China's Threat To Restrict Exports of Rare Earth Minerals to the U.S. Is an Empty Bluff

China's 2010 export restrictions on rare earth compounds failed then, and they would fail now

China is shooting blanks with its threat of a rare earth minerals embargo, the most recent salvo in an ongoing trade war with the United States.

Agence France-Presse reports that, according to various state propaganda sites, the Chinese government may counter President Trump's tariffs by cutting off America's access to exports of rare earth minerals that are used in all sorts of advanced electronics. Rare earth metals are chemically similar and include cerium, neodymium, europium, and samarium. Despite their name, most rare earth metals are similarly abundant as more familiar elements like copper, nickel, and zinc.

"Waging a trade war against China, the United States risks losing the supply of materials that are vital to sustaining its technological strength," the official Xinhua news agency said in a commentary. The state-owned Global Times further warned, "It is believed that if the U.S. increasingly suppresses the development of China, sooner or later, China will use rare earths as a weapon."

While the U.S. Geological Survey reports that China produced 70 percent of rare earth minerals in 2018, there are rare earth minerals elsewhere in the world. What's more, the Chinese government has played this game before, imposing export restrictions on rare earth minerals back in 2010. At the time, I predicted that "new supplies and innovation will ensure that the future of the world's high tech economy will not depend upon the whims of the mercantilist mandarins who steer Chinese industrial and trade policy." By 2016, my prediction had come true.

As a result, the price for the VanEck rare earths ETF, for example, has dropped by more than 85 percent since the fund's inception in 2010.

Also, keep in the mind that the U.S. Geological Survey estimates the value of rare earth compounds and metals imported by the United States in 2018 was just $160 million. Chinese export restrictions on rare earth compounds could cause some short term economic pain, but it would be soon alleviated as miners and innovators turned to exploit the nearly two-thirds of the world's reserves that lay outside of the Middle Kingdom. Those global reserves, by the way, would last more than 700 years at current rates of extraction.

Comments

[Sansos]

The way my chemistry proffessor explained Rare Earths is that they are basically chemical vitamins, you dont need a lot to get things done.

[Chipper Morning Wood]

You know what else is a chemical vitamin that you don’t need a lot of to get things done?

[Zeb]

LSD?

[Dillinger]

mdm to the a

[CharlesWT]

Chinese export restrictions on rare earth compounds could cause some short term economic pain, but it would be soon alleviated as miners and innovators turned to exploit the nearly two-thirds of the world’s reserves that lay outside of the Middle Kingdom.

Perhaps mining decommissioned and abandoned wind turbines.

[Diane Reynolds (Paul.)]

If only they were that useful in death. Recycling rare earths from electronics and what not is incredibly hard, energy intensive and uses a lot of toxic chemicals.

[RoyMo]

It is a lot cheaper and less environmentally destructive to open a new strip mine jn Alaska

[Ken Shultz]

To add to Bailey’s point about projections by Malthusians being wrong again, for all the same reason, again, check out this article:

“SYDNEY—An American chemicals company and an Australian miner want to build the first rare-earth minerals separation plant in the U.S. in years. Their aim is to shore up supplies of important commodities caught up in the U.S.-China trade conflict.

The proposal by Blue Line Corp. and Lynas Corp. LYC 15.48% illustrates how companies are growing increasingly worried by the trade rhetoric out of Washington and Beijing, while looking for opportunities to profit from tit-for-tat tariffs if they aren’t short-lived. The companies aim to build the plant in Hondo, Texas, near where Blue Line is based.

https://www.wsj.com/articles/joint-venture-plans-to-revive-rare-earths-processing-in-u-s-11558341663?

There’s this thing called “arbitrage”. It’s been around since before the Silk Road got started.

[Diane Reynolds (Paul.)]

Side note, this happened in 2010:

The other piece of good news—when Chinese companies have come calling to buy-up rare earth reserves abroad, others have generally been smart enough to say “no.” Just a bit over a year ago, Australia barred the China Non-ferrous Metal Mining group from taking a majority stake in rare-earth producer Lynas Corp. When the Chinese were denied the majority stake, they pulled out entirely from the deal. And as a side note: remember the CNOOC-Unocal deal that fell through back in 2005? There were rare earths involved in that deal too…although CNOOC promised to “sell-back” the mine. Sometimes we do get it right or at least lucky.

[Ken Shultz]

My faulty memory also remembers reading about environmentalists opposing the reopening of rare earth minerals mines–on the basis of environmental concerns.

It was a go-to observations about environmentalists at the time, who oppose any kind of technology that detracts from their preferred solution–which is sacrifice.

It’s like their opposition to fracking and natural gas. It didn’t matter that natural gas released 40% less CO2 into the atmosphere than coal for the same amount of energy. If we’re talking about gaining access to another source of CO2, then the Sierra Club and others opposed it for that reason.

Well, that and the fact that opposing fracking would drive donations to groups like the Sierra Club when that was a hot topic* in the news.

*No pun intended.

[JFree]

Lynas is the only significant rare earth mine outside China. The others are little more than holes in the ground with liars on top.

There just isn’t enough volume of rare earths in actual demand to cover the fixed costs of more than a handful of mines worldwide. Which means that mere export controls doesn’t actually create a change in supply. Merely lower prices in China and higher outside – but outside miners can’t realize those higher prices.

[tlapp]

Do you mean to say the free market will fill the need? Thanks, someone needs to get these politicians a clue.

[JFree]

What’s more, the Chinese government has played this game before, imposing export restrictions on rare earth minerals back in 2010. At the time, I predicted that “new supplies and innovation will ensure that the future of the world’s high tech economy will not depend upon the whims of the mercantilist mandarins who steer Chinese industrial and trade policy.” By 2016, my prediction had come true.

Not sure how your prediction came true. The stock price of REMX is driven entirely by the stock prices of the companies in it and like almost all mining companies they rely on stupid debt/leverage decisions – not on increased volumes or prices. If that Chinese 2010 export restriction had actually failed, then production of things like NdFeb magnets would have spread throughout the world because non-Chinese producers could source supply. The reverse has happened. Virtually all production growth since 2010 has occurred in China – because that’s still the only place where magnet producers can get supply.

[RoyMo]

It is a good thing metals are inherently fungible

[buybuydandavis]

“, imposing export restrictions on rare earth minerals back in 2010. At the time, I predicted that “new supplies and innovation will ensure that the future of the world’s high tech economy will not depend upon the whims of the mercantilist mandarins who steer Chinese industrial and trade policy.” By 2016, my prediction had come true.”

So only 6 years of problems. That’s very convincing that China’s threat has no power.

Meanwhile, Reason has a cow if Trump puts on a tariff for months.

[tlapp]

How true

[China's Rare Earth Threat Is An Empty Bluff - The Global Warming Policy Forum (GWPF)]

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[Kivlor]

And this is why we won’t be leaving Afghanistan any time soon, short of the collapse of our empire. It guarantees access to REMs even if China tries to cut us off.

[CptNerd]

That’s impossible, all the true libertarians have assured me that Trump’s trade war will cripple the economy and cause massive global boils.