Rare earths and the trade war

During 1987, Deng Xiaoping, the highest authority of the People’s Republic of China at that time, said “just as the Middle East has oil, China has rare earths” noting the importance that rare earths would have in the world economy and the strategic position that China planned to occupy.

This statement is crucial to understand the current state of these elements’ market and the role they are playing in the so-called trade war between the US and China. It explains how China has positioned itself as the almost unique producer of rare earth worldwide in 15 years. If at the end of the 80s the world production reached 40,000 tons per year – the US contributed about 30% – in 2002 it reached 100,000 tons, this time being China who dominated the market share with more than 95%. Today China continues to be the undisputed leader in the production, processing, and development of applications for these elements.

And, what are rare earths? What is it that makes them so strategic? The term refers to 17 chemical elements contained in the lanthanides group (15) and also includes the yttrium and the scandium. The earthy appearance of the main minerals that contain these elements is what gave them the nickname of “earth”, while they were defined “rare” not because of their scarcity (some are more abundant than gold) but because of the difficulty of finding them concentrated. Its strategic nature lies in its almost irreplaceable role for the manufacture of products, such as magnets, batteries, and alloys used in industries as diverse as the generation and storage of energy (wind turbines and solar panels), the arms one (jets and missiles), passing through mobile phones, and electric cars.  

This year, on May 21st, a week after the US announced measures against Huawei, Xi Xinping visited Ganzhou prefecture, Jiangxi province, a paradigmatic area in the extraction, processing, and refining of rare earths. As it was more than thirty years ago when Deng Xiaoping predicted the prominence of his country in a market that until then had no great prospects. In his recent visit, Xi made it clear to the world – especially referring to the total dependence on the USA – that China is completely self-sufficient in these strategic elements. 

With the sudden increase in the stock market valuation of rare earth producers, it is evident that the market started the search for solutions to minimize this dependence. In that context, does Chile have the potential to provide a solution? The answer seems to be affirmative. The Biolanthanides project in Concepción represents a competitive and concrete opportunity, considering the type of deposit discovered: rare earth in clays, with low production costs and in which the most valuable rare earths predominate. Another way, perhaps a longer-term one, is to evaluate the recovery of these elements from the tailings of the current national mining, taking as an example the contents of neodymium (essential in the manufacture of magnets) that exist in the tailings of Codelco’s El Teniente. 

It remains to see how the market will evolve worldwide and if Chile manages to participate in it in any way.