The PRC has declared much stricter rules on exporting rare-earth technologies and rare-earth related items. This step further tightens the country’s grip on this strategic sector. China is the world’s largest producer of rare earth minerals. Its importance to the global supply chain cannot be understated, most especially because these materials are critical for the production of magnets used in the automotive, electronics and defense industries.
It’s worth emphasizing that these new export controls come on the heels of new regulations, enacted in early April. Those initial regulations mandated licenses for certain exports of rare earth intermediates. Now, exporters need to get licenses for dual-use technologies that are used in rare-earth mining and smelting processes. This broader shift seeks to safeguard U.S. national interests and prevent the transfer of sensitive technologies into foreign possession.
Implications of Stricter Regulations
The recent surge in export controls has alarmed many around the world. China has been at the center of many of the tensions between Beijing and Washington over rare earth resources for some time now. The United States has called out China for their deliberate slowing of export license approvals. This action has thrown into chaos production for countless companies who rely on these materials.
China has invested massively in new or expanded refining operations in the last few decades. This high-level strategic move has afforded the country a serious lead in the rare earth market. China has an eye-popping 44 million tonnes of rare earth deposits. This represents roughly one-third of the global supply, currently about 110 million tonnes. Other countries with significant deposits are Brazil, Vietnam, Russia, and India, but none come close to China’s reserves.
“For some time, some overseas organisations and individuals have directly or after processing transferred or provided controlled rare-earth items originating in China … for direct or indirect use in sensitive areas such as military operations,” – Ministry spokesperson
In fact, such comments are indicative of China’s increasing fear over foreign access to its rare earth stockpiles and any possible subversive use such access could entail. Reacting As the country deepens its stranglehold on this critical market, every industry across the globe is preparing to face some pretty major upheavals.
Global Response to China’s Controls
It seems the international community has already begun sounding the alarm about China’s escalating export controls. Unsurprisingly, leaders from affected industries and members of Congress from impacted states are deeply concerned about what this means for industries that depend on rare earth elements. Olof Gill, European Commission representative, said at the conference,
“The commission expects China to act as a reliable partner and to ensure stable, predictable access to critical raw materials.”
Predictable access to these critical minerals like rare earths is key to stabilizing global supply chains. Just as important is its support for technological advancement.
The unintended consequences of the limitations China has begun to impose are already being felt across global industries. With multiple manufacturers facing production stoppages due to shrinking stocks of these vital minerals, the supply chain crisis is hitting close to home. Those new regulations will certainly create ripple effects. Get ready for rising costs and supply disruptions in industries that depend on these critical materials.
Future Outlook
China’s making it even harder to get rare earths. Its recent action demonstrates its desire to maintain a hard fist around this important resource. The country has a very impressive legacy of rare earth production patents. This accomplishment is yet another achievement in its dominating hold on industry to date. Other countries would welcome opportunities to find sources of rare earths that don’t necessarily run through China’s hands. They are up against highly competitive, China’s built-out infrastructure and massive investments.
