[Source/Observer Network Wang Yi] Two days after US President Trump announced the imposition of "reciprocal tariffs" on Chinese goods on April 2, China announced export controls on seven categories of heavy rare earth-related items. This move has caused great unease in relevant US industries, which lament that China's counterattack is precise and can be described as "striking at the heart of America's military industry".

"Will export controls or bans have a significant impact on the United States? Yes," said Daniel Pickard (Daniel Pickard), chairman of the US Trade Representative Office and the Commerce Department's Critical Minerals Advisory Committee, and head of the National Security Trade Business Group of Buchanan Ingersoll & Rooney law firm, expressing his concerns about the US rare earth supply after, he began to preach, "earnestly" advising China to quickly resolve the rare earth issue because continuous export disruptions "may damage China's international reputation," while ignoring various long-term US government suppression measures against China.

The New York Times reported on the 13th that China's export controls on rare earth metals and rare earth magnets have triggered panic among relevant US industries, who are worried that this may lead to shortages of these minerals and related products. The scale of emergency reserves for such events varies greatly among companies, making it difficult to predict the duration of production disruptions.

Michael Silver, chairman and CEO of American Elements, stated that they were informed it would take 45 days to issue an export license to resume rare earth metal exports. However, Silver noted that due to the geopolitical situation between China and the US, the company had increased its inventory last winter and could fulfill existing contracts during the waiting period for the license.

However, The New York Times pointed out that the supply of rare earths to military contractors is particularly concerning. James Litinsky, founder executive chairman and CEO of MP Materials, lamented, "Drones and robotics are widely regarded as future weapons of war, yet according to what we have seen, our key raw materials for future supply chains have been cut off."

Rare earth mine in Mountain Pass, California, USA - MP Materials

The newspaper also cited the example of China's seven-week rare earth export ban on Japan following the East China Sea collision incident in 2010, stating that some Japanese companies held enough rare earth inventory to meet over a year's supply, but still felt the impact of China's restrictions. US companies, unwilling to spend cash on stockpiling expensive raw materials, almost do not hoard them, so they may face greater impacts.

Paul Triolo, partner of consulting firm DGA-Albright Stonebridge Group, said that after China imposed export controls, US electric vehicle manufacturers are frantically searching for alternative supply sources. He pointed out that some companies might be forced to shut down within 30 to 60 days due to inventory depletion.

"It's like a big wind blowing," Triolo said. "Our clients are scrambling around looking for alternatives, but there are very few options."

In addition to military contractors and electric vehicle manufacturers already "complaining", the Observer Network Mind Observation Institute also noticed that China's control over the export of seven categories of medium and heavy rare earths will also have a significant impact on the high point competition of the lithography machine industry.

EUV lithography machines have become the most critical tool in America's technological containment of China, but not only does the US face the challenge of China's national efforts to overcome EUV technology, but also, the US itself is highly constrained by China's rare earth material supply when trying to advance lithography technology further. For example, industries are developing short-wavelength (6.X nanometer) laser plasma light sources, and their driving lasers, target materials, and collection mirrors rely heavily on rare earth materials monopolized by China.

The New York Times reported that this export control has negligible economic impact on China but could cause significant shocks to the US. The US not only faces stricter export controls from China but also, even if products containing these rare earth elements are approved to be shipped to the US, they still need to pay the latest tariffs on all Chinese products imposed by Trump at US ports. Although Trump exempted several consumer electronics products from tariffs late on the 11th night, five rare earth industry executives said that rare earth magnet exports were still blocked over the weekend.

By 2023, China produced 99% of the world's heavy rare earth metals, with a small amount coming from a refinery in Vietnam. However, due to tax disputes, this refinery in Vietnam has also closed. China produces approximately 90% of the world's refined rare earths, while Japan and Germany produce a small amount of rare earth magnets, but their raw materials depend entirely on China. Companies such as Lockheed Martin, Tesla, and Apple in the US also use rare earths from China in their supply chains.

Besides the large volume of rare earth supply, China also dominates global rare earth processing technology. MP Materials owns the only rare earth mine in the US, but two-thirds of the rare earths it mines need to be transported to China for processing.

The Wall Street Journal reported in March that China is the largest processor of rare earths, cobalt, copper, and many other metals globally, accounting for 85% of global rare earth refining production. The US exports approximately two-thirds of its rare earths to China, where companies process these minerals into rare earth magnets and then export them back to the US.

The US government is also exploring ways to revitalize its rare earth processing plants and rare earth magnet manufacturing facilities. In 2023, the US Department of Defense provided $258 million in financing to Australian Lynas Rare Earths to build a rare earth processing plant in Texas. However, nearly two years have passed, and construction has not yet begun, partly due to issues with wastewater treatment permits. The company may need to redesign the factory to obtain the permit.

In recent years, some Western countries, including the US, have been constantly seeking and building new rare earth supply chains in an attempt to reduce dependence on China for critical strategic resources. However, bypassing China, a major rare earth resource-rich country and producer, exporter, and consumer, to "go far out of the way" to piece together a new supply chain will inevitably bring more costs at every stage.

Morgan Bazilian, director of the Payne Institute at the Colorado School of Mines, said, "The midstream stage, which involves processing and refining minerals into chemicals and metals, is very important. This stage is dominated by China. Considering China's growth rate, I don't think they will lose their dominant position."

This article is an exclusive contribution by the Observer Network and cannot be reprinted without permission.

Original Source: https://www.toutiao.com/article/7493016888478564874/

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