The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of this site. This site does not give financial, investment or medical advice.
Via Zerohedge…
Back in April of 2018, when the trade war with China was still in its early stages, we explained that among the five “nuclear” options Beijing has to retaliate against the US, one was the block of rare-earth exports to the US, potentially crippling countless US supply chains that rely on these rare commodities, and forcing painful and costly delays in US production as alternative supply pathways had to be implemented.
As a result, for many months China watchers expected Beijing to respond to Trump’s tariff hikes by blocking the exports of one or more rare-earths, although fast forwarding one year later this still hasn’t happened. But that doesn’t mean it won’t happen, and overnight President Xi Jinping’s visit to a rare earths facility fueled speculation that the strategic materials will soon be weaponized in China’s tit-for-tat war the US.
As Bloomberg reported overnight, shares in JL MAG Rare-Earth surged by the daily limit on Monday after Xinhua said the Chinese president had stopped by the company in Jiangxi, a scripted move designed to telegraph what China could do next.
The reason for the dramatic market response is that the presidential visit flags policy priorities, and “rare earths have featured in the escalating trade spat between the U.S. and China.” Specifically, as Bloomberg notes, China raised tariffs to 25% from 10% on American imports, while the U.S. excluded rare earths from its own list of prospective tariffs on roughly $300 billion worth of Chinese goods to be targeted in the next wave of measures. And just in case the White House missed the message, Xi was accompanied on the trip to JL MAG by Liu He, the vice premier who has led the Chinese side in the trade negotiations.
Why does China have a clear advantage in this area? Simple: the U.S. relies on China, the dominant global supplier, for about 80% of its rare earths imports.
The visit “sends a warning signal to the U.S. that China may use rare earths as a retaliation measure as the trade war heats up,” said Pacific Securities analyst Yang Kunhe. That could include curbs on rare earth exports to the U.S., he said.
Xi’s visit came just hours after the Trump administration on Friday blacklisted Huawei and threatened to cut it off from the U.S. software and semiconductors it needs to make its products. A spokesman for China’s foreign ministry told reporters Monday to “please wait and see” how the government and companies respond.
Of course, a Chinese export curb, or ban, would also cripple domestic producers, as domestic rare earth miners would be hurt, and likely need state subsidies, similar to US soybean farmers. But curbs could potentially help companies like JL MAG, which makes magnets containing rare earths that are used in products including electric vehicles and wind turbines.
Finally, to those looking to trade a potential rare-earth export ban, one place would be to go long the REMX rare earth ETF, which after hitting an all time high of $114 in 2011 during the first rare-earth “scare” during the China-Japan trade war, is trading some 90% lower as the market has all but discounted any possibility of a price spike.
Needless to say, should China lock out the US, the price of rare earths could soar orders of magnitude higher.
The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of this site. This site does not give financial, investment or medical advice.
Ouch, that’s going to sting.
Just call Canada, they have plenty of that rare earth!
They have plenty of those not so rare kidnappings, ehr – renditions too.
PS: Canada isn’t even in the top ten producers. https://www.statista.com/statistics/268011/top-countries-in-rare-earth-mine-production/
Is it mined in Canaduh or is it something the cheeseheads are siphoning off some other 3rd wrld cntry ?
Rare earths come mostly from Africa if I remember correctly and is a cruel industry to the native peoples.
I suppose you are joking with “plenty of that rare earth”!
If all else fails, exporting monuments to Ukrainian war criminals could be a real boost in trade for Trudeau.
Canada is feces way-station.
Like fuck they do, so keep telling yourself that ???????????????????????? and the TALIBAN aren’t going to let the United States of trailer parks steal it from them ????????????????????????????
There is a simple trick: they have to move a considerable chunk of JL MAG shares into the possession of Huawei. In that case, Americans are not allowed to buy anymore by their own regulations, as long as Huawei will remain blacklisted.
….and here I thought that 10% inflation under Jimmy Carter was a milestone.
Please China, please shut the US off. Let them find their own rare earth and while they are at it, let them build their own products.
Why do you think the Yanks aren’t leaving Afghanistan? The Yanks are still trying to liberate Rare earth and other resources from the Taliban.
Without rare-earth metals you can’t make ANYTHING high tech.
Simple solution. America just needs to start taking all of China’s phone scrap and recycling it. Sort of a reverse-garbage flow, like Ukrainian reverse gas.
Get the popcorn out folks .It will be very interesting.Trump must be tired of winning.LOL
Your move Trump.
His outstanding IQ will solve all problems and still have time left over for 16 holes on the green..
Assisting US manufacturers to obtain rare earths from China was my job. If China wants they can paralyze a great deal of the US high tech industry. And especially, defense and aerospace. There are no alternatives for most of these minerals. China even made it a point to secure the alternate sources for many of these minerals. As if they planned strategically to use the monopolies in negotiation. That would work if they were negotiating with rational players. But the B Teams just knows how to Double Down, LOL.
Tit for tat… Will China dare?
I hope so, it would be a very clever move by China.
This is going to be very interesting. The US is not accustomed to being stood up against.
Awesome! Let the whole stinking house of cards fall and burn it. Rare earths should be banned and farmers need to start feeding cows grass and stop growing nasty Monsanto/Bayer garbage crops.