Monthly Archives: May 2019

Industrial vitamins, “industrial gold” and “new mother” materials.

• 2019-05-28

President Xi Jinping’s visit earlier this week to a rare earth firm in east China’s Jiangxi province has triggered sharp speculation whether the strategic sector will be included in the escalating Sino-US trade war.

China is one of the world’s major suppliers of rare earth metals, a group of 17 elements that are widely used in high-tech products ranging from flat-screen TVs to lasers and military equipment.

According to some estimates, China is sitting on 90 percent of the world’s rare earth reserves.

China’s rare earths exports, a Reuters report said, have been spared from recent tariffs by the US, which has decided not to impose import duties on those and some other critical minerals from China as part of the trade war.

“Beijing, however, has raised tariffs on imports of U.S. rare earth metal ores from 10 percent to 25 percent from June 1, making it less economical to process the material in China,” the report said.

Xi’s visit to the JL MAG Rare-Earth company as well as the development of the rare earth industry in the city of Ganzhou could be an indication that Beijing is well aware of the power of the element of rare earth in the ongoing tit-for-tat trade war – and could be ready to deploy it.

Xi was accompanied by vice-premier Liu He, the top negotiator with Washington amid the ongoing dispute.

Brief reports on the visit didn’t give details or mention the trade war but the official news agency, Xinhua’s report in Chinese pointed out the importance of rare earth to China, calling it “industrial vitamin, “industrial gold” and “mother of new materials”.

It also said that rare earth is an important element that cannot be regenerated.

In March, China announced that the first batch of quota for rare earths totals 60,000 tonnes, about half the quota set for 2018, according to a circular jointly issued by the Ministry of Natural Resources and Ministry of Industry and Information Technology.

Of the total, 50,425 tonnes were allocated for light rare earths, with 9,575 tonnes for medium and heavy rare earth metals, the Xinhua reported.

“China has by far been the largest source of imported rare earths into the US for a number of years, totalling almost US$92 million in 2018, according to the US International Trade Commission. Japan, the US’ second largest source, contributed US$23 million worth of imports in the same year,” the Hong Kong-based South China Morning Post reported.

Interestingly, Xi visited a monument in Yudu, in the same province, which marked the start of the Communist Party’s Long March 85 years ago. It could be interpreted as the Communist party’s general secretary’s message of unity and endurance to the Chinese amid trade war.

The ministry of foreign affairs, however, advised against “over interpreting” Xi’s visits.

“It’s only normal for the Chinese leader to pay a domestic field trip and do research on relevant industrial policies. I hope you will not over-interpret that.

To the China-US economic and trade relations, just like I said earlier, they must be based on mutual respect, equality and mutual benefit,” spokesperson, Lu Kang said.

What’s Behind the Recent Surge in Rare Earth ETF?

• 2019-05-23

The world is closely watching the exchanges between China president Xi Jinping and America’s Trump. Jinping’s latest trip to a major rare earth minerals company in Jiangxi province has stirred speculations and reactions.

VanEck Vectors Rare Earth/Strategic Metals ETF’s REMX gain ofaround 5% to close at $15.25 on May 21 can also be the result of this visit. Per Reuters, MVIS Global Rare Earth/Strategic Minerals Index recorded the highest one-day gain of 6.4% since October 2011 on the day.

Rare Earth Elements & US Connection

According to The Rare Earth Technology Alliance, there are 17 elements that are deemed rare. Found in Earth’s crust, these elements are integral for the making of modern technologies, including consumer electronics, computers and networks, communications, clean energy, advanced transportation, health care, environmental mitigation, national defense, to name a few. Available in plenty in different regions, processing rare earth elements into materials is often extremely polluting. China has created well-developed production set-ups for the same.

United States once happened to be a major producer of rare earth elements. However, over the last decade, China’s aggressive pricing schemes helped it develop almost a monopoly in rare earth materials with United States and other miners in the world exiting the segment. In fact, per a Wall Street Journal article, the only mine in the United States producing rare earth minerals, Mountain Pass, is itself dependent on China for processing. Resultantly, the United States had imported around $160 million worth of rare earth elements in 2018, with majority imports from China. The figure excludes the price of finished goods and intermediate products made using rare earths.

However, United States understands its over-dependence on foreign resources for essential minerals. Thus, in March 2019, Congress introduced a bipartisan bill to ramp up mining of U.S. rare earth elements and other critical minerals.

Can Rare Earth be China’s ‘Trump Card’ in Trade War?

China is considered the largest producer of rare earth elements as it accounts for 90% of the global production with only one-third of the world’s rare earth deposits. In fact, it accounted for 80% of the rare earths imported by the United States from 2014 to 2017.

It is believed that if China targets the rare earths exports to the United States, the effects can be catastrophic for the latter with its manufacturers in major industries like defense, oil refineries and technology struggling with supply shortages, delay and soaring raw materials prices. China can also go to the extent of targeting U.S. firms manufacturing machinery and electronics within the Chinese regions from easily accessing rare earths.

However, America might have alternative sources for some of the rare earth elements, like Australia for permanent magnets. Per Reuters, China’s move might end its so-called-monopoly and speed up the process of developing alternative sources with Brazil, Vietnam, Russia, India and Australia gaining the most.