Today, that same race for REEs has heated up, especially as China recently announced restrictions on its perennially monopolized exports. This situation has prompted the United States to seek partnerships with countries like Japan to revive its domestic mining capabilities and reduce reliance on Chinese supplies. Experts caution that “de-risking” from China will not be uncomplicated. It will improve lives to be sure, just not without high costs and severe environmental concerns.
Several months ago, China limited the export of rare earths. These materials are essential for all of our high-tech and green technologies from electric vehicles to cutting-edge electronics to renewable energy systems. Exports of Chinese rare-earth magnets to the United States, specifically, have fallen by 30%. This decline has further increased the pressure to identify new sources of funding. The U.S. government is already aggressively pursuing these types of partnerships, for example with Japan and Australia, among other allies. Their goal is to mitigate the effects of these burdensome restrictions.
Cleveland-Cliffs, one of the largest mining companies in the U.S., has taken its first steps in the same direction. Their efforts align with the broader U.S. strategy to bolster domestic production in response to China’s dominant position in the industry. Despite these initiatives, experts caution that the U.S.-Australia critical minerals deal is unlikely to quickly diminish China’s lead in rare earth production.
Japan, too, is making bold moves to stake its claim in this new world order. A senior European Commission official suggested last week that Japan and the EU should do just that. They should cooperate in nurturing rare earth development, through private investment, in Greenland. This proposal underscores the growing importance of diversifying supply chains and decreasing our reliance on Chinese exports.
Japanese firms such as Japan Steel are tapping into China’s rapidly growing market for magnesium molding machines, which are used for electric vehicles. This action highlights the highly integrated nature of global markets, as countries compete to secure a position in the rapidly growing rare earth industry.
As rare-earth and magnet importers in Germany send their eyes towards Beijing, they’re following China’s next moves with bated breath. The unknown of China’s potential unpredictable export policies would wreak havoc on their business operations and supply chains.
While this is worthy of hope for a breakthrough deal with China, the U.S. is very much keeping its cards close to the vest. Many analysts underscore that this would be an unlikely outcome of renewed diplomacy. The complicated realities of global trade will prevent any real change from occurring easily or quickly.
China currently dominates the rare earth industry. This sector is booming, with countries and industries moving quickly to embrace greener technologies. Countries are trying to come to terms with the ramifications of China’s export prohibitions. That race for rare earths will soon be one of the fundamental elements of international economic competitive strategy.