China’s Rare-Earth Strategy

(Reuters) - Rare earth elements are used in a wide range of consumer products, from iPhones to electric car motors, as well as military jet engines, satellites and lasers.

FILE PHOTO: Samples of rare earth minerals from left: Cerium oxide, Bastnaesite, Neodymium oxide and Lanthanum carbonate at Molycorp's Mountain Pass Rare Earth facility in Mountain Pass, California June 29, 2015. REUTERS/David Becker/File Photo

Rising tensions between the United States and China have sparked concerns that Beijing could use its dominant position as a supplier of rare earths for leverage in the trade war between the two global economic powers. China supplied 80% of the rare earths imported by the United States from 2014 to 2017. China is home to at least 85% of the world’s capacity to process rare earth ores into material manufacturers can use, according to research firm Adamas Intelligence. It would take years to build enough processing plants to match China’s processing capacity of 220,000 tonnes - which is five times the combined capacity of the rest of the world. Alternative processing plants would struggle to compete with China’s low costs in the future, should trade tensions abate.

WHAT ARE RARE EARTHS USED IN?

Rare earths are used in rechargeable batteries for electric and hybrid cars, advanced ceramics, computers, DVD players, wind turbines, catalysts in cars and oil refineries, monitors, televisions, lighting, lasers, fiber optics, superconductors and glass polishing.

Several rare earth elements, such as neodymium and dysprosium, are critical to the motors used in electric vehicles.

Some rare earth minerals are essential in military equipment such as jet engines, missile guidance systems, missile defense systems, satellites, as well as in lasers.

WHICH COMPANIES ARE MOST DEPENDENT ON CHINESE SUPPLIES?

Companies such as Raytheon Co (RTN.N), Lockheed Martin Corp (LMT.N) and BAE Systems Plc (BAES.L) all make sophisticated missiles that use rare earths metals in their guidance systems, and sensors. Apple Inc (AAPL.O) uses rare earth elements in speakers, cameras and to make phones vibrate.

The United States imported $160 million of rare earth compounds and metals in 2018, up nearly 17% from 2017. Around 60% of it was used in catalysts for oil refining and in vehicle engines.

WHAT ARE RARE EARTHS AND WHERE DO THEY OCCUR?

Rare earth metals are a group of 17 elements - lanthanum, cerium, praseodymium, neodymium, promethium, samarium, europium, gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium, lutetium, scandium, yttrium - that appear in low concentrations in the ground.

HOW ARE RARE EARTHS AFFECTED BY U.S. TARIFFS?

So far, the U.S. government has exempted rare earths from tariffs on Chinese goods.

HOW HAVE RARE EARTHS PRICES REACTED TO THE RISING TENSIONS?

The price of neodymium, mostly used in magnets, has surged 30% to $68.5 per kilogram since April, while dysprosium, also used in magnets, has risen 30% to $290 per kilogram in the same period.

Both materials are crucial. Neodymium enhances magnetic force but its performance declines under high temperature. Since motors can run very hot, dysprosium is added to help the neodymium resist heat. As more electric and hybrid vehicles hit the market, demand for the minerals is expected to soar.

WHAT ABOUT MALAYSIA AND LYNAS?

Dennis Ignatius, former Malaysian ambassador, is of the view Lynas is free to promote the company as a strategic alternative to China but the people of Malaysia shouldn’t be asked to pay the price for it in terms of health risks and environmental degradation. If Lynas is of such great strategic importance to the entire free world, perhaps countries like Japan, the US and Australia should share the burden by at least agreeing to store the toxic waste (now amounting to more than 450,000 tons) in their own countries instead of dumping it here.

In recent months, Malaysians have become increasingly aware of the dangers posed by toxic waste with schoolchildren the biggest victims. It is a harbinger of what is to come if the people themselves do not demand that the government they voted into office do far more to protect their environment. If the government fails to do its duty, the people must be ready to take to the streets once again to make their voices heard. Putrajaya must understand that the health, safety and well-being of Malaysians must take priority over geopolitics, foreign corporations or profits.

Reference:

U.S. dependence on China's rare earth: Trade war vulnerability www.reuters.com

Rurika Imahashi & Ck Tan, China's rare-earth strategy versus US risks backfiring www.asia.nikkei.com 

Dennis Ignatius, Lynas: Profits, politics & people www.freemalaysiatoday.com