China’s arming of rare lands is likely to lag far behind

This is due to the fact that there is little concern about the news that Beijing plans to ban technology exports to refine small metal suites. Such action, if taken, would have met with even more spectacular setbacks than previous attempts to arm the trade on rare lands.

In 2010, a dispute between China and Japan over a group of islands off the northeast coast of Taiwan imposed export restrictions on a total of 17 rare lands in Beijing. This is a problem for Japan, as it relies on elements such as neodymium, dysprosium and terbium as essential components of equipment such as motors, LEDs, lasers and fuel cells. At that time, China had a monopoly on the production of world metals. Without alternative supply resources, Japan’s high-tech industry would be crippled.

There is a big lesson to be learned from that crisis: Source diversification is an absolute necessity, as Beijing has agreed to use rare lands as a geopolitical weapon.

Japan Oil, Gas and Metals National Corporation, or Jagmec, is an organization set up to guarantee access to essential goods for the country, sponsored by Australian producer Linas Rare Earths Limited. Supply chain.

Thanks to that investment, Linas now produces nearly 20,000 metric tons of rare earth oxides a year from the Mount Weld mine in Australia and a processing plant in Malaysia, 500 tons more than is needed to meet all of America’s demands – or critical applications. Last month, Texas signed an agreement to build a new facility to process 5,000 tons of rare land per year, jointly funded by the U.S. Department of Defense. The Pentagon last year funded other projects to guarantee further processing in the US, including the large Mountain Pass mine in the Mojave Desert, where the Listed MP Materials Corporation operates.

The result of all this is dramatic. China’s market share will fall to 58% by 2020, from 98% of world excavated production in 2010. Mount Weld and Mountain Pass alone now account for a quarter of the world’s rare land supplies.

Meanwhile, the US Pentagon has set up a government stockpile of rare-earth elements equivalent to the US Strategic Petroleum Reserve and announced plans to buy 5,000 tonnes last year. Separately, major importers brought and won the case against China in the World Trade Organization on rare lands, as well as tungsten and molybdenum, two other items that accounted for the largest share of supply.

Occasional saber-rattles in the past year have already boosted the values ​​of non-Chinese producers, making it even easier for them to finance the expansion of mining and processing capacity. Last August Linas raised $ 5,335 million, sold new shares to pay for a processing facility in Australia and upgraded at its Malaysia plant. MP’s market capitalization has increased tenfold since it went public through the SPAC deal last July.

No one should be surprised about these events.

When Arab countries used the dominance of their oil exports to raise the price of crude oil in the 1970s, the result was not a perpetual Gulf sore throat on power, but a diversification. Rich nations have abandoned their oil-based power plants and built coal and nuclear generators instead, drilling new wells in the North Sea, Siberia, Mexico and Texas.

When former US President Richard Nixon imposed export restrictions on soybeans shortly before the Arab oil embargo in 1973, there was a similar outcome to help boost domestic inflation in the United States. Japan, which relies on the United States for 92% of its soybean supply, has helped establish the Brazilian industry to expand its import base. It is now the largest global producer of such oilseeds.

The world relies on a wide range of supply chains to supply a range of essential products, from electric vehicle (EV) batteries to fertilizers and MRI scanners. Most of the time, we pay less attention to the interdependence built into these commercial networks, because any player acts recklessly by using his own position in the market as a geopolitical leverage.

As China also seeks to present itself in a technically complex market for semiconductors, political restrictions on exports will cause major importers to restructure their supply chains to be more resilient. Beijing control over rare lands is the paper tiger as always.

David Fickling is a Bloomberg opinion columnist who covers industrial as well as industrial and consumer organizations.

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