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Rare Earths: China Causes Violent Capers

April 2021 | Market

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“The Panic Around Rare Earths is Back” is the title of Manager Magazine on February 18. (*) This is followed by a paper on the impact of China’s recent muscle games on the rare earth market. Once again, China’s Ministry of Industry and Information Technology has been thinking remarkably loudly in recent weeks about the introduction of new export restrictions or regulations for neodymium, terbium & co. The obvious objective: market power as a means of political pressure. After all, China still covers about 80 to 90 percent of the world’s rare earth needs. And it likes to use this power in a very targeted way to show the Western world who is in charge of this promising topic.

As a result, China can either scare or reassure global markets – and thus create fierce capers around the globe: supply chains are under pressure, manufacturers of smartphones, laptops, electric cars, and wind turbines are worried about replenishment for their productions, and the price trend for the coveted raw materials is volatile.

EU Must Reduce Dependency

The dependence of Western states on China’s rare-earth exports is correspondingly worrying. The German Commodities Agency (DERA) calls it an “alarm signal” in the Handelsblatt at the end of January that China now wants to legislate the administration of a single industry. And in the same article, Matthias Wachter, raw materials expert at the Federal Association of German Industry (BDI), calls for: “The Europeans to enable sustainable promotion and further processing through appropriate framework conditions.” (*)

This is now also the cause of the Ex-EU Commissioner Günther Oettinger. In a guest article in the Handelsblatt of 28 January, he warns: “China, as might be expected, is anything but simpeachous: with export quotas, Beijing controls the price of rare earths almost at will.” Given that rare earths play a major role, particularly in promising decarbonisation technologies such as e-mobility and wind power, Oettinger quotes the current Vice-President of the European Commission, Maros Sefcovic, who “rightly warns against swapping the reduction of dependence on fossil fuels for an even greater dependence on rare earths.” Oettinger’s conclusion: “Europe must significantly reduce its dependence on China through alliances, trade agreements and smart recycling strategies.” (*) Initiatives such as the European Alliance for Rare Earths, launched by the European Commission in September 2021, deserved all support.

Long-Term Investment Form

However, it will probably be many years before such initiatives actually bear fruit. Years in which China-controlled caprioles are expected on the market. For investors, this means above all: Rare earths are a long-term form of investment. Although the market is controlled by the traditional supply-demand system, it is in the meantime subject to political influence.

(* Translation by TRADIUM Privat)

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