The dominant position of China in rare earths is a direct result of decades of strategic planning and state-backed acquisitions (Al Jazeera)

Chairman of China Rare Earth Group Dongfang Nonferrous Metals Co., Ltd. boasted about China's leading position in the rare earth industry, and insisted that the attempts by the United States, Europe, and Japan to weaken Beijing's control are destined to fail.

He said in an interview with the Financial Times: "Our technological advancements will enhance China's ability to set rare earth prices. In the foreseeable future, the international market will still rely on China's supply chain."

This statement is not baseless; it is a reality accumulated over decades of government planning and strategic acquisitions, making China the most capable participant in controlling every link in the value chain from mining to magnet manufacturing.

As global demand for these important minerals continues to grow (from smartphones to electric vehicles and fighter jets), rare earth conflicts are becoming one of the most significant frontiers in economic and geopolitical competition between Beijing and the West.

Beijing's low-price policy is not only a trade strategy but also a carefully designed means to prevent any potential competitors from entering (Reuters)

High Dependence on China

The Financial Times explained that the US, Europe, and Japan are desperately trying to establish alternative supply chains, but the reality shows that these countries are almost entirely dependent on China, which accounts for 70% of global mining, 90% of separation and processing, and 93% of the magnet industry share.

The newspaper stated that these figures make it extremely difficult to break Beijing's control, especially because Beijing has kept prices at a sufficiently low level to prevent any new competitors from entering.

The newspaper cited Ursula von der Leyen, President of the European Commission, who said that China follows a "dominance and dependence" model that forces competitors to go bankrupt. The paper also noted that Beijing uses export restrictions as leverage against Washington while continuing to strictly manage mineral flows to prevent any external hoarding.

Roots of Control and Exclusionary Policies

China's advantage can be traced back to the 1990s when the mining industry boomed, benefiting from relaxed environmental regulations. At that time, Chinese leaders had a famous saying: "The Middle East has oil, and China has rare earths."

State-owned enterprises such as China Nonferrous Metal Industry Corporation and Beijing Sanhuan New Materials also acquired General Motors' Magnequant magnet division and its Indiana factory in 1995, followed by the acquisition of France's UGIMAG rare earth division.

By 2004, the US production lines were closed, workers were laid off, and equipment was shipped to factories in Tianjin and Ningbo, China.

John Omerod, a magnet industry expert, told the Financial Times that competing with China is impossible. "Clients go to China for quotes, then ask you to provide the same quote, which is simply impossible," he said.

By 2010, the last two US magnet companies went out of business, and Japan began stockpiling metals and recycling Toyota Prius batteries, among other products.

Low Prices and Continuous Investment

Although the low-price policy has squeezed profits of Western companies and even some private Chinese companies, state-owned enterprises continue to invest and expand.

The Financial Times explained that this policy has given Beijing a huge scale and technological advantage, especially in processing businesses, which are prohibited from being exported.

"They are not reducing production to raise prices, but rather using their dominant position to maintain the ability to use these resources as an economic weapon," said Grace L. Baskaran, an expert at the Center for Strategic and International Studies. "This is not just about rare earths; this model is repeating itself in other commodities."

Omerod emphasized, "It is impossible to reach the price level of China. Magnet buyers must accept a premium higher than the so-called Chinese price."

Meanwhile, Gareth Hitchen, founder of Technology Materials Research, expressed doubt about whether Western countries could find alternative demand for expensive magnets. "Most Western companies have always been driven by the pursuit of the lowest cost, regardless of the price. If there is a cheaper alternative, why would they buy a more expensive product?" he asked.

Full control over mining, processing, and magnet manufacturing gives China extraordinary supply chain control (Reuters)

Future Challenges

The Financial Times pointed out that the G7 announced in June this year its intention to establish a unified standard mechanism, while Washington took further steps in July by promising to double the price of neodymium brazing metal for MB Materials, a company based in Las Vegas, and committed to purchasing all output from a future magnet factory. However, facing market realities, these efforts remain limited.

The newspaper concluded that China not only won the rare earth race but also set a "strategic trap" for the West. The fundamental dilemma lies not only in building new mines or modernizing factories but also in dealing with China's economic model supported by the state, which can withstand temporary losses to gain long-term control.

Therefore, the West faces a difficult choice: either continue relying on the low-cost Chinese supply chain, or fund more expensive domestic and foreign alternatives, thereby burdening businesses and consumers.

According to the Financial Times, this fragile balance makes decoupling from China costly and possibly unachievable in the short term, thus giving Beijing a strategic advantage at the core of the global economy.

Sources: Financial Times

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