China willing to meet reasonable rare earth demand from other countries

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The trade war is prompting China to rethink its rare-earth strategy and make quick adjustments.

"Undoubtedly, the USA side wants to use the products made by China's exported rare earths to counter and suppress China's development".

After Chinese President Xi Jinping visited a rare earths facility last week, Global Times editor-in-chief Hu Xijin tweeted on Tuesday that China is "seriously considering restricting rare earth exports to the United States".

John Luddy, vice president for national security policy at the Aerospace Industries Association, said USA government funding could be used to bolster production, processing capacity and stockpiling of critical supplies. China accounts for 80% of U.S. rare earth imports and if export restrictions were enforced other suppliers outside of China would struggle to meet USA demands for rare earths, those include Australian firm Lynas.

"Waging a trade war against China, the United States risks losing the supply of materials that are vital to sustaining its technological strength", the official Xinhua news agency said in a commentary. On one hand, rare earth minerals are crucial and China holds most of the cards. By contrast, rare earths are ubiquitous in modern life, and their use is likely to spread as technology advances.

As per a 2016 report from the congressional US Government Accountability Office, accessed by Reuters, the US Defense Department accounts for about 1 per cent of US demand, which in turn accounts for about 9 per cent of global demand for rare earths. Because their supply is limited, and the production capacity of foreign producers other than China is weak, the demand of rare earths will not be greatly impacted as the United States will have no choice but to pay the higher prices to ensure they receive the materials which are irreplaceable in some high-tech industries.

Rare earths are also mined in India, South Africa, Canada, Australia, Estonia, Malaysia and Brazil.

But there are increasing concerns within the worldwide community that China might use its dominant position as a supplier of rare earths for leverage in the trade war.

The nationalistic Chinese newspaper Global Times warned that China has plenty of ways to retaliate against the United States, including the threat of cutting off supplies of rare earths.

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Rare earths are a group of 17 chemical elements which have properties key for the production of everything from satellites to jet engines. Everything from smartphones to flat screen TVs to green energy to electric vehicle batteries rely on rare earth metals.

"Rare earth elements are central to the entire spectrum of defense technologies that are vitally important to military forces in many countries,"stated the Rare Earth Technology Alliance".

"Regardless of the outcome of trade discussions, this matter must be addressed", Dan Kish, distinguished senior fellow at the Institute for Energy Research, told The Daily Caller News Foundation.

"Will rare earths become a counter-weapon for China to hit back against the pressure the United States has put on for no reason at all?"

An unnamed official from the National Development and Reform Commission, China's state planner, issued a cryptic warning late Tuesday.

"Breaking our foreign mineral dependence is critical to the future of manufacturing in America", Murkowski said in April.

"It's hard for me to believe that they would be mad enough to take that big step", he said, adding that it would have a negative effect on the Chinese economy.

"We could see responses on the USA side, perhaps very soon", ARPN's McGroarty said.

Despite the concern, and despite yearly defense authorization bills ordering the Pentagon to get to work on recovering and recycling rare earth elements, the U.S. was still woefully underprepared for any shock to the supply chain as recently as 2016. The project, which will cost more than $300 million to develop, would involve an on-site mine and processing facility that would annually process about 7.3 million tonnes of ore and produce about 3,325 tonnes of rare earths. Then they will have to go back to where they stood before they backpedalled on earlier concessions.