The Xi Jinping administration is making a move to delimit the country's production rate of rare earth minerals in the second half of 2018, the data from Adamas Intelligence indicated on Wednesday, a decision that could potentially cause a major shake-up in the global electronics and weapons manufacturing industries. With the decrease in supply, this could also result in a huge spike in prices for the critical materials.
China remains to be the largest and the most important producer and consumer of rare earth minerals. Rare earth, as they are collectively called, is comprised of 17 periodic table elements that are used primarily to make a wide range of consumer electronics, electric vehicles, and even weapon parts.
As pointed out by Breaking Views, these elements are no less commonly found throughout the earth's crust. However, extracting them can be a bit tricky and apparently it's only China and a few more others that have the necessary technology and manpower to mine them.
Twenty years ago, the former paramount leader of the People's Republic of China, Deng Xiaoping, likened these resources to Middle East's black gold - crude oil.
The US Geological Survey data indicated that China accounts for more than 80 percent, around 156,000 tonnes, of the total world output of rare earth last year. The US, in particular, imported $150 million worth shipment of rare earth from China in 2017.
According to Reuters, this recent move by the Chinese government is already sending manufacturers in a panic mode as they are now beginning to scour the globe for alternative sources of these precious supplies.
In the second half of 2018, Beijing's production quota of these minerals was cut off by 36 percent to 45,000, which is the lowest in more than five years. With this figure, it could only provide enough supply for its domestic buyers, much less so for its international clients.
As pointed out by Adamas, this is clearly China's attempt to take a better grip on the market. Financial analysts and industry experts also see the decision as a way for Beijing to lash back against Washington as the China-US tariff war continues to escalate.
There will be other players who will likely to benefit on this recent development. Australia's Lynas, for example, will see a significant increase in market share.
Pricing Schemes
The Reuters report cited Adamas' predictions on the possible rising prices due to this production cutback. One key rare earth mineral, the PrNd Oxide, could see an increase by 10 percent to 50 percent from its original price within the next 12 months.
Ryan Castilloux of Adamas added that this scenario could also be true to other minerals like neodymium 9Nd), praseodymium (Pr), and dysprosium (Dy), all of which are used to make electric vehicle engines.
