From ChinaPower
As China’s economy has developed over the past few decades, its leaders have sought to make the country a key player in strategically important industries. To that end, Beijing has established China as the world’s leading supplier of rare earths, a collection of 17 minerals essential to the manufacture of smartphones, electric vehicles, military weapon systems, and myriad other advanced technologies.
Beijing has shown its willingness to use its weight in the global rare earth industry to achieve its political goals and raise alarm bells in several major countries. However, China’s influence within the industry is likely to wane in the coming years as changing market dynamics enable new players to compete.
The global marketplace for rare earths
Global trade in rare earths is relatively low compared to other raw materials. In 2019, the value of global imports of rare earths was only $ 1.15 billion – a fraction of global crude oil imports of more than $ 1 trillion. However, the total value of goods made with rare earths is immense. For example, every Apple iPhone is based on several rare earth elements. Neodymium is used to make tiny but powerful magnets that iPhone speakers work with. Europium is used in trace amounts to create red colors on screens and cerium is used to polish the phones during the manufacturing process. In fiscal 2019, Apple sold $ 142.4 billion worth of iPhones.
Despite their name, most rare earth elements are relatively common. However, the mining and conversion of rare earths into usable materials is expensive and harmful to the environment. Beijing has for years used its relatively inexpensive labor and lax environmental laws to gain a competitive advantage in the world market and become the leading supplier of rare earths. From 2008 to 2018, China exported almost 408,000 tons of rare earths, which was 42.3 percent of all rare earth exports in the reporting period. The United States was the second largest exporter, supplying around 9.3 percent of the world’s total. Malaysia (9.1 percent), Austria (9.0 percent) and Japan (7.1 percent) rounded off the top 5.
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According to the Chinese customs authorities, China exported 45,552 tons of rare earths worth $ 398.8 million in 2019. The vast majority of these exports went to the world’s major economic and technological powerhouses. About 36 percent (by volume) went to Japan, which makes it the main Chinese rare earth destination. The USA took a close second place with 33.4 percent of Chinese exports. In addition to the Netherlands (9.6 percent), South Korea (5.4 percent) and Italy (3.5 percent), these five countries together imported 87.8 percent of China’s rare earth exports.
| Breakdown of Global Rare Earth Exports (2008-2018) | ||||
|---|---|---|---|---|
| country | Export volume (Metric tons) |
Share (%) | Export value (Million US $) |
Share (%) |
| China | 407,886.6 | 42.3 | 8,112.2 | 46.3 |
| United States of America | 89,467.1 | 9.3 | 953.6 | 5.4 |
| Malaysia | 87,696.1 | 9.1 | 942.4 | 5.4 |
| Austria | 87,055.1 | 9.0 | 867.8 | 5.0 |
| Japan | 68,412.9 | 7.1 | 2,172.6 | 12.4 |
| rest of the world | 223,172.7 | 23.2 | 4,467.7 | 25.5 |
| Source: UN Comtrade Database |
With 42.6 percent of total exports by volume, lanthanum was by far China’s largest export of rare earths. Lanthanum is used in significant amounts in hybrid vehicle batteries. For example, each Toyota Prius contains about 10-15 kilograms (kg) of the substance. Terbium, which is significantly more expensive, was China’s largest export item in terms of value, accounting for around 14.5 percent ($ 57.9 million) of the country’s total exports in 2019. Terbium is mainly used in solid-state electronic devices, but is also used in sonar systems and television screens.
China’s ambition to dominate the rare earth industry
China’s dominance in the rare earth industry is the result of decades of targeted industrial policies aimed at overtaking other nations. In recent years, Beijing has also tried to reform China’s rare earth industry to improve efficiency, better protect the environment, and combat illegal mining.
The Chinese government took important steps to support its burgeoning rare earth industry by granting export tax rebates in the mid-1980s. The discounts cut costs for Chinese mining companies, allowing them to gain a foothold in the world market. From 1985 to 1995, China’s rare earth mining output exploded from just 8,500 tons to around 48,000 tons, and its share of global mining output rose from 21.4 percent to 60.1 percent.
The original article contains well-made interactive graphics.
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