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Because China will also keep the world in its grip with rare earths in the future with its rules

China has just expanded its already severe restrictions on the export of technologies related to the refining of rare earth minerals. The most recent restrictions concern the technology for producing rare earth magnets, used in electric motors and generators. These minerals are also widely used in the automotive industry and consumer electronics such as cell phones.

The economics of electric energy for mobility cannot exist, at least for now, without these permanent magnets that require rare earths.
The export of rare earth extraction and separation technology had already been banned by China. The most recent and previous restrictions are part of a broader trade war between the United States and China over technology exchange. At the end of 2022 the United States banned exports of advanced microchips. China responded with a ban on the export of germanium and gallium , two metals critical to the production of advanced chips. The United States imports half of its germanium needs and all of the gallium it uses.

What exactly do the Chinese hope to achieve? The answer becomes quite clear when you realize that China supplies 90% of the world's volume of refined rare earth metals. The country produces 60% of the mineral. This means that the rest of the world sends three-quarters of the ore to China for processing and the Chinese would like to continue enjoying their near-monopoly on processing. This puts China in a commanding position to decide who gets these metals and whether or not the rest of the world gets any. In 2010, China unexpectedly and drastically reduced exports of rare earths, causing prices to skyrocket.

The most obvious response to this uncertainty would be to encourage rare earth mining outside of China. The current US administration has launched a modest program to incentivize the mining of critical minerals such as lithium, nickel, graphite, cobalt and manganese in the United States. Many rare earths are already part of the so-called List of Critical Minerals and can therefore benefit from incentives to encourage domestic production. A small loan has been allocated for this purpose. A similar operation, with much fewer resources, is underway in the EU . In the end, rare earths are distributed almost everywhere.

A private attempt to revive a shuttered rare earth mine, the largest in the United States, resulted in a colossal financial loss for investors as rare earth prices plummeted after China regained its previous level of exports after the 2010 reduction . This shows how China can easily sabotage any attempt to challenge its dominance of the rare earth market.

Given the close relationship between the Chinese government and the rare earth industry, the only reasonable way to break China's stranglehold on the rare earth market would be for governments to guarantee the price of rare earths mined by domestic companies. This solution is so contrary to the neoliberal free market ethos of the last 40 years that I don't think it can become reality.

In a world where consensus on the free trade of goods is breaking down and geopolitical interests are coming to the fore, China appears to be far less concerned with abiding by free trade rules than with protecting its own perceived national interests. If other large countries and trading blocs begin to move in the same direction, the easy availability of low-cost goods and resources produced in distant places could become increasingly problematic.


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The article Why China will keep the world in its grip on rare earths even in the future with its rules comes from Economic Scenarios .


This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/perche-la-cina-terra-il-mondo-in-pugno-con-le-terre-rare-anche-in-futuro-con-le-sue-regole/ on Thu, 28 Dec 2023 08:00:34 +0000.