China Restricts Rare Earths Exports, Again
The U.S. stock market bounced back on Tuesday, making the first sizable gains ever since U.S. President Donald Trump imposed a minimum 10% tariff on all imports from 90 countries, roiling financial markets across the globe. However, oil markets have struggled to advance after posting heavy losses to trade at multi-year lows on fears of a full-blown trade war. Brent crude for June delivery slipped 0.4% to trade at $63.94 per barrel at 11.45 am ET on Tuesday, a level they last touched in February 2021, while WTI crude for May delivery was flat on the day at $60.66 per barrel.
However, the unraveling trade war between the United States and China is only getting started, with Trump threatening extra 50% tariffs on China unless it imposes retaliatory duties on U.S. exports.
China was the hardest hit by the latest tariffs, with the Middle Kingdom now facing an effective tariff of 64.9%, including an additional 34% duty imposed by former President Trump on top of existing tariffs from previous administrations. Beijing announced a slew of countermeasures, including extra levies of 34% on all U.S. goods as well as export curbs on rare earth minerals. Under the new restrictions, Beijing requires exporters to apply for a license from the Ministry of Economy and also disclose the final use of materials like dysprosium, gadolinium, scandium, terbium, samarium, yttrium and lutetium. This was not the first time Beijing is leveraging its dominance in rare earths in a trade war with its biggest rival. Back in December, China banned exports of antimony, gallium and germanium to the U.S., minerals are used in specialty applications in chipmaking, defense and communications industries. In 2023, China banned the export of technology to extract and separate rare earths in a bid to protect its rare earths industries.
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REEs are used in a number of technologies including catalysts for automobiles and petroleum refining, magnets for wind turbines and defense technologies, and phosphors in lighting and computer and TV screens. Electric vehicles rely on rare earth elements, primarily neodymium, dysprosium, and terbium, in the permanent magnets of their electric motors to achieve high magnetic strength and maintain performance at elevated temperatures.
Relying On China
Unfortunately, the U.S. remains heavily reliant on China’s rare earths, with the Middle Kingdom supplying nearly three quarters of its needs. China refines 89% of the world’s neodymium and praseodymium, the key metals for EV magnets. To complicate matters, U.S. REE imports from other countries including Estonia (6%), Japan (3%) and France (3%) are themselves heavily dependent on chemical substances and mineral concentrates produced in China. This leaves the United States particularly vulnerable to trade wars with a major rival, something Beijing is not shy to leverage.
Thankfully, the country is now closer to finding a solution to its REE conundrum. Researchers from The University of Texas at Austin have released estimates that U.S. coal ash contains 11 million tons of rare earth elements, nearly eight times the country’s known domestic reserves. Long considered an industrial waste, coal ash is the powdery byproduct left after burning coal for fuel. This is the first national assessment of coal ash as a resource. Unlike traditional mining, coal ash extraction comes with a key advantage since the burning process has already separated the minerals from their original ore, thus reducing the need for energy-intensive refining steps.
“There’s huge volumes of this stuff all over the country,” said Davin Bagdonas, a research scientist at the University of Wyoming. “And the upfront process of extracting the (mineral host) is already taken care of for us.”
However, it’s likely to take years, if not decades, before the U.S. can become an independent producer of rare earths and cut its reliance on China. The previous Congress introduced a bipartisan bill titled Reclaiming American Rare Earths (RARE) Act that offers a framework of tax incentives to encourage more investment into the U.S.-based REE mining and production. Currently, a site in Colorado is set to become the first non-China facility for refining rare earth ores while dozens of companies and startups from Alaska to Texas are advancing mining development.
In the meantime, Washington can build new supply chains outside of China just like Japan did when it faced a similar fate more than a decade ago.
By Alex Kimani for Oilprice.com
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