China's monopoly on rare earths is shaky: opportunities for the West!

China's monopoly on rare earths is shaky: opportunities for the West!

There is currently a noticeable change in the global economy, especially when it comes to the so-called “black gold” of modern industry: rare earths. These critical raw materials are crucial to the production of numerous high-tech products and have applications ranging from electronics to defense. In a captivating geopolitical game, Western industry is also turning away from dependence on China, which controls almost the entire supply chain.

According to recent reports, how The Frankfurter Allgemeine Zeitung reports, the western sector is heavily dependent on Chinese rare earths. In 2019, during the trade conflict, China's President Xi Jinping cleverly exploited this dependence to demonstrate the country's influence in the global market. The US responded with high tariffs on Chinese goods, which was a bold starting point. But Western industry realized that it had to rethink.

The pressure on the markets

China controls nearly 70% of global mining and produces more than 90% of processed rare earths. These are not trivial numbers! How The German wave clarified, the German arms industry can look forward to supplies for the next five years, but a stable future does not only depend on current storage levels.

In recent years, people have not only been thinking about addiction, but also actively working on alternatives. Companies in Europe and the USA are expanding their production capacities for rare earths and magnets. Experts say optimism is evident in capital markets around the world as new deposits are discovered in countries such as Canada, Australia and Brazil. But will that be enough to break China's dominance?

The challenges at a glance

“There is something going on,” warn the economists. China's influence remains strong, and Western countries face major challenges. As the IEA reports, the high market concentration of rare earths poses a serious risk to global supply chains. This unsustainability is further reinforced by China's new export permit, which will present new hurdles for foreign companies from December 2023. All of these measures can be seen as a direct response to the restrictions on Chinese companies in the USA.

But restructuring the raw materials landscape will not be easy. Thomas Kümmer, an experienced resource industry expert, remains skeptical and emphasizes that China's price advantages and technical expertise in rare earth processing continue to represent a hurdle. According to his assessment, the US strategy to reduce dependence could fail because of its own refineries.

A competition for the future

The cards in this game have been reshuffled - and the cleanup of China's own environmental damage is estimated to cost around five billion euros. But as pressure mounts, the West is investing in developing new supply chains. However, diversification initiatives require a good hand in creating new mines, trained workers and, above all, economic incentives.

Time is of the essence and the next steps must be taken quickly to avoid remaining in the shadow of China's monopoly position. Whether the West can hold its own in this geostrategic race remains to be seen.