As tensions between the U.S. and China escalate, the spotlight is increasingly on rare earth elements and critical minerals essential for various technologies and industries. Recent disruptions in Myanmar, where armed rebels took control of a key mining center on October 23, 2024, have led to significant supply challenges. This turmoil is expected to consolidate gains in rare earth prices, as China imported 31,000 tonnes of rare earth oxide from Myanmar in the first nine months of 2024, highlighting the country's dependency on this source. [3b06758c]
In a related development, the U.S. economy could face a staggering $3.4 billion loss if China enforces a total ban on gallium and germanium, according to a report by the United States Geological Survey (USGS) published on November 20, 2024. China supplies 60% of the world's germanium and has already implemented export licensing controls on these minerals in 2023. The semiconductor manufacturing industry would be the most affected, accounting for over 40% of the total projected loss. [10c121d7]
China dominates the global rare earth market, controlling 90% of processing capacity and 60% of production. In response to the ongoing geopolitical tensions, the Chinese government has set upper limits for rare earth mining output at 135,000 tonnes and smelting at 127,000 tonnes, while also banning the export of rare-earth-extraction technologies. These measures are part of China's broader strategy to maintain its dominance in the sector amid increasing scrutiny from the U.S. [3b06758c]
The U.S. has been actively responding to these challenges. In recent discussions, presidential candidate Donald Trump threatened to increase tariffs on Chinese goods by 60%, while Vice President Kamala Harris is likely to maintain current tariff levels. This reflects the ongoing trade tensions and the U.S. government's efforts to secure its supply chains for critical minerals. [3b06758c]
In 2022, the U.S. designated 50 minerals as critical to its economy and national security, with China being a major supplier. The U.S. Department of Defense has allocated $439 million since 2019 to boost domestic production of rare earth minerals, resulting in a 54% increase in U.S. mine production since then. However, the reliance on China remains significant, as 21 of these critical minerals are primarily imported from the country. [11c8d00b]
The geopolitical implications of these developments are profound, as Australia emerges as a key player in the critical minerals sector. The Australian government is set to unveil its budget, which will include substantial investments aimed at boosting this sector, reflecting a commitment to capitalize on the global green energy revolution. The interconnectedness of these markets is underscored by the fact that Australia relies on China for 60% of global production and 85% of processing of critical minerals. [68f40d3d] [9ca2c90c] [3f475e23]
In summary, the combination of China's export restrictions on gallium and germanium, alongside the ongoing turmoil in Myanmar and U.S.-China trade tensions, paints a complex picture of the global minerals market and its implications for the U.S. economy. [10c121d7]