The U.S.-China bargaining over securing rare earths and rare metals is becoming more intense. At the end of September, U.S. President Donald Trump signed an executive order aimed at reducing dependence from China by expanding its self-sufficiency in rare earths. On the other hand, China has positioned rare earths as strategic goods and used them as diplomatic cards. In response to these moves, Japan and the European Union have also taken their own measures to prevent dependence on China.
As the U.S.-China standoff deepened, President Trump signed an executive order on September 30 aimed at increasing the self-sufficiency of rare earths and transforming the structure of importing most of them from China. Mr. Trump called China's stance an "invasive act" and expressed a sense of urgency that it would result in the loss of U.S. mining and manufacturing jobs.
The U.S. is ranked among the world's top producers in rare earth reserves, and was once known as one of the largest producers, but the ratio of dependence on China has increased like other countries, as has the number of mines closed one after another due to China's low price offensive.
The EU's European Commission (EC) has also recently announced an action plan aimed at reducing dependence on China. Rare metals such as lithium, which is used in high-performance magnets for electric vehicle motors, and titanium, which is indispensable for promoting the aerospace industry, were added to the list as essential raw materials for stable procurement.EC also mentioned the establishment of the Raw Materials Union, which consists of European companies and government agencies, including exploration, mining, use and recycling of rare earths and rare metals, and is poised to secure resources as a whole.
In recent years, the urgent need to secure rare earths has been triggered by a September 2010 collision between a Chinese fishing boat and a Japanese Coast Guard patrol boat off the Senkaku Islands in Okinawa, Japan. With this, friction intensified between Japan and China. At that time, China, which accounted for more than 90% of the world's supply, used the embargo on rare earths as a means of saying.
Fears of a shortage of supplies have made Japan re-aware that it needs to reduce its over-reliance on China as rare earth prices soar.
China's use of rare earth resources as a diplomatic card was found to be an advantage. However, companies such as Japan, the United States and Australia quickly announced the diversification of suppliers and the development of new technologies for rare earths, and the European Union filed a lawsuit with the World Trade Organization (WTO) regarding export restrictions on rare metals, resulting in a decline in rare earth prices. The Chinese government at the time was said to have completely mis-lead it.
With the EV and next-generation communication standard "5G" expected to expand, rare earths and rare metals are once again attracting attention. Japan has also 300,000 people to strengthen their stockpile system for the stable supply of rare metals. This summer, the company aims to further reduce its dependence on China in anticipation of intensifying competition for rare metals, which are essential for the manufacture of electronic components for EVs and semiconductors.
The Japan Petroleum, Natural Gas and Metals Mineral Resources Organization (JOGMEC), which is responsible for stockpiling resources, is expected to increase its current stockpile, which was targeted at 60 days' consumption in Japan, to about 180 days (by type) and hastily accumulate. It is also said that the aim is to open a hole in china's market oligopoly by supporting Japanese companies to secure interests such as mine development.
As the spread of covid-19 becomes more serious, information ran out in June this year that Beijing would strengthen its national stockpile of rare earths and other strategic goods. The market reacted sensitively to this information, with neodymium and other markets turning on an uptrend on speculation that the Chinese government would buy large amounts of rare earths.
China accounted for 79% of the country's production of rare earths (2017) released by the U.S. Geological Survey (USGS), far ahead of Australia (15%), the second largest. Meanwhile, China's exports of rare earths fell 62 percent year-on-year to 1,642 tons in August, according to China's General Administration of Customs.
It is unclear whether the significant decline in exports is not limited to a decline in demand due to the corona disaster, but is a deliberate export restriction by the Chinese government. Information about China's national stockpile is kept secret, so information and rumors tend to be ahead, but in the midst of the U.S.-China confrontation, it is well thought that it will continue to strengthen the national stockpile of rare earths and rare metals as strategic goods and restrict exports as diplomatic cards.
Naoya Abe
Former Bloomberg News reporter and editor
Capitol Intelligence Group (Washington D.C.) Tokyo bureau chief
Currently working as Managing editor of the news site MIRUPLUS
