Over 2 million tonnes of rare earths per year: Vietnam as a rising star, or a Chinese newspaper hoax?
Vietnam could become Europe’s next major raw-materials hope for rare earths not sourced from China. According to certain articles, the country plans to increase its rare earth production to 2.02 million tonnes per year by 2030. An incredible undertaking whose realization is difficult to imagine given the lengthy processes involved in opening mines. Perhaps, however, the authors of this news are not concerned with overcoming fundamental laws of physics, but rather with manipulating the prices of highly sought-after rare earths.
565 times as many tonnes of rare earths
According to the US Geological Survey, Vietnam has already increased its rare earth production from 400 tonnes in 2021 to 4,300 tonnes in 2022. That is an almost tenfold increase and also shows what is realistically possible. Annual production of 2.02 million tonnes would mean Vietnam mining one tenth of its rare earth reserves each year, which would be completely depleted in well under 10 years. At 22 million tonnes, these reserves are the second-largest in the world. To achieve this, the Vietnamese government intends to open four additional mines on top of the nine already in operation. By 2030, there would be seven years not only to open these mines, but also to ramp up their output to around 465 times the 2022 level. It is difficult to imagine how this could succeed.
Is the Vietnam Rare Earth Company owned by China?
It is difficult to determine exactly where the 2-million figure came from before it found its way onto the internet. However, the 2021 MiMa report by the Center for Minerals and Materials contains another interesting piece of information: the Vietnam Rare Earth Company (VRE) is 90% owned by China (the remaining 10% is held by Japan). Could there be a connection? What would China gain by spreading the rumour that vast quantities of rare earths could flood the market?
Western mining projects would no longer be profitable
As China’s monopoly on critical raw materials intensifies, other countries are trying to become more independent and are pushing ahead with exploration. If prices were to collapse worldwide, it would prevent the West from producing rare earths and technology metals profitably. Our companies would then still be able to buy almost exclusively from China. This would give the Middle Kingdom a guaranteed sales market and allow it to continue using raw material scarcity as leverage to achieve political objectives.
Price stability through the Supply Chain Act
Of course, nobody knows whether that is the case. What is clear, however, is that Europe has decided to hold companies more accountable for diversifying their supply chains. Relying on China’s low-cost deliveries and shifting the risk onto the government will not work. This will create a market for rare earths produced outside China and produced “green”, even if that means higher prices. Rare earth investors should therefore not be deterred—on the contrary: right now is precisely the most favourable time to enter this asset class.