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China Threatens to Cut Off U.S Supply of Rare Earths.

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    China produces 80% of the world's rare earth elements. They are used in weapons, cell phones, hybrid cars, and magnets.China does not have the means to match the US in the total number or amount of tariffs. But China can strike back in other ways. One critical way would be to cut off the US supply of rare earth elements.Rare earths are 17 minerals used to make cell phones, hybrid cars, weapons, flat-screen TVs, magnets, mercury-vapor lights, and camera lenses.

    Xi Visits Rare Earth Plant

    Bloomberg reports Xi’s Trip to Rare-Earths Plant Stokes Talk of Trade Retaliation

    "Shares in JL MAG Rare-Earth Co. surged by their daily limit Monday after state news agency Xinhua said the Chinese president had stopped by the company in Jiangxi. Official news outlets give regular updates on the whereabouts of top leaders, sometimes leading to share spikes on the belief that companies have been handed official backing.The U.S. relies on China, the dominant global supplier, for about 80% of its rare earths imports. Xi was accompanied on the trip to JL MAG by Liu He, the vice premier who has led the Chinese side in the trade negotiations.The visit “sends a warning signal to the U.S. that China may use rare earths as a retaliation measure as the trade war heats up,” Yang Kunhe, analyst at Pacific Securities Co., said by phone from Beijing. That could include curbs on rare earth exports to the U.S., he said."

    U.S. Rare Earths Revival Planned Amid Trade Conflict

    The Wall Street Journal reports U.S. Rare Earths Revival Planned Amid Trade ConflictThe Trump administration worries a lack of domestic rare-earth supplies undermines a competitive modern economy and strong military. Last year, the U.S. Geological Survey designated 35 minerals as critical to the economy and national defense. The U.S. is nearly reliant on imports for more than half of them.Rare earths are among the most extreme examples of such critical minerals, with China accounting for more than 90% of the world supply over the past decade, according to U.S. government figures.China’s control of the global rare-earths market has long been a concern of manufacturers, particularly after Chinese export quotas led to a price surge that in 2011 made some of the elements more valuable than gold.

    Building a Plant is Not So Easy

    The WSJ article notes that Blue Line Corporation, a US company, and Lynas Corp., an Australian miner propose to build the first rare-earths separation plant in the U.S. in years.But that would take time. And there are huge environmental issues.I have covered this before. So I am not at all surprised by any of this.The lead image is from my August 2, 2018 article Not Only are We Stupid, We are Hypocrites. Take a look at what I said at the time:

    Three Ways China Can Retaliate1: Let the Yuan slide 25% negating the tariffs.2: Further limit US firms ability to do deals in China3: Halt Rare Earth Exports. Rare earths are 17 minerals used to make cell phones, hybrid cars, weapons, flat-screen TVs, magnets, mercury-vapor lights, and camera lenses.Option one has capital flight risks for China of course. But US tariffs pose numerous risks to the US and global economy as well. Option two is a given. Option three is rarely discussed, but China has at least 80% of the global market.

    Not So Rare

    Rare earths are not that rare actually. That fact prompted the Verge view: China can’t control the market in rare earth elements because they aren’t all that rare.However, there's a good set of reasons nearly all rare earths are produced in China. The whole process is “expensive, difficult, and dangerous,” says former rare earth trader and freelance journalist Tim Worstall. He tells The Verge that, because of this, the West has been more or less happy to cede production of rare earths to China. From the 1960s to the ‘80s, the US did actually supply the world with these elements; all extracted from a single mine in California named Mountain Pass. But in the ‘90s, China entered the market and drove down prices, making Mountain Pass unprofitable and leading to its closure in 2002. There’s also the fact that rare earth production in China is often a byproduct of other mining operations. “The biggest plant there is actually an iron ore mine which extracts rare earths on the side,” says Worstall. This means that, unlike the Mountain Pass mine, producers aren’t reliant on a single product. “If you are trying to only produce rare earths, then you’re subject to the swings and roundabouts of the market.” As the academic David S. Abraham explains in his book The Elements of Power, this makes for a grueling extraction process. To create rare earths from the ore that contains them, this material has to be dissolved in solutions of acids, over and over again, then filtered, and dissolved once more. “The goal is not so much to remove rare earths from the mix as to remove everything else,” writes Abraham. Rare earth ore goes through these steps hundreds and hundreds of times, and for each new mining location, the concentration of the acids used has to be recalculated in order to target the specific impurities in the soil. To top it off, the whole process produces any number of nasty chemical byproducts and is radioactive.

    Rare Earth Response

    The notion that there will be a plant any time soon in the US seems like fantaslyland material.On September 17, 2018, I penned Trump Unwisely Escalates Trade War: Expect a "Rare Earth" Response From ChinaIt did not happen because Trump backed down following an escalating series of belligerent trade Tweets.In December, Trump gave China until March, then April, then May, then June.To quote Yogi Berra, It's Deja Vu All Over Again.


 
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