China’s position as the world leader of rare earth reserves is indisputable. In recent weeks, its leading state-owned rare earth miners have surged and re-entered the black. This flip flop comes on the heels of the Chinese government’s recent export restrictions, which have pumped up prices of these key inputs dramatically.
The country has the largest reserves of rare earth elements. These elements are indispensable for high-tech applications such as electronics, renewable energy technologies and defense systems. These elements are known as REEs and consist of neodymium, dysprosium, lanthanum, and others. The Inner Mongolia Autonomous Region is home to what is considered one of the world’s largest rare-earth mines. In reality, this mine is important toward cementing China’s competitive advantage in the supply chain.
Recent quarterly reports indicate that all of the big three listed state-owned Chinese rare earths have returned to profit. Additionally, 90% of them have at the same time reported turnaround on their financial performance. These developments signal a shift in the industry’s fortunes, attributed largely to Beijing’s strategic export curbs aimed at ensuring domestic supply and increasing market prices.
When the Chinese government adopted export restrictions, prices for rare earths went up significantly. This exploding price bodes extremely well for the miners’ bottom lines. At the same time, global demand for these rare earth elements is skyrocketing. In practice, the restrictions have produced an unintended consequence of improving the market climate for producers in China. Analysts consider these developments transformative to the state of international trade in rare earths.
China’s position as a dominant player in the rare earth industry remains unchallenged, with its mines producing a significant portion of the world’s supply. For our nation’s access to and control over these vital resources, countries like Japan and the Philippines would be much more exposed to their dependence on Chinese exports. Consequently, many countries are looking for ways to create their own rare earth industries or looking to source them from alternative suppliers.