Beijing sent another warning to America over rare earths: trade war or not, we could squeeze you, at any time.
That’s according to a recent Global Times, editorial, which argues that China has several tactical options besides this one in the rare earth market.
“China doesn’t necessarily need to continue cutting the exports of rare-earth minerals. One option for China is to export the minerals as usual to markets including the US,” says the editorial.“As long as China dominates the world’s rare-earth output, Washington will be under constant pressure from Beijing even though there is no restriction on rare-earth exports.”
Why? Because America relies heavily on China’s rare earth supplies for its needs.
“The excessive reliance of the US on China’s rare earths is the fundamental reason why Washington is under pressure. China is in no hurry to ban rare-earths exports,” notes the Global Times, “and the best choice is to maintain a deterrent force on the US in the long run by using rare earths as leverage.”
But China won’t rule out using this “ace,” if the US-China trade war worsens.
“China doesn’t want to restrict the export of rare-earth minerals to escalate the trade war with the US, but Washington must not push China too hard,” continues the editorial.
That echoes the first warning China gave to America in May, at the high of the US-China trade war. Back then, Beijing threatened cutting off rare earth metal supplies to US technology and defense industries. We wrote about it in a previous piece.
“Rare Earth Minerals are just another highlight of the adversarial relationship between the world’s two largest superpowers,” says Deric Scott, Vice President of Metals.com.
Still, Ted Bauman, senior research analyst at BanyanHill Publishing, thinks China is overplaying its rare earth dominance.
“The idea that that the Chinese control something that is required to make the modern world function makes for great headlines and clickbait. But things aren’t quite as bad as they seem,” says Bauman.
“News reports give the impression that China has a monopoly on the supply of certain critical rare earths, like neodymium-praseodymium, crucial for making high-strength magnets required for electric vehicles and other emerging battery applications,” he explains.“But the truth is that China’s dominant position in these minerals is based on the Chinese government’s willingness to allow significant environmental damage, including radioactive waste, in its mining operations.”
The result? Chinese rare earths are less expensive than other sources — but those other sources do exist. “Alternatives to Chinese rare earths include Brazil, Vietnam, Russia, Australia, Burundi and the U.S. itself. A significant rise in the global price of certain rare earths would make mining in those places feasible,” continues Bauman.“Some rare earths can even be profitably produced from recycling.”
And that makes America less dependent on Chinese rare earth supplies.
Meanwhile, the US Department of Defense could develop domestic supplies.
In short, America has the means to deal with a cut off Chinese rare earth supplies, and eventually end Beijing’s monopoly in this market.
That’s why all these Chinese threats about rare earths are mainly bluster, according to Bauman. Simply put, China won’t do it. “Ultimately, all of this means that the Chinese have to weigh the results of an export ban to the U.S. against the potential loss of their supply monopoly,” he says. “My guess is that the Chinese won’t cut off their nose to spite their face.”
And that’s why its repeated warnings shouldn’t be taken seriously.