The Changing Structure of the Global Rare Earth Supply
For the sake of national security interests, the U.S. Department of Energy has decided to increase the domestic production of rare earth elements while also reducing its reliance on China’s rare earth metals. Therefore, the U.S. is headed the same way as Japan toward a diversifying rare earth global supply chains in order to enhance a critical materials strategy and stabilizing rare earth supplies.
Rare earth elements, already well known substances, provide unique physical properties for advanced technology applications that cannot be achieved with other materials. Therefore, rare earths have become key ingredients for enhancing the performance of many advanced technology products, especially as a key factor in developing modern military technologies. Under the circumstances, the high political sensitivity of rare earths is self-evident. Pursuing the diversification of the supply is inevitable for the rare earth industry; meanwhile, China has also expressed its preference for global diversification of the rare earth trade as noted in a related white paper published at last year.
In fact, the world’s rare earth supplies patterns are changing. China’s domestic supply chains are also are undergoing certain profound changes in rare earth market. In most recent years, China has launched many special policies to regulate its rare earth mining and production. The country’s rare earth upstream industry sector has been gradually integrated and consolidated into an oligarchic industrial structure, headed by a few industrial giants. Chinese domestic rare earth industrial supply patterns have been changed as has the traditional resource management approach in the major rare earth regions, which is ”unified mining, unified price, unified purchase and distribution.” This means the government-led controlled rare earth resources have resulted in the rare earth upstream industry being led by a few state-owned large enterprises with concentration reaching 80% or higher.
The diversification of supplies will have effects on the rest of world’s rare earth industry. Despite the Chinese government having reiterated on more than one occasion that China will continue its rare earth supply to the international market, the total exports quotas should be limited at reasonable levels. So I believe that the country’s quota policy on rare earth exports will remain stable in the coming several years. With global use of rare earth elements growing, some non-Chinese rare earth mining projects will usher in new development opportunities, particularly where heavy rare earth mining projects are concerned.
Overall, the U.S. and the Japanese government want to speed up implementing a greater diversification of rare earth supplies, which relieves the contradiction between the supply and demand of balance of the global rare earths market. China’s market share of rare earth elements will decrease but its market dominance will not be shaken. The Chinese government has moved to strengthen its strict control and supervision of domestic rare earth supply chains, which will stabilize the country’s rare earth market.
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