources like this for general managers, or if we have incentives or KOTRA, how can we connect these things to collaboration? If you run in hopes of tangible results right away, what do they want? We can do this, but in the mid- to long-term, we succeeded in Argentina's lithium mine, but we also succeeded in Indonesia's oil, right? Like that, shouldn't we solve it one by one? This is not an answer, but the overall possibility is open to me. I'd like to say this.

◆ Cho Tae-hyun: Okay. If resource diplomacy was more precise during MB. It is a time when I feel a lot of regret that I wish I had more patience in politics. So far, we've talked about various things surrounding resources with Cha Young-joo, director of the I Asset Economic Research Institute. Thank you for talking today.