Rare Earths: China's Dominance Sparks Global Scramble for Critical Minerals

China's strategic maneuvers in the rare earth market, including acquisitions and export restrictions, are reshaping global supply chains. Nations worldwide are scrambling to secure their own critical mineral resources, fostering new alliances and domestic production efforts to counter China's dominance in this vital sector.

China's Grip Tightens: Acquisitions and Export Curbs

China's influence over the global rare earth market has intensified through strategic acquisitions and stringent export controls. These actions have sent ripples across industries reliant on these critical minerals.

• Acquisitions: Shenghe Resources, a Chinese rare earth processor, is set to acquire Australia's Peak Rare Earths for $97 million. Peak Rare Earths is developing the Ngualla project in Tanzania, which boasts one of the world's largest and highest-grade neodymium-praseodymium (NdPr) deposits. This acquisition further solidifies China's control over key rare earth assets globally.
• Export Restrictions: China has implemented export restrictions on a wide range of rare earth alloys, mixtures, and magnets. This move has caused significant concern among global automakers, aerospace manufacturers, and semiconductor companies, leading to potential production delays and outages. In one notable instance, Beijing reportedly asked South Korean companies not to export products containing Chinese rare earth minerals to U.S. defense firms, threatening sanctions for non-compliance.

Global Responses: Diversification and Strategic Alliances

In response to China's tightening grip, countries are actively pursuing strategies to diversify their rare earth supply chains and forge new alliances.

• Domestic Production Efforts: The U.S. is re-evaluating its strategy to reduce reliance on China for critical minerals. Efforts are underway to boost domestic capabilities, with companies like MP Materials facing challenges due to low rare earth prices. Russia, holding the world's fifth-largest rare earth reserves, aims to become a top-five producer by 2030, with state-owned Rosatom leading development efforts.
• International Partnerships: Saudi Arabia is positioning itself as a key player in critical minerals. Meanwhile, the U.S. has actively lobbied rare earth developers, such as Greenland's Tanbreez, to prevent sales to China. Lynas Rare Earths, a major non-Chinese producer, is exploring acquisition opportunities in Malaysia and Brazil to expand its footprint.
• Industry Adaptation: Companies are adjusting their operations. Neo Performance Materials, for example, is exiting rare earth separation facilities in China. Sumitomo is backing a U.S. rare earths startup, Phoenix Tailings, indicating a broader trend towards supporting non-Chinese sources.

The Road Ahead: Navigating a Complex Landscape

The global rare earth market remains a complex and evolving landscape. While China has signaled a potential relaxation of export curbs for some chip companies, the underlying tension and the drive for supply chain resilience persist.

• Continued Scrutiny: China is strengthening its approval process for rare earth export applications, indicating ongoing strategic management of these resources.
• Environmental Standards: China's stricter environmental standards are also contributing to higher rare earth prices, impacting global markets.

The ongoing competition for rare earth resources underscores their critical importance in modern technology and defense, pushing nations to secure their access through diverse and strategic means.

Sources

• What are Russia’s rare earth metals ambitions?, KITCO.
• Saudi Arabia eyes key role in critical minerals as U.S. rethinks China strategy, KITCO.
• Global alarms rise as China’s critical mineral export ban takes hold, KITCO.
• China’s Shenghe Resources to buy Australia’s Peak Rare Earths for $97M, KITCO.
• China asks Korea not to export products using rare earths to US defense firms – reports, KITCO.