Under state control China regulates the export of rare earths

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The Chinese government decreed new regulations over the weekend to gain more control over the export of rare earths. In detail, it is about traceability from mining to processing of the elements. The raw materials belong to the state and are therefore now under state control.

China has significantly tightened its own measures for the control and regulation of rare earths. The regulations that have come into force state that all resources of the elements are state-owned and no person or organization has a claim to them. The Chinese state requires exporting companies to implement a comprehensive traceability system for the mining and processing of these raw materials, which allows the state to control the raw material flows. Thus, every gram of the elements should be traceable from the mining site to the end consumer. Prime Minister Li Qiang signed a corresponding decree over the weekend. This was announced by the state news agency Xinhua.

The rapid expansion of electric mobility in particular is driving the need for rare earths forward. The group of rare earths comprises 17 elements, including neodymium and dysprosium. China is the world's largest producer of these elements and controls about 70 percent of global extraction and processing. Rare earths, such as neodymium, dysprosium, and praseodymium, are known for their excellent magnetic properties. For example, neodymium increases the saturation magnetization, while dysprosium increases temperature stability.

The Chinese government emphasizes that these measures are intended solely to combat illegal trade and protect the environment. Critics, on the other hand, see it as an opportunity for China to further expand its market power and gain geopolitical advantages. The rules explicitly target exporting companies. These are to submit detailed reports on the quantities and goals of their exports with immediate effect.

An important point that is gaining importance again due to China's stricter export controls is the recycling of rare earths. The complex process is becoming a strategically important source of raw materials in light of rising commodity prices and dependence on exports. Investments in recycling technologies and infrastructures could thus bring not only economic but also ecological benefits. Unfortunately, the recycling of raw materials was neglected at the beginning of the need for rare earths, as these were still cheap. With rising prices, this could quickly change.

The impact on global markets will be significant due to the signed decree. Many countries and companies are heavily dependent on Chinese exports. A shortage of exports could lead to shortages and significantly drive up the prices of these raw materials. This in turn would increase the costs of many end products, which could affect consumers worldwide. Thus, Chinese products could continue to win in price competition, as the share of rare earths in electric drives makes up a large portion of the price. Therefore, the European Union and the USA have already taken measures to reduce their dependencies. Alternative sources of supply are being sought and projects to develop their own resources are being launched. However, these efforts are time-consuming and costly and will not be able to completely eliminate dependence on China in the short term. Moreover, other countries could also choose a similar path in the future to protect their own resources.

China's increased control over rare earths underscores the growing importance of raw materials for the global economy. The new regulations will likely have far-reaching impacts on the technology industry. Additionally, geopolitical effects cannot be ruled out. While China strengthens its position as a leading supplier, other countries must urgently develop strategies to reduce their dependency through recycling or products without rare earths. (mr)