A group of 17 chemically related elements collectively referred to as the rare-earth elements are referred to as rare-earth resources (REEs).
Earth elements play a vital role in a wide range of advanced technological applications and industries, thanks to their exceptional characteristics.
Potential Manipulation of Rare-Earth Supply by China
Rare earth elements find applications in various industries such as electronics, renewable energy, electric vehicles, defense, and more. Neodymium and praseodymium, for instance, are essential for permanent magnets used in wind turbines and electric motors.
Despite the name rare, these elements are relatively abundant in the Earth’s crust. However, their extraction and separation pose challenges due to their low concentrations and their association with other minerals, resulting in high costs.
China holds a dominant position in the global rare-earth market, both in terms of production and reserves. This is due to its substantial reserves, lower production costs, and previous consolidation of the industry. Concerns have been raised by other nations regarding China’s potential manipulation of rare-earth supply and pricing for geopolitical or economic advantages.
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Key Component in US Military Hardware
A recent report indicates that China is considering an export ban on high-performance rare-earth magnets to the United States. This development could significantly escalate tensions between the two superpowers, as rare earth magnets from China’s Bayan Obo region are used in US Javelin missiles and F-35 fighter jets. China currently produces about 70% of the global rare earth magnets utilized in advanced military hardware.
The US, through initiatives like the CHIPS Act, has sought to limit the export of advanced semiconductor technology to China. In response, China may leverage its rare-earth supply as a bargaining chip, as it did in 2019 when it threatened to cut off exports to the US in retaliation against President Trump’s measures.
In an effort to decrease reliance on China, other nations have been actively investigating alternative sources and establishing their own capabilities for rare-earth production.
Diversification of the supply chain and the promotion of responsible mining practices and recycling are being pursued to ensure a stable and sustainable rare-earth supply in the future.
Investors interested in this sector may consider monitoring the Vaneck Rare Earth Strategic Metals ETF (REMX), which tracks the MVIS Global Rare Earth/Strategic Metals Index. This index comprises companies engaged in activities related to rare-earth elements.
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