Explainer: Can the US take back some control of rare earths from China?
- Beijing, as the lowest cost producer, can lower prices to put emerging rivals out of business
China has retaliated against the United States’ imposition of up to 25 per cent tariffs on US$200 billion worth of Chinese exports, by slapping duties on US$60 billion worth of US products from June 1, including rare earth products.
One US company, MP Materials, is the primary target of these duties, which will be raised from the 10 per cent imposed in September. The company runs the US’s only commercial scale rare earth mining project, and relies on Chinese downstream processors to buy its products.
The case highlights the need for the US and other countries to diversify their supply sources for these strategic materials, ensuring a stable supply of the 17 elements critical to the manufacture of products ranging from electric vehicles to smartphones and cameras. China accounts for 90 per cent of the global supply of rare earth elements.
What is the cost of turning semi-processed concentrates into rare earth elements? Is it profitable?
Every producer has different production costs since each deals with a different mixture of rare earth elements depending on the content of their ore supply. In Baotou, northern China, where the world’s biggest and most competitive rare earth production base is located, rare earth oxides can be produced for US$7-10 per kilogram, according to rare earths and electric battery metals consultancy Adamas Intelligence.
Output here typically contains about 50 per cent cerium, 20 per cent lanthanum and 20-25 per cent praseodymium and neodymium. The remaining 5-10 per cent comprises other rare earth elements. The price of cerium and lanthanum oxides is about US$2 a kilogram, compared with US$45 for neodymium-praseodymium oxide. This means the bulk of profits come from the latter, a key magnet rare earth input material.