China, presently the top processor of rare earths in the world, took another step to preserve its hegemony in a number of vital metals on December 21 when it outlawed the export of technology for extracting and separating the metals.

China responded to steps by the United States and Japan to lessen their reliance on Chinese suppliers on Thursday by imposing limitations on the transfer of technology related to the production of rare-earth magnets and by banning exports of related technologies.

The restriction is anticipated to have the greatest effect on so-called “heavy rare earths,” where China has a stranglehold on refining, even though Western nations are beginning to step up their own rare earth processing plants.

In December 2022, the ministry of commerce asked for public feedback over the technology’s possible addition to its “Catalogue of Technologies Prohibited and Restricted from Export.”

Export ban and the retaliation by US

The United States and other nations are trying to create supply chains that are independent of China in light of growing concerns about economic security, which has led to the tightening of restrictions.

Japan is skilled in using metals to create strong magnets, and the United States employs these magnets in high-tech goods.

Technologies included to a list of technologies subject to export controls include those for the mining, processing, and selection of rare-earth ore. Exporting technologies for rare earth extraction, separation, and alloy production was already prohibited.

The most recent indication that the administration of President Xi Jinping is retaliating against US-led restrictions on advanced computer chip sales to Chinese businesses.

The list of goods on the technology export ban was reduced from 164 in the 2020 edition to 134 on Thursday, but in high-tech industries where Beijing and Washington are fighting for supremacy, more stringent technical criteria were placed.

The new regulations run the danger of escalating geopolitical conflicts for control of global supply chains for technology and resources between China, the US, and its allies. They will also highlight China’s control over significant portions of the world’s vital resources, which will be of importance to many in the west.

Much of the United States’ output of rare earth elements is sent to China for processing before being reimported. According to a Chinese research firm, it was China’s top trading partner for rare-earth imports and exports last year.

Numerous analysts interpret them as proof that Beijing is using its hegemony over international clean technology supply chains to retaliate against trade restrictions that have been tightened by the US President Joe Biden administration.

Washington’s powers have expanded under Biden, from supplying China with state-of-the-art semiconductor technology to progressively preventing Chinese manufacturers of electric vehicles and batteries from obtaining substantial government subsidies in the US.

Concerns about China’s excessive reliance on the country for rare earths and many other commodities and materials needed in clean technology have long been voiced by Washington and Brussels policymakers.

According to US data, non-Chinese production of rare earth oxides increased nearly fourfold to 90,000 tons over the seven years leading up to 2022 with strong government assistance. However, China has continued to dominate, increasing its own output to 200,000 tonnes.

China continues to dominate refining and processing, despite efforts by the United States to establish its own rare earth mines. Because of their influence on the environment, other nations such as the U.S. do not have enough refining facilities, and China has amassed technological knowledge in processing.

China’s Export of Rare metals

China’s contribution to the world’s production of rare earth elements decreased to about 70% last year from approximately 90% ten years ago, as per the U.S. Geological Survey.
The majority of the supply chain for rare earths, essential components for defense and sustainable energy goods, is under Chinese control.

The Chinese government has been exerting more control over vital resources in high-tech industries. Exporters of rare earth materials were required to disclose the kinds of metals they export and where they ship them starting in November. Exports of graphite, a material used in electric vehicle batteries, and gallium, a material used in semiconductors, now require prior clearance.

The embargo was put in place this year as Chinese authorities began demanding extra export licenses for elements like gallium, germanium, and graphite—materials essential to the production of technology and whose supply is mostly under Beijing’s control.

A Geo political war with the West?

In addition, the IEA predicted that during the two decades leading up to 2040, the world’s demand will rise up to seven times due to the shift away from carbon-intensive energy production and transportation toward cleaner power generation and electric vehicles.

The agency expressed concerns about how quickly the west might be able to detach itself from China’s vital mineral supply, noting that it usually took more than 15 years for countries to establish mining ventures from discovery to first production.

In August, it introduced export permits for germanium and gallium, two minerals used in chipmaking. On December 1st, it implemented similar rules for numerous types of graphite.
A set of 17 metals known as rare earths are utilized to create magnets that are employed in electronics, wind turbines, and electric vehicles (EVs).

Due to technological difficulties and pollution concerns, Western rare earth corporations have found it difficult to apply China’s sophisticated solvent extraction technology for refining vital minerals.

How much of the technology is truly being transferred is unclear. Since 2007, China has opposed exports, according to a rare earths specialist who wished to remain anonymous due to the delicate nature of the subject.

“Other nations possess separation technology, including the US, Japan, and France, but China has the top efficiency and cost advantage,” he said.
“China has the top efficiency and cost advantage, but other countries like the US, Japan, and France all have the separation technology,” the speaker stated.

According to consulting firm Benchmark Mineral Intelligence (BMI), China currently separates 99.9% of the world’s heavy rare earths, including dysprosium, which is utilized in permanent magnet motors for electric vehicles.
Neodymium and praseodymium (NdPr), two “light” rare earths, account for the majority of the processing capacity being installed in the West.

According to Mr. Daan De Jonge of BMI, “the impact of this ban will most likely be greater difficulty getting heavy rare earth separation capacity online outside of China.”

“You’re still very exposed to geopolitical shocks if you’re still relying on dysprosium from China, even if you have all the PrNd separated in Europe or the US as you want.”

What is yet to be seen is that if this is what the Chinese government is strategizing to over power the nuclear nations like U.S and Japan. Can this ban act as another step ahead in the escalating tensions between China and US?