Rare Earth elements china
© Reuters
Workers transport soil containing rare earth elements for export at a port in Lianyungang in Jiangsu province on October 31, 2010.
China, the world's largest refiner and supplier of rare earth, cut back on overseas shipments of the elements in the first five months of 2019, amid growing calls by nationalists to use the country's stockpile as a tit-for-tat response in its trade war with the United States.

Exports of rare earth elements fell 16 per cent in May from a month earlier to 3,640 tonnes, according to the General Administration of Customs data. Overseas shipments for the first five months of 2019 fell 7.2 per cent to 19,265 tonnes, compared to the same period last year.

The declines are pointing to the use of export permits over rare earth as leverage in China's trade negotiations with the US, the world's biggest importer of the elements. The US was the world's largest importer of refined rare earth elements, with 59 per cent of imports valued at US$92 million sourced from China, according to data by the US International Trade Commission.

"China should still take an open attitude towards the trade tensions, treating trade deals and foreign companies friendly," said Qiao Yide, vice-chairman of the Shanghai Development Research Foundation, a non-profit institution established with the aim of promoting research on the issues of development. "Even if a trade agreement can't be reached in future, China should reform its markets to make it fair and transparent in the global trading system."

Rare earths are 17 elements on the periodic table with names like europium and ytterbium which share similar chemical and physical properties. Although as abundant in the earth's crust as other metals, these elements are "rare" because they always occur in nature as compounds and oxides, which make them extremely expensive and environmentally polluting to refine and extract in commercially viable quantities.

They are used to provide precision polishes to flat-panel displays, remove impurities in steelmaking and to make phosophers used in incandescent and LED lights. Some are even used as pigments in ceramics. Another commonly used rare earth is neodymium, found in permanent magnets in motors, miniature amplifiers and speakers.

China has dominated the industry since the 1980s, accounting for seven of every 10 metric tonnes mined worldwide last year and serving as the main processor of the ores, according to the US Geological Survey.

The US used to dominate the industry, serving as the world's leading miner until the 1980s, when it was overtaken by China, according to data from the US Geological Survey. Lower labour costs and more lenient environmental standards are some of the reasons why mining migrated from the US.

As China looks for ways to retaliate against the US in a rapidly escalating trade war, one potential target that is looming large, particularly for the technology sector, is rare earth metals.


Comment: Are Rare Earth Metals China's Ultimate Weapon?
The question is how serious would it impact the US economy were China to ban exports of rare earths to the USA? Short answer, very serious.

In addition to its use in most electronic devices such as smart phones or laptops, rare earth minerals are absolutely essential to the Pentagon and the US military forces. According to Breaking Defense newsletter, rare earth components are essential for such major weapons systems as the nuclear-powered SSN-774 Virginia-class fast attack submarine; the DDG-51 Aegis destroyer; the F-35 Joint Strike fighter among others. They note that "Rare earths are also essential to precision-guided munitions, lasers, satellite communications, radar, sonar and other military equipment, added a 2013 Congressional Research Service report."

As trade tensions have escalated, analysts are questioning whether Beijing will use the "nuclear option", its dominance in the industry, as a check on efforts by US President Donald Trump to place tariffs on nearly all goods exported from China, as he seeks to change years of Chinese industrial and trade policy.

China's unwavering dominance in the market has raised concerns among companies and policymakers, particularly as China has used it as a weapon in the past.

During a diplomatic stand-off in 2010, China briefly limited exports of rare earth materials to Japan in a row after a Chinese trawler collided with Japanese patrol boats near a disputed island. China did so without publicly acknowledging the restriction.

That same year, Beijing placed quotas, licences and taxes on rare earth elements as the worldwide use of rare earths in clean energy and defence technologies was on the rise. China removed these restrictions in 2014 after the US, Japan and members of the European Union complained to the World Trade Organisation.