High Voltage: In 2010, China’s ‘weaponisation’ of rare earths sent prices into low orbit. Could it happen again?

Mining

20 hours ago | Reuben Adams

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• China is reportedly considering banning exports of various rare-earth magnet production and process/refining tech
• In 2010 a diplomatic row with Japan saw Beijing throttle REE exports under the guise of protecting the environment; prices went parabolic for a short period
• ASX REE stocks enjoyed a welcome boost on Tuesday

Our High Voltage column wraps all the news driving ASX stocks with exposure to lithium, cobalt, graphite, nickel, rare earths, manganese, magnesium, and vanadium.

China is reportedly considering banning exports of various rare-earth magnet production and process/refining tech in response to the US targeting its chip-making industry.

China is the world’s dominant miner, processor, refiner, importer and exporter of rare earths (REE) products, which are important in the production of many technologies we use today.

Neodymium and praseodymium (NdPr) are two REEs used in permanent magnets for electric vehicles and wind turbines, markets expected to drive a more than doubling in demand by 2030.

Caption: Demand for rare earths continues to grow for EV and wind energy markets. Source: Lynas Rare Earths Half Year 2023 Presentation

“[Chinese] officials are planning amendments to a technology export restriction list, which was last updated in 2020,” writes Nikkei Asia.

“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 all, there are 43 amendments or additions in the draft list first announced in December by the commerce and technology ministries.

“Officials have finished taking public comments from experts, and the changes are expected to go into force this year.”

Rare earths stocks on the ASX went for a run Tuesday in response.

Shades of 2010?

China played a similar card in 2010, when a diplomatic row with Japan saw Beijing throttle REE exports under the guise of protecting the environment.

NdPr prices skyrocketed, and ASX stocks followed suit.

Pre-production Lynas (ASX:LYC), for example, went from $700m market cap in 2008 to a peak around $4.2bn in 2011.

Prices substantially retraced from late 2011, as did share prices, again at China’s behest.

China’s power over REE pricing prompted the US and other jurisdictions to try build out REE supply chains of their own.

Progress has been slow, with China still accounting for around 60% of world supply of rare earths oxides. Importantly it also dominates REE separation, a black art poorly understood by the West.

For example, the only commercial rare earth separation operation in Europe belongs to TSX listed Neo Performance Materials, while Lynas has been selected to build one in the US by the Dept of Defence.

There could be fun and games coming for the REE sector if China becomes more combative, Far East Capital analyst Warwick Grigor says.

A welcome boost for REE prices

Chinese REE imports and exports have been strong, but prices have fallen at a similar rate to lithium in 2023.

The picture is of a market where demand is strong but sentiment is weak.

“The domestic rare earth mining quota has continued to increase steadily in 2023,” Shanghai Metals Market analysts said late March.

“At the same time, the imports of overseas rare earth also increased significantly.

“At the beginning of last week, under the influence of increasing inquiries, the transaction prices of rare earth picked up slightly.

“However, due to the weak downstream demand, most industry players were still pessimistic about the future market.”

Here’s how a basket of ASX stocks with exposure to lithium, cobalt, graphite, nickel, rare earths, magnesium, manganese, and vanadium is performing>>>

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