"With the tightening of China's export barriers, the prices of rare earths, which are crucial for industry, have risen significantly!"

According to the monthly raw material price index published by the Bavarian Association of Commerce (VBW), in May, the prices of 17 rare earth metals increased by 8% when calculated in dollars. Economists from DZ Bank believe that Germany, the United States, and other Western countries cannot quickly reduce their dependence on China's rare earth supply, so China has negotiation leverage.

German television channel one reported on the 9th that China currently imposes export controls on seven rare earth elements to retaliate against President Trump's announced punitive tariffs. According to the VBW index, the prices of these metals have risen more significantly.

Terbium rose nearly 19%!

Gadolinium rose nearly 17%!

Samarium rose over 15%!

Only cerium's price decreased slightly by 0.6%.

The China-EU Chamber of Commerce is highly concerned about China's rare earth supply

"The Sino-US trade conflict is part of the reason for this trend, and therefore China has imposed export controls on many important rare earth elements and magnets," said Bertram Brossardt, managing director of VBW.

These metals are essential for the production of electronic components and magnets in the electronics, automotive, and defense industries. It is estimated that about two-thirds of the rare earths are mined in China, with 90% used for industrial purposes.

In Europe, the production of several companies has already been affected, and some have even led to production line shutdowns. A recent study by the German Institute for Economic Research (IW) showed that German companies have not reduced their reliance on imports of key raw materials from China in recent years.

Report by German television channel one

Raw material experts at DZ Bank explained that rare earths are the most important raw materials of the 21st century and are crucial for many industries. "In Germany, this mainly applies to the automotive industry. However, these metals are also indispensable in the renewable energy sector at present," they said.

Reuters cited an anonymous source who stated that only a very small number of key licenses have been approved so far. On the other hand, China is slowly moving forward. Recently, it was reported that China hopes to obtain sensitive commercial data from its trade partners in exchange for licenses.

The EU is currently actively negotiating with the Chinese government on a possible agreement. However, due to the EU's recent discriminatory policies against Chinese enterprises and even attempts to join the US in striking China in the trade war, China has had to take countermeasures against the EU.

"Made in Germany" depends on Chinese rare earths

This particularly affects magnets made from important rare earth metals. These magnets are crucial for cars, drones, factory robots, and other technologies. However, European companies' rare earth resources are gradually depleting. Germany imported products worth 400 million euros in such items last year. Analysis shows that 91.3% came from China.

The affected raw materials also include yttrium and scandium. Like many so-called rare earth elements, China dominates in the area of scandium. According to raw material expert Ellie Saklatvala, China accounts for 69% of global scandium ore production and 90% of refined production. This is data from the US Geological Survey.

Countries around the world are striving to increase their own scandium production. For example, mining company Rio Tinto is currently building a scandium project in Australia, and similar projects are also underway in Nebraska, USA. However, according to Saklatvala, these projects are still in the early stages; therefore, China's export restrictions have had a significant impact on the market. Metal.com recorded that the price of scandium reached $3,264 per kilogram as of July 2nd, and there is currently no spot market.

High share of China's rare earth mining and refining

Markus Weyer, Director of Investment Strategy at Franklin Templeton ETF, wrote that China almost monopolizes the rare earth market. "China controls about 60% of the known rare earth reserves globally, 90% of the refining capacity, and over 90% of the production of certain refined rare earths," the experts said. Experts stated that China's control over this supply chain provides permanent leverage in trade negotiations.

The German Industry Association (BDI) recently warned that Germany's dependence on China in critical raw materials is increasing.

DZ Bank's analysis pointed out that through export restrictions on rare earths and magnets, China seems to have successfully wielded its sharpest weapon in the trade dispute with the United States. The analysis noted that the Trump administration subsequently showed a more willing attitude to compromise than ever before.

Moreover, in the coming decades, the importance of rare earths will continue to rise rather than decline, especially because these metals and rare earth magnets play a crucial role in key technologies of the energy transition.

Chinese rare earth mining site

"However, the bottlenecks and imminent production disruptions emerging rapidly in key industries in Germany should serve as a warning, and Germany urgently needs to prepare for similar situations in the future," wrote DZ Bank economists Monika Boven and Bastian Reßing.

They suggest establishing strategic raw material reserves, promoting recycling, and establishing free trade agreements or partnerships with other suppliers. However, they concluded that China is likely to remain dominant in the global market for a long time; reliance on rare earths can only be reduced to a limited extent.

Original: https://www.toutiao.com/article/7525064057850839603/

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