Pentagon and Toyota seek to overcome China's rare earth strangehold

The US Department of Defense and Japanese automaker Toyota (NYSE:TM) have embarked upon simultaneous bids to overcome China's strangehold on rare earth metals via the development of North American supply sources.

Bloomberg reports that both the Pentagon and Asia's largest auto maker have teamed up with Canadian companies Ucore Rare Metals Inc. (TSX-V:UCU) and Matamec Explorations Inc. (TSX:MAT) to expand supply of rare earth metals via mining of deposits in North America.

In October the Pentagon entered an exploratory agreement with Ucore as well as enlisted Canada's Great Western Minerals Group to study supplies of yttrium oxide which is used in jet engines.

Toyota's trading firm Toyota Tsusho has meanwhile taken up a 49% stake in a joint venture with Matamec, while also pursuing a feasibility study of Quebec's Kipawa project for the extraction of dyprosium and other heavy metals.

Rare earth metals are a set of 17 heavy elements possessing similar properties which are essential to a number of hi-tech industries. Both the Pentagon and Toyota are dependent upon rare earth metals for use as high-performance magnets in drone weaponry and electric automobiles.

China currently controls 95% of the world's rare earth supplies, which makes both the DodD and Toyota highly vulnerable to any untoward changes to China's rare earth export policy.

The precarious nature of their dependency upon China's rare earth exports is further heightened by geopolitical considerations, such as the Middle Kingdom's relationship with the US as a strategic competitor, and the country's unresolved animus towards Japan for its militaristic aggression last century.

China has already used curbs of rare earth exports as a punitive measure during disputes with Japan, slashing supplies to the Land of the Rising Sun by 40% in 2010.

In July both Japan and the US teamed up with the EU to apply for a WTO probe into China's restrictions of rare earth exports, claiming that the measures were in violation of international free trade agreements.