China critical material export ban

[Spekulatius]

The export controls (effectively  bans) have received very little attention in the news, but are a big deal:

https://investingnews.com/china-rare-earths-export-controls/

https://www.chemistryworld.com/news/china-bans-sale-of-three-critical-elements-and-superhard-materials-to-the-us/4020652.article

 

As of now, the export controls include rare earth (used in magnets and many other things), Germanium , Gallium, antinomy (used in semiconductor manufacturing l Infrared applications). China has in the past hinted at export controls but now they actually shot a pretty big bazooka, especially the rare earth part.

 

I think we are going to see shortages within the next few month who the safety stock runs out in many companies. Many electric motors and tools used in semiconductor manufacturing use rare earth in magnets amongst other things.

[LC]

The issue it seems is getting it out of the ground. The US has rare earth minerals (as does Canada and *gasp* Greenland) but building the mining infrastructure is a long, expensive journey.

 

https://spectrum.ieee.org/ukraine-rare-earth-minerals

 

https://catalog.data.gov/dataset/rare-earth-element-occurrences-in-the-united-states#sec-dates

[Spekulatius]

5 minutes ago, LC said:

The issue it seems is getting it out of the ground. The US has rare earth minerals (as does Canada and *gasp* Greenland) but building the mining infrastructure is a long, expensive journey.

 

https://spectrum.ieee.org/ukraine-rare-earth-minerals

 

https://catalog.data.gov/dataset/rare-earth-element-occurrences-in-the-united-states#sec-dates

The issue isn’t as much getting it out the ground, the issue is concentrating  and processing it. Rare earth deposits are low grade which means a lot of processing is needed to get it concentrated and since many are chemically similar it takes effort to purify them too. The Chinese had a long time to optimize these processing steps and it was state sponsored for a long time, hence their large market share.

 

I think most ore are actually imported into China and not mined locally. Nobody can beat them so far in processing them. This is something the west will have to do no matter what.

Edited April 8, 2025 by Spekulatius

[Dalal.Holdings]

Another strategic capability the U.S. should figure out and Tariffs can serve as a forcing function to achieve that.

[Spekulatius]

20 minutes ago, Dalal.Holdings said:

Another strategic capability the U.S. should figure out and Tariffs can serve as a forcing function to achieve that.

How so? China stopped selling them to the West (not just the US). You can’t buy them any more and they had 80-90% market share. But the real interesting thing about the ban that they also stopped export of products from the materials. What that means is unclear to me, could mean the finished magnets or even electric motors made with these magnets. I think they left it vague on purpose.

 

I personally  know that some products that contain Germanium (which was export controlled in late December 2024) are export controlled as well , not just the metal itself which pretty much means you can buy it any more from Chinese vendors. Also, from hearsay, Vietnamese vendors won’t sell it either, because they are really disguised Chinese business operating in Vietnam.

Edited April 8, 2025 by Spekulatius

[Dalal.Holdings]

1 minute ago, Spekulatius said:

How so? China stopped selling them to the West (not just the US). You can’t buy them any more and they had 80-90% market share. but the real interesting thing about the ban that they also stopped export of products. Hat that means is unclear to me, could mean the finished magnets or even electric motors made with these motors. I think they left it vague on purpose.

 

I personally  know that some products that contain Germanium (which was export co rolled in late December 2024) are export controlled as well which pretty much means you can buy it any more from Vendors. Also, from hearsay, Vietnamese vendors won’t sell it either, because they are really disguised Chinese business operating in Vietnam.

 

The U.S. needs to build the capability to process and concentrate rare earths. It's a national security issue.

 

I believe MolyCorp used to be a dominant producer of certain rare earths

[Blake Hampton]

China has a weapon that could hurt America: rare-earth exports - The Economist

 

"Yet China’s latest restrictions could cause more damage, for three reasons. First, the “heavy” rare earths it has picked are the hardest to substitute. Dysprosium and terbium regulate heat in magnets that power offshore wind turbines, jets and spacecraft. “The bigger the motor, the weightier the rare earth you need,” says Ionut Lazar of CRU, another consultancy. The other five metals are crucial for artificial-intelligence chips. Some are also used in MRI scanners, lasers and fibre optics."

[Blake Hampton]

[Blake Hampton]

Not Just ‘Rare Earths’: U.S. Gets Many Critical Minerals From China - NYT

[Spekulatius]

While true, the $ value of minerals imported is fairly small. The odd lots podcasts mentioned ~$170M last year  from China. Even if prices 10x, its $1.7B - rounding error on the overall scheme of things.

This is just arrow the Chinese shoot in the trade war exchange. It costs them very little and creates a problem that costs the adversary way more to address.

Edited April 18, 2025 by Spekulatius

[Dalal.Holdings]

The problem for China is even if China restricts rare earth exports to the U.S., American firms can get them through other nations. Unless they want to stop shipping to the entire rest of the world, it’s going to be impossible to prevent Americans from sourcing through other nations

[Spekulatius]

1 hour ago, Dalal.Holdings said:

The problem for China is even if China restricts rare earth exports to the U.S., American firms can get them through other nations. Unless they want to stop shipping to the entire rest of the world, it’s going to be impossible to prevent Americans from sourcing through other nations

The export controls (technically not an export ban, but practically right now they are) applies to all nations, not just the USA. It is possible that China puts rules in place to allow exports to certain countries  , but that would almost certainly disallow trans exports to the US. While those are never perfect, they do restrict access.

 

Right it seems that export licenses from China are almost impossible to get, and if your business has any sort of affiliation with defense,  you can forget about it anyways.

 

 

Edited April 18, 2025 by Spekulatius

[Dalal.Holdings]

Just set up dummy corporations in countries that can get rare earths from China. Use those corps to buy from the firms that bought from China. China has very little control over where these things end up once they leave their shores. Like Deepseek getting access to Nvidia chips through 3rd party firms in Singapore. Lots of ways for the rare earths to end up in American hands once they leave China

 

Im sure the U.S. intelligence establishment can figure out ways to secure supplies for defense too

 

The smuggling/black market will thrive in trade wars

 

Edited April 18, 2025 by Dalal.Holdings

[Spekulatius]

I thought it was perfectly clear that China has banned all rare earth exports everywhere for now. What I don’t know is how they have banned products of rare earth exports. My guess is they they restrict for examples magnets (which are made from rare earth like neodymium etc) but not electric motors that are build with these magnets for example.

So there will be likely a shortage and economic impact, but my guess is that it won’t be crippling for the west. Gettint rare earth production (mining and processing etc) will take years.

[shhughes1116]

This vulnerability is not new - we’ve been dependent on China for rare earth elements, especially the heavy ones, for the last decade.  I’d hope that the administration considered this (and relevant mitigations) before starting their tariff war with China.  I think we are a few years away from MolyCorp resuming refinery operations for all rare earth elements including the heavy ones.  

[Dalal.Holdings]

China’s halting of shipments of rare earths to rest of the world is temporary. If they continue the ban, the rest of the world will band together and create new sources and the Chinese sources will become irrelevant…

 

I don’t think that happens. Instead, I think China will slowly reopen exports to certain countries and there will be ways to smuggle it to the U.S. until American capabilities ramp up

[Spekulatius]

China will not be irrelevant in rare earth sue they have the cost advantage. I think the goal is to force other nations to buy their products containing rare earth elements because the rare earth metals won’t be available in sufficiently high quantities except for very high priority uses like defense for most counties except China.

[Dalal.Holdings]

11 hours ago, Spekulatius said:

China will not be irrelevant in rare earth sue they have the cost advantage. I think the goal is to force other nations to buy their products containing rare earth elements because the rare earth metals won’t be available in sufficiently high quantities except for very high priority uses like defense for most counties except China.

 

This just justifies the U.S. decoupling from China even further.

Free trade has its benefits, but free trade and massive trade deficits with your greatest geopolitical rival who gets stronger in critical industries in the process just makes no sense.

[Spekulatius]

16 minutes ago, Dalal.Holdings said:

 

This just justifies the U.S. decoupling from China even further.

Free trade has its benefits, but free trade and massive trade deficits with your greatest geopolitical rival who gets stronger in critical industries in the process just makes no sense.

I agree with this, but now we will see if the US is actually prepared . The first scare about rare earth was about 12 years or so ago around 2013 and Molycorp was round then too and a momentum stock, but little was done in the meantime. Molycorp itself went bankrupt.

https://en.wikipedia.org/wiki/Molycorp#:~:text=Molycorp Inc.&text=The corporation%2C which was formerly,output and a 2014 restructuring.

[Dalal.Holdings]

https://www.bloomberg.com/news/articles/2025-04-17/us-rare-earth-miner-mp-materials-halts-exports-to-china

 

Molycorp's successor (MP Materials) is making a lot of claims about bringing back rare earth processing/the rare earth supply chain to the U.S. It'll obviously take time and we'll see what happens

[Blake Hampton]

Dyspro-What? Why an Obscure Element Has the EV Industry in a Panic - WSJ

 

“Rare earths are used in almost everything that turns on,” said Gracelin Baskaran, a director at the Center for Strategic and International Studies, a Washington, D.C., think tank. “The primary use of rare earths is permanent magnets.”

 

 

"The development of a new mine takes an average of 29 years in the U.S., according to a report by S&P Global Market Intelligence. The bigger problem is that the U.S. can’t currently separate dysprosium from surrounding rock. China’s head start on mining and extracting the precious elements makes it difficult to build alternative sources. “A mine in China, to produce from an ore to oxide, costs around $11 to $15 a kilogram,” said Mukherjee, of Benchmark Mineral Intelligence. “For a mine in Brazil, it’s approximately $35 to $40 a kilogram. It would be even higher in the U.S. or Australia. There also are key parts of the refining process known only to Chinese companies, said Baskaran. “It’s a permitting problem, a know-how problem and a technical problem,” she said."

[Blake Hampton]

Seems like a big deal.

[Paarslaars]

Guess Myanmar is getting invaded soon.

 

They don't have nuclear weapons right?

[mcliu]

IMO, this is the kind of stuff where governments should mandate a domestic supply chain.

Yes it'll be more expensive but it's such a small input in the grand scheme.

[Spekulatius]

Looks like there is a real issue:

https://finance.yahoo.com/news/exclusive-china-magnet-pinch-threatens-193711597.html