Will the world need subsidies and tariffs to respond to China's rare earth export curbs?

South China Morning Post

6 hours ago

China's halt on rare earth exports will fuel efforts to build alternative production capacity overseas despite technical and financial challenges, according to REalloys, an American firm that is involved in the industry.
But the buildout would be costly and protracted due to technical challenges and could require subsidies and tariffs to stave off competition from Chinese products, which have dominated the global market for nearly three decades, analysts said.
'China has done a remarkable job at putting these supply chains for
critical metals together,' said REalloys CEO David Argyle in an interview on June 16. 'Once you control these supply chains, it is very difficult for new entrants [to] displace [them] because it is a zero-sum game.'
Last year, China accounted for 69 per cent of the world's rare earth ore production, but it controlled 90 per cent of global downstream processing, which turns rare earth oxides or other compounds into a metallic form, he said. China also dominates the global market for heavy rare earths, which go into high-performance
magnets used in defence products, electric vehicles and wind turbine generators, with a share of 98 to 99 per cent.
'China has a very
strong card to play [in trade negotiations], which doesn't impact tens of thousands of Chinese jobs,' he said. 'But they have overplayed it this time because the recent supply halt resulted in minor shutdowns at automotive plants in the US and Europe.'
Ohio-based REalloys planned to spend more than US$50 million to set up a production line capable of making 1,000 tonnes of high-performance magnet materials by 2027, in collaboration with Canada's Saskatchewan Research Council, Argyle said.
REalloys will source ore mined in Brazil for processing in Canada, in addition to recycled sources, he said. The development of a mine in the Canadian province of Saskatchewan was also on the cards.