‘Near universal monopoly’: China’s restriction on rare earths export raises concerns

Founder of Tolou Capital Management, Spencer Hakimian, said that China’s decision to escalate rather than deescalate is a “major problem”. He was speaking in context of Beijing putting seven rare earths on an export control list. 

“China choosing to escalate rather than deescalate. China has a near universal monopoly on rare earth minerals needed for essentially all modern manufacturing. This is a major problem,” he said. 

The trade war between China and the US has escalated, with President Donald Trump imposing 145 per cent tariffs on China, while President Xi Jinping imposing 125 per cent tariffs on the US. 

He asked whether the CFO of a Fortune 500 company would approve any new investment in a country as unstable as the US. So far, they have had announcements of a universal reciprocal tariff, which backed down to 10 per cent for a while, and then announced 50 per cent tariffs on Chinese, which increased to 90 per cent, 104 per cent, 125 per cent, and finally 145 per cent. “Electronics exempted. Electronics now potentially back on,” he said. 

President Xi Jinping, responding to the US's tariffs, urged Europe to work together, "China and Europe should fulfil their international responsibilities... and jointly resist unilateral bullying practices." He later also urged Vietnam: “The two sides should strengthen cooperation in production and supply chains.” Xi set out to visit Vietnam, Malaysia and Cambodia amid the tariff war. 

CHINA’S RARE EARTHS

The stoppage on rare earths began on April 4 when Beijing imposed controls on these materials, which are crucial for the defence, energy, and automotive sectors. This move is part of China's response to tariff increases on its goods by U.S. President Donald Trump.

Chinese exporters now face a lengthy wait for government licenses from the Ministry of Commerce, a process that can take from six weeks to several months. Last month, Reuters reported a halt in antimony exports to the European Union after China added it to a control list in September. 

China accounts for around 90 per cent of global rare earth production, and these restrictions highlight Beijing's ability to leverage this control, potentially disrupting supplies worldwide.

The constraints might also prompt international buyers to seek alternatives outside China, though this shift could be a slow process. Some Chinese sellers have already declared force majeure on contracts with foreign buyers, analysts noted. Cargoes awaiting shipment at ports are not allowed to leave unless they have cleared customs.