China targets US rare earth export; Australian miners shine


  • China is curbing the Rare Earth Elements' exports to the US as the two countries lock horns over trade war.
  • China's move will significantly affect the US's defence sector, highly dependent on the Chinese exports.
  • The US is trying to reduce the dependence on Chinese suppliers and promoting Australian REE miners to boost domestic supply.

Source: Copyright © 2021 Kalkine Media Pty Ltd.

Rare Earth Elements are found in relatively abundant quantity in the Earth's crust, but the mineable concentrations are less than other minerals. China holds the largest reserves (44MMt) of REE reserves followed by Vietnam, Brazil and Russia. The leading producers of REE include China, the US, Australia and Burma.

The global demand for the REE is continuously rising at a fast rate backed by its vast application in the automotive, electronic gadgets and defence sectors. As per a few market experts, the demand is anticipated to grow at ~11% CAGR in the next six years.

The global shift towards green energy and the US rejoining the Paris Agreement with a focus on curbing the carbon emission is further adding momentum to the demand.

China’s Role in REE Arena:

Since China holds one-third of the world's total reserves and is the leading producer of REE, thus helping it to maintain the monopoly and rule the prices. There is a wide gap between China and the next top producer. Countries with significant reserves rely on Chinese exports as they cannot compete with Chinese scale and cheap labour. Additionally, if any country unearths REE, it has to rely on China for its processing, increasing the world's dependency on China.

China curbs exports to the US:

According to USGS, China accounts for around 80% of the US’s REE imports. A significant portion of the REE is being used to manufacture weapons and fighter jets used in the defence sector.

Source: Copyright © 2021 Kalkine Media Pty Ltd.

China is also heading towards achieving net-zero carbon footprints and trying to restrict the mining operations. Reports suggest that China has shut more than 1,300 heavy metal operating sites since 2016 to curb the carbon emission and reduce soil pollution. However, the matter gained attention in 2019 in the midst of an extending trade war between US and China. Recently, China’s Ministry of Industry and Information Technology (MIIT) had proposed control on 17 REEs, accounting for about 80% of global supply.

World’s leading users, including Europe and the US, are badly affected by China's move to curb the exports.

What is the US's plan on China's export curb?

Europe and the US are making decent attempts to lessen their reliance on China for REE imports. Last year, Donald Trump took the initiative to boost domestic production and reduce the country’s reliance on the Chinese supply.

Trump awarded a contract to Australian Lynas Rare Earths Limited (ASX:LYC) to reinforce the REE processing facilities. The facility will produce around 5,000 tonnes of REE per year and help the country secure its domestic supply of REE.

On 17 February 2021, Lynas stocks soared more than ~13% higher at A$6.11 following the news of China’s curb on US exports. The stock is now up more than 400 per cent since its lows during pandemics.