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China tightens its grip on rare earths and gives Africa an opportunity

Editor's ChoiceChina tightens its grip on rare earths and gives Africa an opportunity

LONDON: China tops the list of countries when measured by the volume of production of REMs, producing in 2023 more than two thirds of the global rare earth mine output.

Last week Beijing declared that rare earth metals (REM) in China are the property of the state, warning that “no organisation or person may encroach on or destroy rare-earth resources”. The country’s State Council also announced that from 1 October the government would operate a traceability database to ensure that it has full control over the extraction, use and export of the metals. Why?

First of all, remember that this move follows a growing row between China and the US over the increasing numbers of cheap Chinese electric vehicles starting to flood the market. Last month the European Union announced tariffs of up to 48% on EVs made in China, including those manufactured by MG, Volvo and BYD, in a row over what the EU claims are unfair subsidies from Beijing. This action was the result of a probe launched last year by the European Commission that concluded European competitors were being harmed by Chinese subsidies which allowed manufacturers to keep their costs artificially low. China rejected the claim, arguing that its industry has flourished naturally.

REMs and EVs are inextricably linked, so it’s almost certain that these two events are connected. You can’t make electric cars without the use of many REMs. In fact, you can’t make a huge number of things without REMs. If you are reading this newspaper on a tablet or smart phone, you will be holding up to 16 REMs in your hand. Among many applications, REMs are used to make batteries and control systems in EVs, red lasers in precision guided missiles, signal boosters in trans-oceanic cables which make the internet possible, control rods in nuclear reactors, magnets in wind turbines and are even used in the treatment of lung cancer. The list goes on and on. This is why there is a brutal competition developing between the US, China, Russia and the EU over a small group of REMs on which their economies depend.

The curious thing about rare earths, those 17 chemical elements that over the past decade have become extremely sought after by every manufacturer, is that they aren’t rare. Discovered in the late 1700s, they are called “rare” because at the time no one had seen them before, and “earths” because they were characterised as non-ferrous metals—simply “earths”. Just about every country has some form of REMs somewhere in their subsoil, but it requires an enormous volume of rock to extract just a small amount of metal. Thousands of tons of material produces just a few kilos of REMs, so the challenge is to discover a sufficient concentration to make its mining economically possible.

China tops the list of countries when measured by the volume of production of REMs, producing in 2023 more than two thirds of the global rare earth mine output. In a distant second place was the United States, accounting for 12%, followed by Myanmar which produced 11%. Most of the latter came from Kachin, the state on the border with China, so was in effect the result of outsourcing by Beijing. Australia was fourth at 5% with India at just under 1%.

China’s dominance of the REM industry has been no accident. Years of research and industrial policy helped the country to develop a superior position in the market. Now China has the ability to control production and the global availability of these valuable metals. As a result, countries in the rest of the world are desperately searching for their own supplies, with the US and EU launching efforts to procure REMs both at home and abroad.

Because they occupy such a pivotal role in such a diverse array of items, demand for REMs is expected to grow exponentially in coming years. Also growing rapidly are concerns that China may use its dominant position in REM supply chains as political leverage. There are good reasons for such anxieties. Here’s one. In 2010, there were a number of territorial disputes between China and Japan over the sovereignty of the uninhabited islands known as Senkaku in Japan, Diaoyu in China and Tiaoyutai in Taiwan. This archipelago has been controlled by Japan since 1895 and is close to key shipping lanes and rich fishing grounds.

China acquiesced to Japanese sovereignty until 1970, when the existence of oil reserves surfaced and tensions between the two countries increased. It was at this time that Beijing issued a warning to Tokyo that it might withhold REMs as a form of leverage. Market dynamics, however, appear to have lowered the threat to Japan, but there remains the real danger that China will leverage its control of REMs to punish nations over current and future political disagreements.

These concerns increased at the end of last year, when in a response to moves by the US and Japan to reduce their reliance on Chinese suppliers, Beijing announced that there would be a ban on the exports of technology for REM mining, ore selection and refining, having already introduced export permits for chipmaking materials, gallium and germanium, months earlier. “This should be a clarion call that dependence on China for any part of the REM value chain is not sustainable”, screamed some western experts, calling for the US and its allies to establish alternative supplies to safeguard against potential geopolitical conflicts. Others took a more pragmatic view, arguing that as China has become a prominent manufacturer of environmentally-friendly products, such as electric vehicles, solar panels and advanced electrical networks, all of which has resulted in a surge in domestic demand for REMs, this has contributed to the country’s ability to export rare earths to other countries. In other words, Beijing is simply safeguarding its economic interests rather than punishing other countries.

Whatever the reason, there is little doubt that manufacturing countries must urgently seek alternative supply chains as their investments in the “green revolution” accelerate. Following its territorial dispute with China, Japan successfully shifted away from its dependence on China and instead increased its reliance on sources based in Australia. Although this created a more costly supply chain, Japan insulated itself from geopolitical dynamics and potential prohibitions from an unfriendly China.

The US and EU are also urgently seeking potential geographical sites for REMs. A report published in 2022 by the United Nations Economic Commission for Europe, argued that southern and eastern regions of Europe “exhibited considerable potential for REMs”. The problem, however, is that the extraction and processing procedures of REMs are hazardous and have an adverse environmental impact on the region where they take place. China built factories close to the mines, thus increasing the efficiency and lowering the production cost. However, the pollution resulting from REM mining poisoned the soil in a wide area around the mines which then became incapable of supporting crops. Worse still, Beijing discovered that the pollution from the mines not only contaminated valuable water supplies to local communities, but also threatened major cities downstream. The clean-up process is expensive and time-consuming, with some experts predicting that it could take 50-100 years for the environment to recover.

China’s new policy announced last week and the urgent needs for REMs by the US and EU open a window of opportunity for African countries whose potential for REM mining is largely untapped. Currently, the mining exploration budgets in sub-Saharan Africa are the second lowest in the world, but recently several rich deposits have been found which will likely stimulate further investment. These include the Songwe Hill rare earths mine in Malawi, which is expected to start production next year, the Lofdal heavy rare earth operation in Namibia, and South Africa’s Steenkampskraal mine, which has one of the highest grades of REMs in the world. Zambia and the Democratic Republic of the Congo are setting an example for other African countries by cooperating to build a regional value chain by manufacturing electric batteries using minerals found in both countries, rather than simply exporting ores and missing out on the benefits of local processing and manufacturing.

Africa’s landmass, mining potential and plentiful supply of cheap labour give its leaders a huge opportunity to leverage the search for new sources of rare earths in their countries. Thanks to China’s new policies on REMs, manufacturers of products requiring rare earths will in all likelihood now turn south to Africa. This will attract much needed revenue for many sub-Saharan countries to finance core socio-economic objectives and reduce poverty in the second-largest and second-most populous continent in the world.

John Dobson is a former British diplomat, who also worked in UK Prime Minister John Major’s office between 1995 and 1998. He is currently a visiting fellow at the University of Plymouth.

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