China and the United States, the world’s top two economies, have been crossing swords with each other for a while now as trade talks have apparently stalled even as US President Donald Trump has hiked tariffs on USD 200 billion in Chinese goods earlier this month and blacklisted telecoms giant Huawei. Beijing has blamed the US of ‘naked terrorism’ as it ramps us its rhetoric on the trade war.
But there are increasing concerns within the international community that China might use its dominant position as a supplier of rare earths for leverage in the trade war. Rare earth elements are used in a wide range of consumer products, from iPhones to electric car motors, as well as military jet engines, satellites and lasers.
What are rare earths and where do they occur?
These are a group comprising of 17 elements – lanthanum, cerium, praseodymium, neodymium, promethium, samarium, europium, gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium, lutetium, scandium, yttrium – that appear in low concentrations in the ground.
While they are more abundant, they are difficult and costly to mine and process cleanly. China hosts most of the world’s processing capacity and supplied 80 per cent of the rare earths imported by the United States from 2014 to 2017. Data from the US Geological Survey showed that in 2017, China accounted for 81 per cent of the world’s rare earth production.
Rare earths are also mined in India, South Africa, Canada, Australia, Estonia, Malaysia and Brazil.
What are rare earths used in?
Rare earths are usually used in rechargeable batteries for electric and hybrid cars, computers, advanced ceramics, DVD players, wind turbines, catalysts in cars and oil refineries, monitors, televisions, lighting, lasers, fiber optics, superconductors and glass polishing. Several rare earth elements, such as neodymium and dysprosium, are critical to the motors used in electric vehicles.
Are rare earths also used in military equipment?
There are some rare earths that are essential in military equipment like jet engines, missile guidance systems, antimissile defense systems, satellites, as well as in lasers. For instance, Lanthanum, a rare earth material, is needed to manufacture night vision devices.
As per a 2016 report from the congressional US Government Accountability Office, accessed by Reuters, the US Defense Department accounts for about 1 per cent of US demand, which in turn accounts for about 9 per cent of global demand for rare earths.
Which are the companies most reliant on Chinese supplies?
Companies like Raytheon Co, Lockheed Martin Corp and BAE Systems Plc all make sophisticated missiles that employ rare earths in their guidance systems, and sensors.
Apple Inc, for instance, uses rare earth elements in speakers, cameras and the so-called “haptic” engines that make its phones vibrate. The company told Reuters that elements aren’t available from traditional recyclers because they are used in such small amounts they cannot be recovered.
How are rare earths affected by US tariffs?
As per the latest information, the US has has exempted rare earths from tariffs on Chinese goods.
(With inputs from Reuters)