Not only strategic minerals such as rare earths, but also the "export licenses" for related products will be re-examined. The Ministry of Commerce will serve as the central control center, accelerating countermeasures against U.S. tariffs. "Korean manufacturers have been complaining about the losses they have suffered."

Under the context of the prolonged U.S.-China tariff war, China is comprehensively re-examining export licenses for at least 2,000 types of goods to manage strategic minerals including rare earths. On the 13th, Beijing industry sources said that starting from April, the Chinese Ministry of Commerce not only re-evaluates the strategic value of mineral resources included in the export control list, but also re-assesses the related components, compounds, and technological products, imposing restrictions on exports. The clearly defined controlled export items are 12 types of rare earths and strategic minerals banned from export to the United States in February and April last year, as well as 700 goods on the list of dual-use items revised at the end of last year. As the review of "derivatives" of these goods has begun, the controlled items have increased to more than 2,000. A relevant person from the South Korean government stated: "Since China restricted the export of rare earths to Japan in 2010, it is restructuring its strategic mineral export system comprehensively after 15 years. Due to the reorganization of the mineral supply chain by China, Korean electronics and heavy machinery manufacturers have suffered losses due to the obstruction of essential raw material imports."

The core of China's large-scale consolidation of the mineral supply chain lies in "strengthening central control" and "expanding the range of controlled categories." China has established a tracking system covering the entire production process of minerals, and passed the "Regulations on Export Control of Dual-Use Items" at the end of last year, unifying the mineral export control center under the Ministry of Commerce. This move aims to improve control efficiency, with one department responsible for the export of strategic minerals. The range of controlled categories has also expanded to include essential items for global cutting-edge industries such as electric vehicles and batteries. In April this year, China announced export controls on seven rare earth elements (including samarium, gadolinium, terbium, dysprosium, yttrium, etc.), which are actually 100% mined and refined in China. This can be understood as selecting only the heavy rare earths essential for national defense industries and advanced technologies among the 17 rare earth elements.

China strictly controls the export of rare earths... Ford factory in the United States stops production, fighter jet production is also blocked

Due to the reorganization of the mineral supply chain, the number of cases where the export of commodities originally regarded as general industrial materials has been delayed has increased significantly. The Chinese customs suddenly interrupted the customs clearance procedures for minerals transported by export enterprises to countries such as South Korea and the United States, and the Ministry of Commerce required confirmation in written form of the "export compliance" of the relevant minerals. According to Beijing sources, since May, any electronic circuit components (semiconductor chips) or raw materials containing specific minerals, regardless of quantity, even if not listed in the regulatory list, will automatically become verification objects, resulting in frequent export blockages. The Financial Times (FT) reported: "Chinese customs have delayed the customs clearance of general metal products such as titanium rods and zirconium tubes, which are not officially regulated objects."

The Chinese mineral control is considered a means to respond to the U.S. measures restricting semiconductors, artificial intelligence (AI), and batteries. Data from the International Energy Agency (IEA) show that China accounts for about 70% of global rare earth production and 92% of refined and processed quantities. The U.S. Geological Survey (USGS) also stated that approximately 70% of the rare earth metals and compounds imported by the United States from 2020 to 2023 came from China. During the first term of President Trump, China did not implement measures to control rare earths in the U.S.-China trade war, but now that it has achieved results in advanced technology and supply chain self-sufficiency, it is seen as a step to strengthen its "mineral control power" against the United States without hesitation.

The ultimate goal of China's enhanced control over strategic minerals is to build a national management system, fundamentally preventing illegal mining and smuggling of strategic minerals. This is to avoid repeating the mistakes of the past when the restriction on rare earth exports failed due to smuggling issues during the dispute over the Diaoyu Islands with Japan in 2010.

Previously, starting from the 2010s, China began to merge rare earth companies on a large scale, achieving the emergence of large enterprises from mining to processing. Last year, the two companies "China Rare Earth" in the south and "Northern Rare Earth" in the north merged "Guangdong Rare Earth," monopolizing the share of mine mining and smelting and separation processes. In 2023, China introduced a "traceability system," requiring mineral export enterprises to report transaction records, customer information, and transaction volumes before exporting. Last year, China established a traceability system for the entire production process of rare earths. In February this year, China cracked down on the leakage of mineral-related technologies, and Chinese enterprises voluntarily stopped the export of "lithium extraction filtration devices."

The number of mineral types that China plans to control is rapidly increasing according to the strengthened national guidelines. The Ministry of Commerce is re-examining whether "derivative goods" listed on the export control list can be exported. For example, with samarium used in aviation motors, there are more than 200 kinds of components and compounds directly or indirectly related to it (according to HS coding standards). The Ministry of Commerce requires a reply on whether these goods can be exported before they can be exported.

Due to China's restrictions on the export of rare earths and other minerals, the American car company Ford temporarily stopped car production in May last year. "Rare earth magnets" are used in most major components, from the motor of the car's wipers to the braking system. The production of fighter jets by defense companies such as Lockheed Martin was also blocked for the same reason. With the partial paralysis of the global automotive supply chain, even U.S. President Donald Trump intervened to negotiate with China and reached a temporary agreement to lift the 6-month ban on rare earth exports.

While strictly controlling its own minerals, China is also purchasing large amounts of strategic minerals such as nickel, lithium, cobalt, and copper to expand its national reserves. According to a report by the British Financial Times, China has purchased 100,000 tons of nickel as national reserves since December last year. Usually, the annual reserve volume is about 60,000 to 100,000 tons, and the nickel reserves may double this year. Data from the research institution Benchmark Minerals Information show that in the next 10 years, 90% of the lithium mined in Africa will be owned by Chinese companies or come from mines invested in by Chinese companies.

Experts believe that the possibility of China completely cutting off the export of rare earths is very low. Because this would not only cause opposition from neighboring countries and major countries such as the United States, South Korea, Japan, and Europe, but could also lead to international pressure. About 95% of South Korea's mineral demand depends on overseas imports, and key minerals such as graphite (97% reliance on China), lithium (84%), and germanium (74%) used in the semiconductor and electric vehicle industries as main industries depend on China. The reorganization of China's mineral supply chain will inevitably have a direct impact on the South Korean industry. There are warnings that China's strengthening of mineral control may backfire. Bob Davis, former Beijing bureau chief of The Wall Street Journal, said: "The greater the pressure China exerts, the more it stimulates other countries to mine and produce rare earths, which could be harmful to China in the long run."

Rare Earths

17 rare metals with limited natural occurrence. They are the core materials for semiconductors, electric vehicle batteries, etc., and are called the "vitamins of high-tech industries." It takes more than 15 years to discover and produce rare earths, so they are difficult to commercialize in the short term. The International Energy Agency (IEA) predicts that rare earth demand will reach seven times the current level by 2040.

Original article: https://www.toutiao.com/article/7527152648068334131/

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