Analyses
28 sep 22

What keeps China ahead in the global rare minerals race?

The decades-long dominance of China over rare earth minerals has eventually started to come under increasing global competition. Yet, it is not only the volume of the minerals waiting to be dug but an audacious building and coordinating of the domestic infrastructure over a long time that puts China ahead. 

The missing years needed to boost global coordination and infrastructure is the main reason the U.S. and Europe are hectically investing in rare mineral areas. Both are undertaking a vast effort to build alliances and raise giant facilities to meet their needs in the future without dependence on China. But this will not be easy as Sustainability Chief at Northvolt, Emma Nehrenheim, says the challenge waiting ahead involves the whole ecosystem of mining, refining and chemical engineering, to the Financial Times

Before diving into China's decades-old rare mineral strategy, we should examine how the rivals are doing. 

The world looks at China for now

According to the U.S. Geological Survey (USGS), the global output of rare earth minerals doubled from 2016 to 2021 and reached 280,000 metric tons. Between 2008 and 2018, China exported around 408,000 metric tons of rare minerals, representing 42.3% of all rare earth exports in that period, the U.N. data says.

China's exports amounted to 42.3 per cent of all rare earth exports. According to China's General Administration of Customs, 87.8% of the 45,552 metric tons of rare earth mined in 2019 were exported to Japan (36%), the U.S. (33.4%), the Netherlands (9.6%), South Korea (5.4%) and Italy (3.5%). That year, lanthanum was on the list of most exported rare elements with 42.6% of the total export volume, a mineral mainly used in hybrid vehicle batteries. 

USGS figures say that as of 2021, the measured and indicated resources of rare earth estimated in the U.S. is 2.4 million tons and 15 million tons in Canada. To compare, Vietnam, the second richest country in rare minerals, has 22 million tons of reserves, while China is the global leader with 44 million tons. 

While Europe's reserves are way below these figures, a recent study by KU Leuven underlines the ever-increasing need for rare earth supplies to meet the E.U.'s goal of reaching climate neutrality by 2050. The paper lists the needed supply compared to current levels as follows: 

  • 35 times more lithium,
  • 30% more aluminium,
  • 35% more copper, 
  • 45% more silicon,
  • 100% more nickel
  • 330% more cobalt. 

According to the paper, the demand will peak around 2040, following a significant need for the recycling industry to keep up with the demand. Europe, trying to distance itself from China due to environmental and social issues related to mining and Russia due to the Ukrainian war, has ramped up efforts to meet the goals set in the European Commission's Action Plan on Critical Raw Materials, introduced in 2020. The plan is a roadmap Europe, and the U.S. is now trying to follow:

  • Developing resilient value chains for E.U. industrial ecosystems;
  • Reducing dependency on primary critical raw materials, 
  • Strengthening domestic sourcing of raw materials in the E.U.;
  • Diversifying sourcing from third countries, establishing a smooth international trade by fully respecting the E.U. 's international obligations.

Thus, we are seeing major investments and agreements in North America and Europe to catch up with China long-term and start the painstakingly huge development process as quickly as possible. Some recent and significant projects include:  

How is China doing it? 

The E.C plan for rare minerals simplifies what China has been doing for more than 20 years. Back in 1992, the former leader of the People's Republic of China, Deng Xiaoping, emphasized the importance of rare minerals and said China must fully use its advantage in this area. From 1985 to 1995, China's production surged from only 8,500 metric tons to almost 48,000 metric tons, increasing the global share in the rare mineral market to 60.1% from 21.4%. 

According to Statista, China has 37% of the world's rare earth reserves and holds 60% of the global rare mineral production and 85% of processing capacity, according to Brink. And it's not how much the exports earn but how much global influence they have on worldwide trade. The value of worldwide rare mineral imports totalled only $1.15 billion in 2019. During the 2019 fiscal year, iPhones sold by Apple totalled $142.4 billion, containing imported rare minerals. 

China has acknowledged its advantage early and, being the largest producer and processor of rare minerals in the last two decades, now aims to increase its influence on clean energy too. Out of the 17 rare minerals, neodymium, praseodymium, dysprosium, and terbium are on high demand, used in permanent magnets for E.V.s and wind turbines, which are at the core of E.U.'s zero-emission plans. 

China's strategy for mining and processing rare minerals was solidified in 2021, with the establishment of China Rare Earth Group Co., supervised by China's state assets regulator. The industrial conglomerate, which consists of Aluminium Corporation of China, China Minmetals Corporation, Ganzhou Rare Earth Group Co. and two research firms, holds almost 70% of China's rare mineral production volume. With this move, China aims to: 

  • Increase domestic competition and increase production,
  • Eliminate illegal activities in the domestic industry, 
  • Establish regulations to comply with environmental and labour issues, 
  • Increase global dominance in the rare-earth mineral market. 

Having an advantage in the most costly steps of rare earth production is the main reason China is dominant. China was not idle while the West was pursuing global projects and announced important moves, CATL's plan of building a massive gigafactory in North America being the most prominent.

In the long term, China will face several challenges in its global strategy. New emerging mining, processing and recycling companies will shift the balance in the supply chain. New technologies in EV batteries are expected to reduce dependence on main minerals, primarily lithium. And Chinese companies will have to deal with increasing environmental and labour regulations in the West. 

The rare-earth mineral wars are just getting bigger, it seems. 

The main image shows a lithium processing plant in Australia, courtesy of Shutterstock.

Authored by: Mufit Yilmaz Gokmen