China's Power Over Rare Earths Is Not As Great As It Seems

In April, after the US slapped China with 54% tariffs, China began to restrict exports of seven rare earths. Lately, some shipments have resumed, but the West remains anxious.

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It does not look like the epicentre of a geopolitical earthquake. JL MAG's headquarters in Ganzhou, in southeastern China, features leafy streets, a running track and a football pitch. The factory blocks are painted a jaunty blue and white. The airy campus usually supplies China's BYD and America's Tesla, the world's two biggest manufacturers of electric cars, with magnets made from rare earths—obscure minerals with a big role in modern industry. Recently, however, China has restricted exports of JL MAG's wares and of rare earths more broadly, causing shortages that forced the idling of some factories and alarmed Western firms and governments.

Rare earths, a group of 17 elements with unique magnetic, luminescent and electrical properties, are vital to modern economies. Refined into powdered oxides and sintered into magnets, they can be found in consumer appliances such as mobile phones, vacuum cleaners and stereo speakers. Their use in data centres, in the generators of wind turbines and in the motors of electric cars—and also in the robots that assemble such things—makes them essential to booming industries. They are important to the defence industry (for jet engines, guided missiles and night-vision goggles) and to health care (for lasers and scanners).

As the world gets richer, greener and warier, demand for all these things is surging. Adamas Intelligence, a research firm, expects rare-earth consumption to more than double by 2035.

Rare earths are rare only in the sense that they tend to be found in very low concentrations and are chemically difficult to isolate. Their production, in contrast, is highly concentrated (see chart 1), with Chinese firms accounting for 69% of the ore dug up, over 90% of the refined minerals produced and nearly all of the manufacture of rare-earth magnets.