Where is the difficulty of rare earth countermeasures

    Statistics show that China's rare earth exports in July dropped 69.1 percent year on year to only 1,620 tons. China's total rare earth exports in the first seven months of this year were 22,736 tons, down 20.2 percent year on year.Gao Feng, a spokesman for the Ministry of Commerce, said the drop in exports was mainly due to the slowdown in production and operation of rare earth downstream enterprises since the beginning of this year due to the impact of the COVID-19 epidemic.Chinese enterprises conduct international trade in accordance with changes in international market demand and risks.Previously, some foreign media speculated whether the decline in rare earth exports was China's way of countering the United States. Some netizens have been discussing why we do not restrict rare earth exports as our countermeasures.

    As an important strategic resource, rare earth is very important to the development of high technology.China produces more than 80% of the world's rare earth products, and the US relies on China for 80% of its rare earth imports. Why have the rare earth products not been as counter-productive as some netizens expected?There are three possible reasons:

    First, rare earth prices have not risen.

    China's rare earth exports fell nearly 70 percent in July from a year earlier, but the price rise of about 10 percent was not as dramatic as expected, probably because demand for rare earths was curtailed by the outbreak, but also because of the impact of rare earth inventories.In general, rare earth demand is relatively small, easy to store, and the major demand countries have current reserves that are resistant to short-term risk.

    The trend in recent years is the same.Rare earth prices have been depressed in recent years due to severe oversupply.Since 2011, global rare-earth prices have surged several times, only to fall back a few months later.According to the Business Press rare Earth Price Index, the rare earth index stood at 380 on August 26, 2020, down 62% from the cycle peak of 1000 (2011-12-06) and up 40.22% from its low of 271 on September 13, 2015 (note: the cycle refers to 2011 to the present).This reflects a global surplus of rare earth production capacity.

    Second, our main advantage is low cost.

    Although rare earth is of high strategic value, its resource scarcity is not that high. In addition to China (37%), Brazil, Vietnam, Russia, India, Australia, the United States and other countries have abundant rare earth reserves.Relying on rare earth production as a strategic bargaining chip has short-term effect, but long-term effect is difficult.The technology of rare earth mining is not difficult to master. The main reason why the global supply of rare earth relies on China for a long time is that our cost is relatively low, including resource cost, labor cost and environmental cost.A sharp rise in rare earth prices would spur other countries to mine and boost international production quickly.Many historical examples, such as cobalt, illustrate this point.

    Finally, counteraction may force the United States to accelerate the development of its own and other countries' rare-earth industries.

    The United States has begun to promote its own rare earth industry and provide more support to its Allies.In may this year, the American senator cruz had a rare earth financing bill, hope to the United States mines developers and manufacturers offer tax breaks to buy its products, to help boost U.S. rare earth industry, will also require the U.S. defense department in all the weapons used in the United States of rare earth products, in order to get rid of the dependence on Chinese rare earth products.Australia's rare-earth mining and separation technology is also advancing rapidly, with U.S. support.It has been reported that Australia will establish a one-stop rare earth production system as early as 2024.The use of rare earths as a counter measure is bound to increase U.S. support and subsidies, or further distort market prices, which will be more detrimental to the long-term development of China's rare earths industry.

    To play a counter-role is an expectation of the society for rare earth resources, but for the rare earth industry itself, the more urgent task is how to think about the problem of rare earth mining from a long-term strategic perspective.At present the market capacity is loose and the price is low to provide the opportunity for the rare earth industry to consolidate further.In addition, we should deepen the reform of resource and environmental taxes so that relevant taxes can better reflect the environmental externalities of exploitation and resource scarcity.