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China’s Rare Earths ‘Slump’ A Sign Of Domestic ‘Hoarding’ For EV Batteries, And More
Jan 17, 2021,08:30am EST|77 views
China loves to be in everybody’s strategic supply chains. Rare earths is one of them. These are the minerals, often dug out of mines in Africa, that China controls. They go into your iPhone. They go into the Panasonic battery that powers your Tesla TSLA -2.2%.
China’s rare earth exports fell to 35,448 tons last year from 46,330 tonnes in 2019, customs data showed on Thursday. China blamed the pandemic for weak demand. The 2020 exports were the lowest since 2015, according to Reuters.
But there may be more to it than the pandemic. For those China watchers, and competitors, looking for tears in the fabric, the slump has a little less to do with the pandemic than Beijing may be letting on.
“We are seeing the unfolding of the Chinese Communist Party’s Made in China 2025 and Belt and Road initiatives,” says Pini Althaus, CEO of USA Rare Earth. Both policies have been strategies for China’s continued dominance as a global manufacturer and exporter of finished goods. This strategy is leading to an increase in local demand for rare earth metals, from lithium to cobalt.
Last month, China’s export control law (ECL) went live. It’s their latest effort to control the export of strategic commodities — including minerals used for EV batteries — and to increase dependency on China by ‘hoarding’ supply.
Many of the minerals China does get outside of his borders are mined by state-owned enterprises who then bring the raw materials home to be processed into usable metals for manufacturing. As these Chinese state-owned companies operate at a loss, for the most part, they serve the purpose of being able to supply end-users with cheap resources.
China controls around 86.5% of the Democratic Republic of Congo’s cobalt exports and their SOEs own most of them, according to business intel conducted by Horizon Advisory. The DRC is home to around 60% of the world’s mined cobalt, for example. There are at last 12 mines of cobalt in that country and China’s companies invest in and own them all. China Non-Ferrous Metal Mining Group is the biggie in this space there.
China is also stockpiling rare earths and critical minerals for its own domestic use, as companies and governments face worldwide shortages due to new demand for electric vehicles. China is on par to totally own that market. The more of those metals in China’s control, the higher the price for batteries, making it cheaper to make them in China than in Detroit, for example, where South Korea’s LG Chem is making batteries for the new line of Ford battery-powered trucks.
Emily de La Bruyère, co-founder of Horizon, says China “has a large enough market share in rare minerals like lithium that it can have an outsized impact on pricing.”
Two of the world’s largest battery makers are Chinese — BYD and CATL. Tesla is now developing batteries with CATL at its Gigafactory in Shanghai, the Tesla hub for China, Asia and exports bound for Europe.
The customs data released and reported by Reuters on Thursday showed that in 2020, China exported the fewest rare earth elements in five years, falling by more than 25% from 2019 as China is using more of that resource to crank up its own base supply. Most of it is likely going to chipmakers and battery makers.
“This decline is a harbinger of a tightening of the market, limiting global access, increasing prices and enabling China to maintain dominance (in the space),” says Althaus.
In 2010 when China entirely cut Japan off from rare earth exports as part of a dispute in the South China Sea, the U.S. and Japan took its case to the World Trade Organization.
China was forced to resume exports to Japan.
But reductions today, whether partly due to Covid or not, can be chalked up as China gearing up for a mad rush for EVs and wanting to produce all the batteries it can, or own the metals that the likes of Panasonic and LG Chem — both market leaders — will need to make high powered car batteries.
Withholding exports for internal use will not be regarded by the WTO as a breach of international trade laws. China is now a net importer of rare earth materials though they are mostly importing from mines they own outright in southeast Asia and Africa or have large investment positions.
The U.S. is way behind the eight ball on this issue, though the Department of Defense is worried that some of the rare earths that go into making magnets for fighter jets are highly dependent on China.
There are several rare earth deposits located within U.S. USA Rare Earth owns one of them. Their Round Top Project in Hudspeth County, Texas, has some of those minerals used in car batteries, including lithium, as well as metals used in defense contract projects for things like magnets.
MP Materials’ mine in Mountain Pass, Calif., is the only operational rare earth mine in the United States. But all of its minerals are offloaded to China. The mine used to be majority-owned by the Chinese, and now it still gets nearly everything that is pulled out of the ground there.
With China supplying about 80% of rare earths to the United States as of 2018, the Trump Administration set a goal in 2018 to move some of the supply chain of rare earth metals the U.S., especially for defense-related product lines.
With the Biden Administration taking the helm this week, interest in rare earths is taking off as a play on his commitment to strong environmental policy. Center to this is the growth in EVs, of course.
The VanEck Rare Earths Strategy (REMX) is up 87% since March, but most of that has come since November 9. It’s been a rocket ever since. Nearly everything in it is Chinese. The only American company in the top 10 is Lithium Americas. Three others are Australian. The rest are from China.
The U.S. is just way behind on the natural resources required to power Tesla’s and the new battery-powered Hummer. The battery may be made here, but the metals that go into it are dependent on China. No China metals, fewer EVs.
“No one project and no one company is going to end this dependence on China,” Althaus says. “Collaboration is required between the rare earth mining and processing companies themselves, as the demand for these materials will far outweigh what any one project will be able to provide. To succeed, we have to approach this with a united front, with the government supporting companies that are investing in the critical minerals sector.”
www.forbes.com
Jan 17, 2021,08:30am EST|77 views
China loves to be in everybody’s strategic supply chains. Rare earths is one of them. These are the minerals, often dug out of mines in Africa, that China controls. They go into your iPhone. They go into the Panasonic battery that powers your Tesla TSLA -2.2%.
China’s rare earth exports fell to 35,448 tons last year from 46,330 tonnes in 2019, customs data showed on Thursday. China blamed the pandemic for weak demand. The 2020 exports were the lowest since 2015, according to Reuters.
But there may be more to it than the pandemic. For those China watchers, and competitors, looking for tears in the fabric, the slump has a little less to do with the pandemic than Beijing may be letting on.
“We are seeing the unfolding of the Chinese Communist Party’s Made in China 2025 and Belt and Road initiatives,” says Pini Althaus, CEO of USA Rare Earth. Both policies have been strategies for China’s continued dominance as a global manufacturer and exporter of finished goods. This strategy is leading to an increase in local demand for rare earth metals, from lithium to cobalt.
Last month, China’s export control law (ECL) went live. It’s their latest effort to control the export of strategic commodities — including minerals used for EV batteries — and to increase dependency on China by ‘hoarding’ supply.
Many of the minerals China does get outside of his borders are mined by state-owned enterprises who then bring the raw materials home to be processed into usable metals for manufacturing. As these Chinese state-owned companies operate at a loss, for the most part, they serve the purpose of being able to supply end-users with cheap resources.
China controls around 86.5% of the Democratic Republic of Congo’s cobalt exports and their SOEs own most of them, according to business intel conducted by Horizon Advisory. The DRC is home to around 60% of the world’s mined cobalt, for example. There are at last 12 mines of cobalt in that country and China’s companies invest in and own them all. China Non-Ferrous Metal Mining Group is the biggie in this space there.
China is also stockpiling rare earths and critical minerals for its own domestic use, as companies and governments face worldwide shortages due to new demand for electric vehicles. China is on par to totally own that market. The more of those metals in China’s control, the higher the price for batteries, making it cheaper to make them in China than in Detroit, for example, where South Korea’s LG Chem is making batteries for the new line of Ford battery-powered trucks.
Emily de La Bruyère, co-founder of Horizon, says China “has a large enough market share in rare minerals like lithium that it can have an outsized impact on pricing.”
Two of the world’s largest battery makers are Chinese — BYD and CATL. Tesla is now developing batteries with CATL at its Gigafactory in Shanghai, the Tesla hub for China, Asia and exports bound for Europe.
The customs data released and reported by Reuters on Thursday showed that in 2020, China exported the fewest rare earth elements in five years, falling by more than 25% from 2019 as China is using more of that resource to crank up its own base supply. Most of it is likely going to chipmakers and battery makers.
“This decline is a harbinger of a tightening of the market, limiting global access, increasing prices and enabling China to maintain dominance (in the space),” says Althaus.
In 2010 when China entirely cut Japan off from rare earth exports as part of a dispute in the South China Sea, the U.S. and Japan took its case to the World Trade Organization.
China was forced to resume exports to Japan.
But reductions today, whether partly due to Covid or not, can be chalked up as China gearing up for a mad rush for EVs and wanting to produce all the batteries it can, or own the metals that the likes of Panasonic and LG Chem — both market leaders — will need to make high powered car batteries.
Withholding exports for internal use will not be regarded by the WTO as a breach of international trade laws. China is now a net importer of rare earth materials though they are mostly importing from mines they own outright in southeast Asia and Africa or have large investment positions.
The U.S. is way behind the eight ball on this issue, though the Department of Defense is worried that some of the rare earths that go into making magnets for fighter jets are highly dependent on China.
There are several rare earth deposits located within U.S. USA Rare Earth owns one of them. Their Round Top Project in Hudspeth County, Texas, has some of those minerals used in car batteries, including lithium, as well as metals used in defense contract projects for things like magnets.
MP Materials’ mine in Mountain Pass, Calif., is the only operational rare earth mine in the United States. But all of its minerals are offloaded to China. The mine used to be majority-owned by the Chinese, and now it still gets nearly everything that is pulled out of the ground there.
With China supplying about 80% of rare earths to the United States as of 2018, the Trump Administration set a goal in 2018 to move some of the supply chain of rare earth metals the U.S., especially for defense-related product lines.
With the Biden Administration taking the helm this week, interest in rare earths is taking off as a play on his commitment to strong environmental policy. Center to this is the growth in EVs, of course.
The VanEck Rare Earths Strategy (REMX) is up 87% since March, but most of that has come since November 9. It’s been a rocket ever since. Nearly everything in it is Chinese. The only American company in the top 10 is Lithium Americas. Three others are Australian. The rest are from China.
The U.S. is just way behind on the natural resources required to power Tesla’s and the new battery-powered Hummer. The battery may be made here, but the metals that go into it are dependent on China. No China metals, fewer EVs.
“No one project and no one company is going to end this dependence on China,” Althaus says. “Collaboration is required between the rare earth mining and processing companies themselves, as the demand for these materials will far outweigh what any one project will be able to provide. To succeed, we have to approach this with a united front, with the government supporting companies that are investing in the critical minerals sector.”
China’s Rare Earths ‘Slump’ A Sign Of Domestic ‘Hoarding’ For EV Batteries, And More
Is China about to send the cost of EV batteries to the moon?
www.forbes.com
