Apart from the chip war between the US and China, a rare earth war seems to be brewing. China may impose an export ban when importers are looking to reduce their reliance on China, the largest rare earth exporter in the world.
Nikkei Asia reported that after making 43 amendments or additions and taking public comments from experts, China had updated a technology export restriction list which may ban the exports of certain rare earth elements. According to the report, the changes are expected to take effect this year.
Rare earths are a group of 17 elements, such as scandium, yttrium, and lanthanides which are critical to many high-tech applications and widely used in smartphones and EVs. For example, they are used to produce permanent magnets for electric motors, generators, hard drives, superconductors, fiber optics, etc. According to the US Geological Survey, despite a declining market share, China still accounts for 70% of all the rare earths produced in the world.
Tesla, the world's largest BEV brand, revealed its intention to eliminate the use of rare earths in its next-generation EVs at the company's Investor Day held in early March. Still, the industry is waiting for more details about how Tesla will achieve its goal.
Developed countries are attempting to decrease their dependence on China for imported processed rare earth elements by exploring alternative sources and diversifying their supply chains. According to Quartz, instead of shipping rare earths for refinement to China, the US began exporting raw rare earth materials to Estonia in 2021, marking the formation of the US-Europe rare earth supply chain. Japan also ramped up its investments in the Australian rare earths giant Lynis to secure supplies of heavy rare earth elements.
Meanwhile, Quartz reported that China is trying to defend its dominance in rare earths by increasing investments at home and abroad. Four rare earth deposits in Jiangxi province resumed operation in 2022 after being halted in 2017 over environmental issues. China is also trying to invest in rare earth mines in Australia and Canada.
Rare earths production (tons) | ||
Country | 2021 | 2022 |
US | 42,000 | 43,000 |
China | 168,000 | 210,000 |
Australia | 24,000 | 18,000 |
Burma | 35,000 | 12,000 |
Thialand | 8,200 | 7,100 |
Vietnam | 400 | 4,300 |
Greenland | 2,900 | 2,900 |
Madagascar | 2,600 | 2,600 |
World total | 290,000 | 300,000 |
Source: US Geological Survey, April 2023
