Last month, the MMI Rare Earth Index (Monthly Metal Mining Index) fell a staggering 11.22%. Industrial production in China slowed down in January. This had a big impact on the index as China remains the source of many rare earth oxides. The Chinese source component of the index fell sharply as many countries looked for non-Chinese supplies of rare earths.
Withdrawal from China could lead to changes in the global supply chain for rare earths. At the moment, rare earth deposits in the US, Australia, Sweden and other parts of the world continue to attract the attention of mining companies seeking to increase the production of rare earth elements.
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Australian rare earth miner Northern Minerals made a big move last month with its largest shareholder China Yuxiao Fund. According to a recent article, Yuxiao Fund is looking to increase its stake from 9.92% to 19.9%, more than doubling its current stake. However, Yuxiao was unable to take this action without the approval of the Foreign Investment Control Board (FIRB), which usually blocks an increase in Chinese investment.
Chinese investment in Australia’s rare earth mining program continues to decline in the wake of the pandemic. Many experts believe that Australia plays a key role in reducing China’s control over the supply of rare earths. Australia ranks sixth in the world in rare earth reserves. However, Australia’s previous attempts to block Chinese rare earth investors have destabilized diplomatic relations between the two countries.
Myanmar, another country with huge reserves of rare earths, also accounts for most of China’s imports of rare earths. In 2021, this figure will reach approximately 60%. Not only is China still Myanmar’s largest trading partner, but about 17% of Myanmar’s entire economy depends on mining. In addition, the salaries offered by Chinese mining companies are well above the average income in Myanmar, which makes working in such projects very attractive. However, this ultimately contributed to China’s dominance in the rare earth game.
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Last month, MetalMiner announced the discovery of a major rare earth deposit in Sweden just above the Arctic Circle line. At the time, researchers rated the discovery as the largest deposit of rare earth elements in Europe. Many are wondering how this discovery will affect the global trade in rare earths.
However, the process of extracting rare earth elements is a long and tedious process. Therefore, the market cannot expect an immediate reversal. Swedish mining company LKAB said: “The process is slow and costly… this has always been a problem in the industry. So now we are trying to get the political system to understand that if they demand, what needs to be done and what needs to be achieved (environmentally and socially) High, and we have no problems.”
While the discovery is undeniably exciting, it won’t alleviate China’s urgent need to abandon its reliance on rare earths. However, the process has to start somewhere.
Tesla recently announced that the company will no longer use rare earth reserves to create new vehicles. The decision was made in part to reduce Tesla’s reliance on Chinese rare earths. As the name suggests, rare earths can become scarce and difficult to obtain. So instead of relying on rare minerals, Tesla plans to build vehicles built with rare earth-free permanent magnet motors.
Following the release of the news, stock prices of many Chinese rare earth companies fell. For example, shares of China Northern Rare Earth Group High-Tech Co Ltd fell 8.2%. The company specializes in the production and sale of refined rare earth elements for export from China. Meanwhile, JL Mag Rare-Earth Co. and Jiangsu Huahong Technology Co., two of China’s largest rare earth manufacturers, shut down as much as 7% of their Chinese production following the announcement.
If Tesla eliminates its permanent magnet motors from future production, the company will no longer need rare earths. But while the motor may be reliable, it also consumes more power. However, if Tesla can move away from rare earths, the move could prove beneficial.
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Post time: Mar-10-2023