Amid heightened import restrictions from the US and EU on Chinese electric vehicles and steel products, analysts foresee escalating trade tensions following China's recent move to tighten control over rare earth metals.
The Chinese State Council recently declared that effective October 1st, all rare earth metals within the country will be under state ownership.
Emphasizing national sovereignty over these critical resources, the State Council sternly warned against any efforts to exploit or jeopardize their integrity by private entities or individuals.
This policy, set to take effect on October 1st, includes plans for a comprehensive tracking database to regulate the mining, usage, and export of rare earth metals efficiently and transparently.
Before this decision, China had already imposed bans on exporting refined rare earths and production technologies essential for permanent magnets. In January, it extended these restrictions to include gallium and germanium, crucial materials for semiconductor production.
In light of China's reinforced regulatory framework for rare earths, the EU and US actively seek to strengthen alternative supply chains in collaboration with countries such as Vietnam, Brazil, and Australia. Their aim is to mitigate disruptions in critical sectors like electric vehicles and renewable energy.
According to a 2022 report by the European Parliament, concerns persist over excessive reliance on monopolistic suppliers, with China supplying 93% of magnesium, Turkey 98% of barium, and Brazil 85% of niobium to the EU.
Frans Timmermans, EU Executive Vice-President, announced plans last year to establish a large-scale rare earth refinery in Estonia, marking a pivotal step outside Asia to enhance the EU's rare earth supply chain resilience.
Recent EU measures include provisional countervailing duties against Chinese electric vehicles, citing substantial government subsidies and preferential access to essential rare earth metals.
Both sides have initiated discussions to defuse escalating tensions sparked by these measures and China's retaliatory actions. However, underlying concerns among the EU, US, and other nations indicate that China's recent policy could exacerbate future trade frictions.
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