Beijing is threatening to cut Washington off from rare earth minerals, according to media reports in China’s papers that included quotes from the state planning agency. The stocks of rare earth producers were up following the news.
One newspaper included the Chinese phrase “don’t say I didn’t warn you”, which the country used before it went to war with India. The paper wrote “those familiar with Chinese diplomatic language know the weight of this phrase.” The language, which appeared in the Global Times, a newspaper affiliated with the Communist Party, was also employed ahead of conflict between China and Vietnam in 1979.
The People’s Daily made it clear China would use the elements as retaliation in its trade war. 80% of U.S. rare earth supplies come from China.
The editor-in-chief of the Global Times tweeted that China is “seriously” weighing the restriction of rare earth exports to the U.S. and could also implement countermeasures.
A National Development & Reform Commission official told CCTV that people in the country won’t be happy to see products made as exported rare earths are being used to suppress China’s development. Editorials in the Global Times and Shanghai Securities News took similar stances in their Wednesday editions.
The U.S. is dependent on importing rare earth minerals from China, which are used in electronics, hybrid vehicles, and energy storage systems. The U.S. imports the rare earth materials because it’s cheaper than producing them domestically.
This is driving rare earth stocks up with the help of President Xi Jinping, who visited a plant earlier this month along with his chief trade negotiator with the U.S.
China already raised tariffs on America’s sole producer of rare earths from 10% to 25%. The U.S., however, excluded rare earths from its list of prospective tariffs on roughly $300 billion in Chinese goods.
In December 2017, U.S. President Donald Trump signed an executive order to reduce the country’s dependence on external sources of critical minerals, including rare earths, which was aimed at reducing U.S. vulnerability to supply disruptions.
China’s rare earth market:
- China Northern Rare Earth Group
- Minmetals Rare Earth Co.
- Xiamen Tungsten Co.
- Chinalco Rare Earth & Metals Co.
Shares of JL Mag Rare-Earth increased by 10% while Innuovo Technology increased by 9.95%. The shares of Australia rare earth miner Lynas also increased by more than 10%.
Lynas Stock May 29
“We’ve been here before,” Fraser Howie, an independent analyst, told CNBC’s “Street Signs” on Wednesday. China banned the export of rare earth minerals to Japan after Tokyo detained a Chinese fishing trawler captain.
Norway’s exports of salmon plummeted after Beijing curbed them. That move was seen as retaliation to a Norwegian committee’s decision in 2010 to award a Chinese dissident the Nobel Prize.