However, in fact, rare earths are not "weapons" that are too dangerous for Beijing to retaliate against the US in the current trade war because the US does not use much rare earth for strategic purposes. Moreover, the US can still source from other places such as Africa to replace the supply from China.
Rare earth is a collection of 17 chemical elements commonly found together in ore fragments distributed in some regions of the world. The fact that many of these 17 elements, such as lanthanum and cerium, are not too rare, but the process of extraction and processing them often causes heavy pollution to the environment. That is one of the reasons rare earth mining activities are concentrated in China.
In 2018, the US imported 160 million US dollars of rare earth, 80% of which came from China. Beijing now sends a message that it will limit rare earth exports to retaliate on trade aimed at the United States.
Rumors that China will stop exporting rare earths to the United States have pushed up the stock prices of China’s rare earth companies to rise, for example, China Minmetals Rare Earth shares have increased nearly 50%. since the beginning of May.
Beijing seems to want US trade negotiators to know that rare earth could be a vital issue for US weapons and technology manufacturing companies. But experts say a ban on rare earth exports to the US could disrupt the production of these companies, but it is difficult to threaten them to the point of being paralyzed like the case. ZTE device (China) after being banned by US components and technology last year.
The good news for Washington was Beijing’s move to limit rare earth exports in 2010 to "punish" Japan, but ultimately did not work much. As the price of rare earth increases, foreign investment will pour into rare earth mines elsewhere in the world, weakening China’s almost monopoly position.
In 2010, China held almost 100% of global rare earth production but now this figure has fallen to 70% although China still dominates the market for rare earth processing. Moreover, US technology companies have developed solutions to limit rare earth use. If the price of rare earths increases due to China’s export restrictions, technology companies will certainly find more options to adapt.
Most importantly, most of America’s rare earth needs are not intrinsically strategic, but mainly come from normal applications such as rare earth used as a catalyst for petroleum refining. These catalysts accounted for 60% of US rare earth demand last year. Oil refiners can still pay a higher price to buy these catalysts from elsewhere or can give up using them without being too seriously affected.
Meanwhile, the US Department of Defense may be more difficult to find sources of rare earths that replace China or eliminate the use of rare earths. The demand of the US Department of Defense accounts for only 1% of the total demand for rare earths. However, US technology companies and the Pentagon may still want to be prepared to respond if rare earth prices rise once Beijing decides to ban rare earth exports to the United States.
On June 5, Jason Nie, a Pentagon Logistics Engineer (DLA) material engineer, said DLA is in talks with the rare earth mkango resources company in Malawi (East Africa) and other companies. Another global rare earth company to buy important minerals as part of its diversification of supply plans, reducing too much dependence on China.
Mkango Resources is still in the process of developing a rare earth mine and building a rare earth processing plant in Malawi. This company only went into operation after a few years.
DLA is also negotiating to purchase rare earths from the rare earth company Rainbow Rare Earths in Burundi, another East African country, and invites investors to invest in some rare earth projects in the US.
Jason Nie said: “We are looking for any supply outside of China. We want to diversify. We don’t want to rely solely on a single provider. ”
Receiving the news, stock prices of Rainbow Rare Earths and Mkango Resources listed on the London Stock Exchange immediately jumped more than 40% in the morning of June 5.
DLA buys, stores and transports most US Department of Defense rare earth supplies from the minerals used in fighter aircraft components to the minerals used to manufacture polyester bags. military uniform. As of September 2016, DLA is holding a volume of rare earth reserves worth 1.15 billion dollars.
On June 4, the US Department of Commerce also released a report that produced 61 detailed proposals to consolidate domestic rare earth production from providing low-interest loans to defense companies to buy rare earths. provision for expanding the supply of rare earth in the United States.
