US faces pressure on rare earths
Expected strengthening of environmental enforcement in pursuit of a greener China could indirectly undercut the nation’s supply of rare earths, a group of 17 elements that play a key role in products from advanced military hardware to mobile phones, Chinese analysts said.
The scenario could be a nightmare for the US, which is locked in a tit-for-tat trade war with China after year-long negotiations failed to address concerns from both sides.
China is the world’s largest supplier of rare-earth minerals. However, the country has no pricing power over these vital elements used in a wide range of high-technology products from new-energy vehicles to missiles. This means that exports aren’t very lucrative for China.
In April, China exported 4,329 tons of rare earths, data from the General Administration of Customs showed, bringing in a revenue of $40.9 million.
Compared with March, the export volume decreased by 330 tons but the value increased by 13 percent or $4.7 million, according to domestic industry website chinaiol.com.
“The export revenue from rare-earth minerals is trivial to China,” said Zhou Shijian, a senior research fellow at the Center for US-China Relations at Tsinghua University. “But their pollution is too much for China.”
Zhou, a former vice president of the China Chamber of Commerce of Metals, Minerals & Chemicals Importers and Exporters, said extracting one ton of rare earths ruins 2,000 tons of soil, damaging both the environment and agriculture.
Zhou said an environmental crackdown is expected to be intensified in 2019 in the country.
Zhou’s comments come as a rising number of Chinese experts are calling on the government to engage in an asymmetric trade war with the US – not to match US tariffs in scale and percentage but to conduct pinpoint strikes that could inflict systemic pain on the US economy. Some said rare earths could be China’s trump card.
In the past decade, China accounted for more than 90 percent of the global production and supply of these minerals, which are mainly consumed by the US, Japan and European countries.
Currently cheap, rare-earth minerals seem to fall into the right category in terms of the trade conflict.
The US defense community has long raised alarms over the US dependence on Chinese supplies of vital minerals. Including the rare earths, the US relies heavily on China for 21 out of 23 strategic metals used in the defense industry, according to Zhou.
While the US plans to include all Chinese imports under its tariff plan, with a list of products worth $300 billion released on Monday by the US Trade Representative’s Office, rare-earth materials were exempted due to their importance.
China has also become a major consumer of rare-earth minerals in recent years, Zhou said, and he believes that Chinese consumers have reserves in the form of raw materials that could last for as long as two years.
The US companies using rare earths have reserves in the form of refined minerals that could last for six months, which means China has the upper hand if there’s a freeze in rare-earth supplies that lasts for several months, Zhou said.
China lost a WTO case in 2014 when it restricted exports of rare earths.
But the pursuit of a better environment by China will be understood by every country, Zhou said.
The US itself also sits on vast rare-earth reserves, but it needs one year to get its supply chain up and running, Zhou said.