China struggles to save its international Rare Earth Market

At the time when China is bedevilled by shifting away of supply chains from its shores and imposition of high import tariffs and blacklisting of its companies by US and Western countries, the world’s second-largest economy is staring at a significant drop in its status as the top international exporter of the rare earth materials.

Data from China’s General Administration of Customs shows that the country’s exports of the 17 minerals classified as rare earths fell 18.2% in December 2023 from the previous month, to 3,439 tons. In 2022, it exported 48,728 metric tonnes of rare earths, down 0.4% year-on-year. The US Geological Survey report also suggests that China’s share of total rare earth exports dropped from about 90% a decade ago to roughly 70% in 2022.

The Chinese Society of Rare Earths (CSRE), which claims to offer the most comprehensive database of disclosed research works in rare earth science and technology, has accepted that there has been a slow displacement of Chinese rare earth exports across the world since 2020.

Countries like the US, Australia and Myanmar are engaged in the exploration of enough rare earth materials, making the international buyers to rely solely no longer on China for the valuable minerals used for making critical components for smart phones, electric vehicles and military hardware like missiles, firearms, radars, and stealth aircraft.

“A complete industrial supply chain independent of China has begun to take shape,” a Shanghai-based firm was quoted by South China Morning Post as saying. In 2023, the net profit of the company, which is involved in the business of rare earth materials, declined 62.6% from the year before.

In the past, China has been successful in flooding markets with cheaper rare earths, making several mines in the West and other parts of the world unprofitable. In fact, China’s less stringent environment regulation and low labour costs helped the country in producing rare earth materials at cheaper rates.

However, since the focus of several countries is on lessening their reliance on China for imports of valuable minerals, the world’s second largest economic power is no longer the top exporter of rare earth materials, Nikkei Asia said.

Rare earths are a collection of 17 elements and they are: lanthanum, cerium, praseodymium, neodymium, promethium, samarium, europium, gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium, lutetium, scandium, and yttrium. China is home to 70% of rare earth mining and 90% of processing capacity, according to the International Energy Agency.

In December 2023, in an apparent response to moves by the US and Japan to reduce their reliance on supplies of rare earths from China, upset Beijing banned exports of technology for making rare-earth magnets and imposed restrictions on the supply of other important industrial metals.

However, this was not the first time China flexed its economic muscles by slapping export bans. Japan came under a China-led embargo on the supply of rare earths for the first time in 2010 when Tokyo arrested a Chinese fishing trawler captain after his vessel collided with two Japanese Coast Guard patrol boats near the Senkaku Islands.

Shaken by this move of China, Japan has reduced its dependence on the world’s second economic power for rare earths by 60% currently from 90% earlier. It has partnered with Lynas Rare Earth Limited which has a mine in Australia and refining plant in Malaysia. Lynas, an Australian company, produces 12% of global rare earth oxides. It provides around 90% of Japan’s supply of neodymium and praseodymium, Foreign Policy said.

Similarly, the US has reduced its dependence on China for rare earth imports—from 80% between 2014 and 2017 to 74% between 2018 to 2021. In terms of processing and refining of rare earth materials, the US accounts for 16% of production, Myanmar 9% and Australia 8%.

In the next few years, experts say, demand for the global supply of rare earths will grow, but the pattern of the mineral supply, which has been so far dominated by China, will change as Europe and Southeast Asian countries like Vietnam, Laos and Malaysia have also started the mining of rare earth elements. As per Brooking Institution, China currently produces some 60% of the world’s rare earth elements and processes 85% of them.

Vietnam has the world’s second-largest reserves of rare earths after China, as per the data from the US Geological Survey. The Southeast Asian country possesses estimated 22 million tons of rare earths, accounting for around 19% of the world’s known reserves. Laos has an estimated 600,000 tons of rare earth reserves, which are mainly distributed in the country’s northern parts such as Xieng Khouang and Huaphane provinces. Whereas Malaysia claims it has 16.2 million tons of rare earth reserves.

These developments categorically show that days are not far away when too many options available for sourcing rare earth materials could lead to further drop in China’s status as the world’s leading supplier of critical minerals, which are helping engineers and scientists in writing a new script in the world of advanced technology.

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