China to halt export and processing of rare earths
The rush starts now! Anyone who’s still been waiting for the starting gun to invest in technology metals and rare earths will get it here: In East Asia, information has been leaked that China is expected to ban the export of technology, machinery, and equipment for processing rare earths as early as this year. Observers also fear an export ban on critical metals.
Back in 2021, China stated that it was not planning any export restrictions on rare earths. The Chinese plans that have now become public look very different: a decision has reportedly been made to ban, in particular, the export of technology for magnetizing rare earths. Since both wind turbines and electric vehicles are increasingly using rare-earth magnets, such an embargo would, among other things, jeopardize Europe’s energy transition. According to observers on the ground, China’s aim is to make Western efforts to achieve independence in raw materials more difficult.
Officially, the leaked information has the status of rumors. However, prominent political and economic players are taking it seriously—especially since a Chinese embargo would make sense as retaliation for the Chip Act and in light of the situation in Taiwan. For Brian Menell, Chairman of the Supervisory Board of the metals group Techmet, China’s approach reflects its self-image as a global power. Following Russia’s example in the war in Ukraine, China now appears to be trying to use commodities urgently needed by the rest of the world as a weapon. This could be used above all to sanction Western involvement in the event of an escalation of the Taiwan conflict.
Since the war in Ukraine, Europe has been preparing to become less dependent on China for critical commodities. But it is not yet prepared for a move like this. Many countries have abandoned mining projects because they place a heavy burden on the environment, meaning that over 90% of mining—and an even larger share of processing rare-earth-bearing ores—takes place in China. Some companies have therefore ordered specialized furnaces in China to be able to refine rare earths themselves. These have lead times of more than 18 months. Whether they will ever arrive is currently doubtful.
What can help Europe get through in such a situation are stockpiles of commodities that have already been processed to industrial-grade standards. While these do not replace long-term refinery projects like Lynas’ in Malaysia, they can keep industry supplied for up to 6 months in the event of a sudden supply stop. For private buyers, they also offer the opportunity to invest tax-free in a class of production-critical commodities whose price could very likely explode in the near future.