Amid high-stakes trade talks with the US, China is trying to balance how it behaves its market influence. Controls the world supply of rare earth metals and magnets. And it withholds the supply of materials as leverage – the key material for everything from cars to fighter jets.
At the same time, Beijing knows that he should not exaggerate his hands by pushing Washington so hard, feeling that the US is being forced to make the long-term investment necessary to break its dependence on China.
This delicate dynamic was highlighted by the clear compromises of the countries that reached London on Tuesday.
Commerce Secretary Howard Lutnick said Chinese negotiators agreed to resume sending rare earth to American businesses. The Chinese government did not confirm this.
However, on Wednesday afternoon, JL Mag Mag Rare-Earth Company, a leading magnet producer in Gantu, China, said it was open to the public and that the Chinese Ministry of Commerce has issued a license for the sale of non-military magnet exports to the US, Europe and Southeast Asia.
China has a long history of using government policies to manage its markets, regularly flooding extremely low-priced Chinese supplies. It has gone out of business many of China's overseas rare earth competitors.
“China is a major rare earth country with the largest resources and largest exports,” said Xiao Yaqing, China's industrial policy leader in 2021, Minister of Industry and Information Technology. He denied that sales of rare earths in China are limited. “Some countries say we are restricting exports.
However, by 2021, China was already dominating the global market.
Jim Hedrick, a former rare earth expert at US Geological Survey, is a rare earth company currently president of US critical materials, and said it will take the US five years to break its dependence on China.
“China has gotten off to a head start of 30 years in rare earth production,” he said.
Magnets made from rare earth metals are important for the production of vehicles, offshore wind turbines, drones, missiles, fighter jets and many other advanced manufacturing products.
It was not clear that the agreement on Wednesday that China would resume sending rare earths and magnets to the US would prove effective in obtaining the supply needed for American industries.
Magnet makers need detailed international supply agreements, not just the framework they have reached, as a rule. According to Stanley Trout, a metallurgist at Metropolitan State University in Denver.
“We live and die by a detailed list of specifications. How does this contract affect our ability to do business?” he said.
Another potential chokepoint that China holds through rare earth and magnet supplies is the two-month licensing protocol for export. However, over the past few days, China has issued export licenses for automakers and their parts suppliers, said the Rarearth Industry leader.
Gasoline-powered cars and sport utility vehicles use up to 100 small rare earth magnets for electric motors in brakes, steering and other systems. Electric vehicles require additional rare earth magnets in the electric motor that rotates the wheels.
However, industry leaders say the licensing process is tedious, and it was unclear whether an agreement from London would resolve these difficulties. For example, Chinese producers of rare earths and magnets must submit documents specifying the end users for each shipment, and end users are often required to provide further information on how to use the cargo. Automakers who are end-users may not know exactly which suppliers in their complex supply chains need rare earths.
Chinese companies managed the global rare earth market in the 1990s. State-owned and illegal mines have flooded the global market with low-cost supplies that have been mostly mined and processed to protect the environment.
International rare earth prices have collapsed. The price of samarium, a rare earth essential for many military applications, fell more than 90%.
A rare earth refinery owned by Japan in Malaysia, where the Japanese manufacturing sector was closed in 1992. In 1994, France closed its refinery, and in 1998 the only American mine and refinery in Mountain Pass, California was shut down.
In all three cases, pollution complaints from environmental activists led to what was initially supposed to be a temporary closure due to improvements to equipment. However, the facility did not reopen as it could not compete profitably with China's low-cost produce.
During the territorial dispute between China and Japan in 2010, in a territorial dispute over controlling clusters of deserted islands in northern Taiwan, China imposed a two-month embargo on the shipment of rare earth elements to Japan, causing widespread distress among Japanese manufacturers.
At the start of that embargo, China's Ministry of Commerce summoned representatives of two dozen private and state-owned enterprises in China with licenses to export rare earths. The ministry ordered them to halt direct shipments to Japan and avoid additional shipments to other countries that could potentially resell supplies to Japan.
The embargo prompted Secretary of State Hillary Clinton and members of Congress to call for sustained Western action to reduce dependence on China. Investors and the US government have poured $1 billion into modernizing, expanding and reopening Mountain Pass American mines and refineries.
Just before the mines reopened in 2014, China's Commerce Department agreed to the US demand in the World Trade Organization case that the country was dismantling restrictions on rare earth exports. Meanwhile, over the past four years, another division of the Chinese government, the Ministry of Industry and Information Technology, has nationalized many of the country's rare earth mines and refineries.
With the support of the Ministry of Industry, Chinese companies have flooded the global market with rare earths. Prices collapsed again, forcing Mountain Pass operations to pause operations again in 2015.
Mountain Pass Mine reopened in 2018 under new ownership and control, but for the next few years it shipped the ore to China for processing. Only since the second half of last year, the site's refineries have resumed processing more than half of the material it produces. The US still has little capacity to manufacture magnets.
David Pearson and you Contributions and research.
