China may restrict rare earth exports

China has been repeatedly rumoured to impose possible restrictions on rare earths exports. This has been seen as part of a further escalation of the trade dispute between the U.S. and China. Hanse data affirm U.S. dependence on China’s rare earths exports. Japan and France are shown to form part of the supply chain for rare earths between China and the U.S.

Rare earths represent a group of elements including europium, neodymium and ytterbium that share similar chemical properties. The elements are rare as they occur mostly as compounds and oxides and are very difficult and expensive to mine in large quantities. Rare earths are used for manufacturing among other flat-panel displays, permanent magnets, computers. China is by far the largest exporter of rare earths. Total value of rare earths (HS284690 Compounds, inorganic or organic (excluding cerium), of rare-earth metals, of yttrium, scandium or mixtures of these metals) exports from China was in 2016 US$231 million down from a high of US$1,852 million in 2011 amid a peak in rare earths prices. The largest rare earths mining operations and reserves are in China, Vietnam, Russia, Brazil and Australia. The U.S. acknowledges its high dependence on rare earths imports and recently embarked on a strategy to diversify its supply sources.

The largest export destinations for China’s rare earths exports are Japan, USA and Korea (Figure 1). The five counties with the largest share in China’s rare earths exports represent 79.1 percent of total rare earths exports in 2016. The countries with the fastest growing share in exports between 2011 and 2016 were the U.S., up from 14.3 percent in 2011, Korea, Netherlands, Vietnam, Spain.

Figure 1. China exports of rare earths
Share in exports, percent

U.S. imports of rare earths during the same time period came predominantly from China, representing 57.7 percent of total U.S. imports of rare earths. Among the countries with the largest shares in U.S. imports in rare earths are France and Japan, representing 17.6 percent and 5.4 percent of total U.S. imports in rare earths. Both countries are also large export destinations for rare exports from China and are not known to mine rare earths. In 2016, China exported US$18.9 million of rare earths to France and the U.S. imported US$15.9 million of rare earths from France.

China suspended temporarily rare exports to Japan in 2010. China seems to have indicated that it considers using its dominant position in rare earths trade as leverage in international trade relations. Supply chains as shown by France and Japan indicate that trade relations are more complex than simple bilateral trade relations suggest.