China has discovered two new rare earth minerals (REE), oboniobite and scandio-fluoro-eckermannite, at its Bayan Obo mine.
The Chinese government has implemented a new rare earths policy to foster innovation and safeguard national security.
The new regulations will strictly govern the mining, smelting, and trade of rare earth elements.
China holds a leading position in the global supply chain of rare earth elements (REEs) and critical minerals, from mining to processing to end uses. The reasons for this success are mainly two. The first is the serious strategic error committed by the United States with the abandonment of public support for the mining sector which has led to the abandonment of private entrepreneurs.
Chinese geologists recently discovered two new minerals – oboniobite and scandio-fluoro-eckermannite – at Inner Mongolia’s Bayan Obo, the world’s largest rare earths mine. According to media reports, the discovery was a joint effort by the CAS Institute of Geology and Geophysics, Inner Mongolia Baotou Steel Union Co., Ltd., Baotou Research Institute of Rare Earths, and Central South University.
As announced by Li Xianhua from the CAS Institute of Geology and Geophysics, the International Mineralogical Association officially recognized the finds and duly approved the new names of the minerals.
What makes these minerals truly exceptional is not only their scarcity but also the presence of valuable elements that hold immense potential across multiple domains. Of particular significance are the scarce and strategically critical metals, niobium and scandium, embedded within these minerals. Eperts say the applications are far reaching, from new materials and energy technologies to information technology, aerospace, and defense.
China’s new REE policy
In July, China announced the Rare Earth Management Regulations, clarifying that REEs are owned by the state and that the CCP will implement protective exploitation of these strategic resources. The measure will go into effect on October 1, 2024.
When clarifying the context of the Regulations, the Chinese side said there are still some outstanding problems in the national management of REE, including "insufficient means and sanctions to correct illegal behavior such as illegal mining or illegal smelting and separation, production without or above target, and trade in illegal rare earth products."
China adopted such "Regulations" in order to protect the supply of REEs through a high level of national security.
The introduction of these "Regulations" aims to firmly control the strategic rare earth resource and "protect its important reserves of industrial metals".
The introduction of the new "Regulations," totaling 32 articles, includes:
clarifying the principles of mining operation;
strengthening the protection of rare earth resources;
improving the management system;
promoting high-quality development of the REE industry;
improving the supervision system of the rare earth industrial chain;
clarifying supervision and management measures, legal responsibility and six other aspects of content.
In addition to clarifying that rare earth resources belong to the state, the new rules require:
that extraction enterprises and those involved in rare earth smelting and separation be identified;
that the total amount of rare earth mining and rare earth smelting and separation be regulated;
that dynamic management be optimized; that a product traceability system be established;
that circulation is strictly managed.
In addition, the Regulations clarify that the state shall "implement unified planning for the development of the rare earth industry and encourage and support research, development and application of new technologies, new processes, new products, new materials and new equipment in the REE industry."
The measure also stipulates that companies that violate the relevant provisions can be fined five to 10 times their illegal income and fines of up to 5 million yuan.
Many analysts believe these regulations will outline new legal penalties for unlawful practices related to rare earth mining and smelting.Toward the end of 2023, China expanded its restricted export list to include numerous technologies related to rare earth production. The updated list by China’s Ministry of Commerce references “rare earths” a total of 17 times.
According to Chinese state media, the update targets items Beijing wants to prohibit from free export in order to protect the nation’s “economic and technological rights and interests. Meanwhile, external analyses indicate that the expanded list bans technologies for producing rare-earth magnets, mining rare earths, and refining these substances.
The Ministry of Justice and the Ministry of Industry and Information Technology said in response to a reporter's question about the regulations on June 29 that "in recent years China has introduced a series of policies and measures regarding access standards to the rare earth industry, industry consolidation, environmental protection and so on, which have effectively promoted and safeguarded the sustained and healthy development of the industry."
China is the world's largest producer of rare earths. REEs are a dozen metal elements that are fundamental to modern technology, from electric cars and wind turbines to robots and military weapons. At the same time, rare earths require rigorous processing to produce usable materials, and China is also a leader in rare earth refining technology.
Two recent developments in Europe, including a potentially transformative acquisition in Greenland, suggest that the West has a solid opportunity to secure critical metals for the future.
In a recent development, Norwegian mining company Rare Earths Norway uncovered one of Europe’s largest deposits of rare earth elements. The discovery was made within the Fen Carbonatite Complex in southern Norway, marking a significant finding for the region and presenting a valuable opportunity for the West to foster rare earth independence.
China holds a leading position in the global supply chain of rare earth elements (REEs) and critical minerals , from mining to processing to end uses.
The reasons for this success are mainly two. The first is the serious strategic error committed by the United States with the abandonment of public support for the mining sector which has led to the abandonment of private entrepreneurs.
The second was Beijing's great ability to climb the value chain with huge investments in research and development and with the experience accumulated in the intermediate stages of production.
The Risk of Dependence on China: A Geoeconomic Weapon for Xi
On the other hand, only now have we realized that in recent decades China - ergo the Chinese Communist Party and Xi Jinping - has waged an economic war against the rest of the world , has eroded production chains with the aim of making states dependent and this plan is succeeding. The corollary is that the more industries weaken (semiconductors, telecommunications, critical minerals and rare earth elements, high-capacity batteries, pharmaceuticals and medical equipment), the more the national security of the states to which they belong is at risk.
Without access to secure supply chains, no country is able to sustain its economy and develop weapons systems for national defense.
Today, the United States and the European Union are strategically dependent on a wide range of critical minerals and materials that are the building blocks of products we use every day.
What Are Rare Earth Elements (REE) and Why Are They Important?
Rare earth elements (REEs) and critical minerals are a group of 17 metals: 15 elements from the lanthanide series and two chemically similar elements, scandium and yttrium. Each with unique, vital properties, they underpin the production, development, delivery, and support of essential services such as telecommunications and computing, food and agriculture, finance, healthcare, education, transportation, and public safety. In the civilian sectors of the economy, strategic and critical materials and their supply chains are essential to countless manufactured goods, ranging from personal electronics (an iPhone, for example, contains eight REEs) to consumables for fuel, food, and medical supplies, to building homes and supporting critical infrastructure.
In the defense industry , strategic and critical materials ensure the expansion of production and development of military goods (an F-35 fighter contains about 420 kg of REE812 and these are essential for guided missiles) and the conduct of armed forces operations. Their demand is expected to increase over the next two decades, especially as the world moves to eliminate net carbon emissions by 2050.
American and European dependence
Although China has only about 30% of global rare earth reserves, it controls 50-60% of global rare earth mining and 80-90% of the market in the intermediate processing stage . Currently, 98% of the EU's rare earth supply comes from China. The US dependence is estimated at around 80%.
The abandonment of the US mining sector coincides with the beginning of Chinese incentive policies
The United States was the major global player in rare earths from World War II until the early 1990s . Beginning in the 1980s, however, government investment ceased and basic research ground to a halt.
By the 1990s, the public-private investment mechanism disappeared, while China had begun to effectively use very similar policies to facilitate the growth of its domestic sector.
As mentioned, China today holds a commanding position in the global rare earth supply chain, from mining to processing to end uses.
Beijing uses numerous tools to maintain its dominance, such as export controls, production quotas, state investment in basic research, nationalization of industry, and, more recently, the consolidation of the state into an integrated mega-corporation .
Environmental and health costs
The extraction of rare earths is highly polluting and entails high environmental and health costs for local communities.
After they are removed from the ground, they must be separated, refined into oxides, and then transformed into metals and alloys before they are ready for industry. The secondary process is also highly damaging to the environment.
While the shift in control of the global supply chain from the United States to China was initially enabled by Beijing's more lax environmental and regulatory standards, it is not true that China now maintains its advantage because of this.
Over the past decade, Beijing has introduced new environmental regulations, enforced existing ones, and innovated some mining and refining processes, making them cleaner.
China's dominance in the rare earth industry is a matter of politics, not geography, then.
The process of separation and refinement is an area in which China has invested a lot of intellectual capital and state resources.
However, the risks to human rights and the environment in mineral supply chains where Chinese companies operate are very high. From January 2021 to December 2022, the Resource Center for Business and Human Rights recorded a total of 102 reports of abuses.
The data:
Indonesia has the highest number of registered reports of abuse (27), followed by Peru, the Democratic Republic of the Congo (DRC) (12), Myanmar (11) and Zimbabwe.
Over 2/3 of the allegations concern human rights violations against local communities . The most salient risks concern impacts on livelihoods, the rights of indigenous peoples and insufficient or lack of consultation.
Over half of the allegations concern negative environmental impacts , where water pollution , effects on wildlife and species habitat, and problems with access to water are frequently recorded.
More than 1/3 of the charges concern workers' rights . Most concern health and safety risks in the workplace.
Despite the significant number of complaints recorded, only seven of the 39 companies have published human rights policies, indicating significant room for improvement in both policies and practices.
The reasons for Chinese dominance
Currently, Beijing's dominance is due more to their investment in separation and refining than to trade or industrial policies.
In 2012, the Chinese government began a process of industry consolidation that transformed the industry into six regional state-owned conglomerates. In December 2021, there was further industry consolidation with the creation of a new mega-enterprise. China Rare Earth Group is the result of the merger of three large mining conglomerates and two research institutions . It will control China's heavy and medium rare earths, under the control of the State-owned Assets Supervision and Administration Commission of the State Council (the highest administrative level).
The new conglomerate will control about 30-40% of global supply . In the future, companies in northern China will also be consolidated , around the Baotou mine in Inner Mongolia, and Beijing will have only two huge, vertically integrated state-owned enterprises that can handle rare earth mining and post-processing. The southern company will focus on heavy minerals , while the northern one will focus on light minerals (including neodymium).
From the discriminatory system of national prices to that of production quotas
To beat competition, Beijing has in the past used a discriminatory system of domestic versus foreign prices and export controls. However, in a lawsuit filed by the United States, the European Union and Japan, the export controls were declared unlawful in 2015 because they violated China's WTO accession agreement. Beijing then abandoned the controls system and relied on production quotas , which it used to maintain limited supply and consistently low prices . Production quotas for regional conglomerates are set centrally by the Ministry of Commerce and enforced by local governments. In recent years, production quotas have failed to meet demand and are starting to strain the domestic rare earth industry.
Domestic demand has currently exceeded domestic supply.
The 2016 “Rare Earth Industry Development Plan,” released by the Ministry of Industry and Information Technology (MIIT) in conjunction with the 13th Five-Year Plan, outlines many of these policies with goals of increased profitability and improvements in the high-value-added of certain segments of the industry that meet higher environmental standards. One goal was to “improve mechanisms to keep prices of superior minerals stable by limiting production.” The 13th Five-Year Plan, in particular, focused on shifting from a “political” economy to higher-value-added products with greater environmental sustainability. Goals included strengthening “geological environmental governance and ecological restoration in regions of intensive mineral resource extraction” and “green mining.” By the time the 14th Five-Year Plan was announced in 2021, many of the goals had been achieved or were underway.
China, therefore, has climbed the value chain with huge investments in research and development and with the experience accumulated in the intermediate stages of production .
Towards a new industrial policy with higher added value
The latest plan focuses heavily on a new industrial policy to shift toward higher value-added manufacturing , green technologies, and an economy more driven by domestic production and demand. Many of the future goals—electric vehicles, space technology, new materials, computing, and more—will require a reliable source of rare earths , both for Chinese manufacturers and for foreign manufacturers based in China.
Beijing also imports rare earths, particularly those needed for permanent magnets . They also import unprocessed concentrate from the United States, which is then refined within China's integrated industry. Most of the U.S.'s rare earth imports, however, are finished products. Although U.S. mine production has increased in recent years, China's midstream leadership is unrivaled .
Chinese vulnerabilities
In recent years, China has also begun to rely on rare earth mining in neighboring Myanmar. Imports come from poorly regulated mines there and possibly also from Chinese minerals mined illegally and recycled across the border.
China also faces supply chain vulnerabilities . For example, when Covid-19 policies temporarily closed the border between China and Myanmar, the price of rare earths began to rise dramatically . These price pressures have been alleviated to some extent with the reopening of the border and may be further ameliorated by the creation of the aforementioned mega-enterprise.
Global demand for rare earths is increasing
Demand for rare earths, especially the heavy ones that can be used in permanent magnets, is increasing and is expected to grow further in the coming decades .
Neodymium, but also dysprosium, praseodymium and samarium are expected to increase significantly in the coming years largely due to green technologies, especially in the automotive industry where neodymium iron boron (NIB) permanent magnets are used for motors (the technology and mineral requirements are similar for wind turbines). Neodymium is found in MRI machines and lasers and NIB magnets are found in computers, mobile phones and other electronic devices, as well as in wind turbines and motors. End uses include healthcare , green energy, defense and everyday consumer products . NIB magnets are ubiquitous.
By 2025, total demand for major rare earth permanent magnet applications is expected to be 94,500 tons . In 2020, global rare earth production was 240,000 tons, including all 17 elements, not just the key ones.
China's investment in R&D
China's investment in R&D and the extent of its experience compared to other countries are evident in the permanent magnet industry and patent grants . In 2021, while China only received 48% of the overall permanent magnet patents, 99% of the neodymium magnet patents and 86% of the samarium cobalt magnet patents were Chinese . Patents in the rare earth sector also have this trend.
Supply chain vulnerabilities, therefore, arise from market concentration in China.
Beijing, however, will not be able to meet its own growing domestic demand , nor global needs , particularly for neodymium and other key rare earths needed for permanent magnets. Without these rare earths, even the global energy transition policy will be difficult to implement .
Comentarios