Although presented as the evil machinations of an enemy state, a recent Financial Times article lays out the rare earths dilemma China faces.
Rare earths in the crosshairs
Rare earths industry executives made unofficial statements indicating Chinese government officials had asked them how badly companies in the US and Europe, including defense contractors, would be affected if China restricted rare earth exports during a bilateral dispute.
The conversations should be seen against the backdrop of moves last month by the Ministry of Industry and Information Technology.
The ministry proposed draft controls on the production and export of 17 rare earth minerals from China. Although China doesn’t control the world supply of mined ores, it does dominate the refining into useable salts and metals, controlling about 80% of global supply.
Nonetheless, the country itself remains at risk to unstable ore supplies from countries like Myanmar. That may help explain Beijing’s tacit support for the recent military coup there.
The US even sends its ores to China for refining. That’s not because it doesn’t have the technical knowhow; the US simply lacks the facilities. Furthermore, China is more willing to tolerate the environmental damage from the dreadfully polluting refining process.
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Rare earths supply dependence
This lack of refining capacity leaves the US and most of its Western allies horribly exposed.