Ann: Trading Halt, page-64

No chips, no rare earths

According to reports fromNikkeiovernight, China is now considering a rare earth export ban — a move that appears to be motivated by this chip war.

As the outlet reports:

‘Officials are planning amendments to a technology export restriction list, which was last updated in 2020.

‘The revisions would either ban or restrict exports of technology to process and refine rare-earth elements. There are also proposed provisions that would prohibit or limit exports of alloy tech for making high-performance magnets derived from rare earths.’

In other words, China is aiming to strangle Western tech efforts via their strong suit: rare earths…just as the US and its allies have done via limiting microprocessor technologies.

And if you’re unaware as to just how dominant China’s rare earth industry is, look at this infographic:

1	Source: Statista [Click to open in a new window]

As you can see, China is by far the top dog of rare earths mining. But it goes beyond that too...

When it comes to processing these minerals and producing the key magnets from them, they’re just as dominant. Up to 85% of all rare earths refining is done by China. As for making the magnets, they account for an even more astounding 92% of global output.

Suffice to say, China is by far the biggest miner, processor, and producer of rare earths products.

And now they may be about to cut the world off to strike back at this chip ban.

History repeats itself

Curiously, this isn’t the first time China has done this. As theNikkeiarticle notes, we saw a similar move from Beijing more than a decade ago:

‘China suspended exports of rare earths to Japan following tensions in 2010 surrounding the Japan-administered Senkaku Islands, which Beijing claims and calls the Diaoyu.

‘Japan specializes in making high-performance magnets from rare earths while the U.S. produces products that use the magnets. That episode led to a heightened sense of alarm in Japan and the U.S. on the economic security front.’

In fact, I’m sure Aussie investors may recall this event pretty well themselves.

Back in 2010 and 2011, this rare earths ban led to a huge market bubble.