Rare earths may be new front in US-China trade war

  • China has threatened to curb the export of rare earth minerals to the US as the trade war between the world’s two largest economies escalates
  • Mint takes a look at what makes these minerals special, besides their presence in iPhones, Tesla cars and high-powered magnets

China has threatened to curb the export of rare earth minerals to the US as the trade war between the world’s two largest economies escalates. The Asian country is the world’s largest producer and consumer of rare earth minerals. Mint takes a look at what makes these minerals special, besides their presence in iPhones, Tesla cars and high-powered magnets.

What are rare earth minerals?

Rare earth minerals are 17 chemical elements, including cerium, neodymium, praseodymium, dysprosium, erbium, europium, gadolinium, and holmium, which are used in everything from high-tech consumer electronics to military equipment. They can be found in iPhones, missiles, wind turbines, satellites, precision weapons, night-vision equipment, lasers and electric car motors. The name suggests they are not present in abundance in nature but that’s not so. The demand for them is small, although rising. They are mined and produced in small quantities and hence the name.

Why does China want to limit rare earth exports to the US?

US President Donald Trump accuses China of unfair trade practices that have kept the trade balance between the world’s two largest economies in favour of the Asian giant. The trade surplus last year was $379 billion, says the US, though China pegs it at $152.6 billion after accounting for the US surplus in services. Last week, Trump raised tariffs from 10% to 25% on imports from China worth $200 billion. The tariffs are hurting the Chinese economy but the US has not relented. According to China, limiting export of rare earths will hurt firms in the US and force it to mellow its stance.

Can China’s stand hurt the US?

China is by far the world’s largest producer and consumer of rare earth minerals. Chinese exports meet around 80% of the world’s demand for these minerals, which is about 156,000 tonnes annually. The US military is worried about China’s dominance of the rare earths market, a Reuters report said last year. Some experts said China’s consumer electronics industry, the biggest end-use consumer of rare earths, can ill afford to lose the US, its largest market. Some said it could put into jeopardy US military programmes and hurt US retail consumers as firms would have to source costlier raw materials from elsewhere.

Why is mining of rare earths controversial?

Mines in which rare earth minerals are extracted are often sites of exploitation, where workers are exposed to toxic substances and dangerous working conditions for meagre pay. Effluents from the mines poison the soil and ground-water and cause pollution. Almost all smartphone firms rely on the rare earths supply chain. Recycling is not possible as very little of the material is used in a given device.

Are others cashing in?

California’s Mountain Pass mine, operated by US consortium MP Mine Operations Llc, is the only rare earth facility in the US. However, it has to ship semi-processed output for refining in China, which imposes a 10% tariff that could rise to 25%. Mountain Pass owners want to overcome this and become self-sufficient. Australian mining firm Lynas will partner US chemical company Blue Line to develop a processing plant in Hondo, Texas. However, this will take more than a year.

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