RARE EARTHS - WHY CHINA'S POWERFUL GEOPOLITICAL ''WEAPON'' IS STARTING TO LOSE ITS POWER - Filenews 13/8
By Javier Blas
Permanent rare earth magnets are everywhere: they help charge cables "stick" to laptops, hold mobile phones in their bases, and secure headphones inside their cases. In recent years, however, they have become a central battleground in China's trade wars with its competitors.
Beijing used export restrictions on these materials to pressure U.S. President Donald Trump to back down on "Liberation Day" tariffs last year. A similar tactic is being applied against Japan, amid the diplomatic dispute with Tokyo.
However, the power of the Chinese "weapon" of rare earths is beginning to wane, as the rest of the world accelerates the development of alternative deposits, materials and processing facilities.
China's dominance is declining
About 15 years ago, almost all rare earths were mined and processed in China. Repeated threats to restrict exports, however, prompted other countries to develop their own production capacities.
Today, almost a third of the world's production takes place outside China. This development has forced Beijing to focus on the rarest elements of this category.
Neodymium and praseodymium, which impart magnetic properties to many everyday devices, are now produced at levels that are not considered particularly vulnerable to severe shortages.
The interest has therefore shifted to three even more hard-to-find elements: samarium, dysprosium and terbium.
Heavy rare earths
Conventional rare earth magnets lose some of their effectiveness at high temperatures. In applications of increased demand, such as electric motors, wind turbines, guided missiles and aeronautics, they need to be strengthened or replaced by so-called heavy rare earths, known as HREE.
A decade ago, several geologists believed that this reality gave China an almost insurmountable advantage.
The exploitable deposits of heavy rare earths seemed to be confined to a single point on the planet: Longnan, an isolated region in southern China. The deposit was discovered by chance in 1969, at the height of the Cultural Revolution.
The image resembled that of the fictional "vibranium" in the Marvel universe, an extremely rare metal found only in the fictional country of Wakanda.
What was considered rare exists elsewhere
Scientific and technological progress is, however, changing the facts. Chemists address the limited availability of certain materials by developing alternatives. Something similar happened with cobalt in lithium-ion batteries in cars, which has been largely replaced by phosphate.
At the same time, geologists are looking for new deposits around the world and proving that materials that were considered extremely difficult to find are not so rare after all. This process is now also ongoing in the case of HREEs.
The geological formation found at Longnan is indeed unusual, but not unique. These are deposits of ion-adsorption clay, which are usually created when heavy tropical rainfall erodes granite massifs for millions of years.
The heavy rare earths are gradually transferred to the bottom of the valleys and trapped in the rocks, which act as a geological sieve.
Production moved to Myanmar
When the Chinese government imposed production restrictions in the mid-2010s, Chinese miners were among the first to look for alternative sources outside the country.
They located and began to exploit rich deposits in Myanmar's Kachin state, an area affected by the war. These mines may already produce more heavy rare earths than their Chinese counterparts.
However, this activity is accompanied by serious environmental problems, linked to the small-scale and often poorly controlled nature of mining.
Billions Invested in Brazil
In other parts of the world, similar projects are being developed under a stricter regulatory framework.
In Brazil, Boston-based Denham Capital Management spent most of the 2010s certifying a clay deposit in the central state of Goiás.
After securing investment from former Xstrata CEO Mick Davis, production began in 2024. The mine now passes to USA Rare Earth, under a $2.8 billion deal announced in April.
This investment may be just the beginning. A study published last year confirmed the existence of clay deposits on four continents, from Madagascar, Malawi and Uganda to Chile and Australia.
At the same time, there are indications of similar deposits in Malaysia, Thailand, Vietnam and even Finland.
Processing facilities are being developed outside China
Mining is only one link in the chain. Equally crucial is the ability to process and separate the individual elements.
Companies outside China with relevant know-how are building facilities for the isolation of dysprosium, terbium and samarium. Lynas Rare Earths and Neo Performance Materials have already gone into commercial production, while MP Materials and Carester, a partner of USA Rare Earth, are expected to begin operations within the next few months.
These investments are an important vote of confidence in the new mines. The main investment proposition of processing enterprises is precisely independence from the Chinese supply chain.
It would make no sense to spend large sums on such facilities if companies were to continue to depend on China and its partners in Myanmar for the supply of raw materials.
The pressure that accelerates detoxification
The expansion of production and processing is a warning to those who attempt to limit the international flow of raw materials in order to secure geopolitical benefits.
By using rare earths as a tool of pressure, China has given its competitors a strong incentive to develop alternative sources of supply.
In an effort to deprive other countries of the necessary magnets, Beijing has unwittingly contributed to the creation of a global industry that can make these elements more available than ever before.
BloombergOpinion
