As China’s economy has developed over the last several decades, its leaders have sought to transform the country into a key player in strategically important industries. Toward this end, Beijing has established China as the dominant global supplier of rare earths, a collection of 17 minerals that are indispensable to the manufacturing of smartphones, electric vehicles, military weapon systems, and countless other advanced technologies.
Beijing has demonstrated a willingness to leverage its weight in the global rare earth industry in pursuit of its political objectives, raising alarm bells in several major countries. However, China’s influence within the industry is likely to be eroded in the coming years as changing market dynamics empower new actors to compete.
The Global Marketplace for Rare Earths
The global rare earths trade is relatively small compared to other commodities. In 2019, the value of worldwide rare earth imports stood at just $1.15 billion – a fraction of the more than $1 trillion in global crude oil imports. The total value of goods produced using rare earths, however, is immense. Each Apple iPhone, for example, relies on multiple rare earth elements. Neodymium is used to make tiny, yet powerful, magnets that allow iPhone speakers to function. Europium is used in trace amounts to produce red colors on screens, and cerium is used to polish the phones during the manufacturing process. During the 2019 fiscal year, Apple sold $142.4 billion worth of iPhones.
Despite their name, most rare earth elements are relatively abundant. The process of mining rare earths and transforming them into usable materials is, however, expensive and damaging to the environment. For years, Beijing exploited its relatively low-cost labor force and lax environmental laws to gain a competitive edge in the global market and become the leading supplier of rare earths. From 2008 to 2018, China exported nearly 408,000 metric tons of rare earths, which amounted to 42.3 percent of all rare earth exports over the period. The United States was the second-largest exporter, supplying roughly 9.3 percent of the global total. Malaysia (9.1 percent), Austria (9.0 percent), and Japan (7.1 percent) rounded out the top five.
According to China’s General Administration of Customs, China exported 45,552 metric tons of rare earths worth $398.8 million in 2019. The vast majority of these exports went to the world’s major economic and technological powerhouses. About 36 percent (by volume) went to Japan, making it the top destination of Chinese rare earths. The US was a close second, taking in 33.4 percent of Chinese exports. Alongside the Netherlands (9.6 percent), South Korea (5.4 percent), and Italy (3.5 percent), these five countries imported a combined 87.8 percent of China’s rare earth exports.
|Breakdown of Global Rare Earth Exports (2008-2018)|
|Share (%)||Export Value|
(millions of US$)
|Rest of World||223,172.7||23.2||4,467.7||25.5|
|Source: UN Comtrade Database|
At 42.6 percent of total exports by volume, lanthanum was China’s top rare earth export by a wide margin. Lanthanum is used in significant quantities in hybrid vehicle batteries. Each Toyota Prius, for instance, contains some 10-15 kilograms (kg) of the substance. Terbium, which is significantly more expensive, was China’s top export by value, accounting for roughly 14.5 percent ($57.9 million) of the country’s total exports in 2019. Terbium is primarily used in solid-state electronic devices but is also used in sonar systems and television screens.
China’s Push to Dominate the Rare Earth Industry
China’s dominance in the rare earth industry is the result of decades of targeted industrial policies aimed at leapfrogging other nations. In recent years, Beijing has also looked to reform China’s rare earth industry to enhance efficiency, better protect the environment, and crack down on illegal mining.
The Chinese government took major steps to support its nascent rare earth industry by issuing export tax rebates in the mid-1980s. The rebates lowered costs for Chinese mining companies, which allowed them to gain a foothold in the global market. From 1985 to 1995, China’s rare earth mining production exploded from just 8,500 metric tons to roughly 48,000 metric tons, and its share of global mining output widened from 21.4 percent to 60.1 percent.
The original article contains well made interactive graphs.