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Rare earths trade dispute

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The rare earths trade dispute, between China on one side and several countries (led chiefly by the United States) on the other, was over China's export restrictions on rare earth elements as well as tungsten and molybdenum. Rare earth metals are used to make powerful neodymium, praseodymium, dysprosium and terbium magnets, defense products and many electronics.

The US, EU and Japan argued that the restrictions were a violation of the WTO trade regulations, while China stated that the restrictions are aimed at resource conservation and environmental protection.[1][2] In 2012, the Obama administration filed a case with the Dispute Settlement Body of the WTO. In 2014, the WTO ruled against China, which led China to drop the export quotas in 2015.[3]

The 2010 episode generated increased investment in rare earth developments outside China.

Products at issue

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There are 17 rare earth metals, and their production is a complex multi-stage process. Exports may be in the form of ores or goods at any stage including mined rare earth ores (all containing a tiny mix of rare earths), refined ore concentrates, refined highly pure metals, or products incorporating refined metals (car li-on batteries, magnets or magnet incorporating windmill generators). Figures given for the various stages are widely undefined as to what level export is being addressed and figures may often be misquoted due to the complexity of the topic. Trade disputes can address country interests over costs, competitive industry positions, or strategic supplies, which all have different relevant export levels and time horizons to consider.

Known reserves of rare earths ores are 120 million tones, with China possessing about one-third of these.[4]

The first stage, the mining process yields rare earth ores. More than 60% of rare earth metals (as of 2019) are mined by China and through controlled entities predominantly in Africa.[5] The second stage is the refining process where ores are separated into some pure metals and some concentrates of light rare earths or heavy rare earth metals. The refining process is highly specific to the nature of the ore and target metals, with concentrates produced intended for other refineries to conduct further refining. China produces 85% of the global market share of anodes and also has a large share in the processing of the materials.[5] It refines 68% of nickel globally, 40% of copper, 59% of lithium, and 73% of cobalt.[5]

Production of parts and goods is yet another industrial step performed by many different companies. China produces a large share of these goods and accounts for the majority of the worlds exports, especially lithium-ion batteries and neodymium magnets. It accounts for most of the global production of mineral-rich components for battery cells, including 70% of cathodes, 85% of anodes, 66% of separators, and 62% of electrolytes [5] China holds 78% of the world's cell manufacturing capacity for EV batteries, which are then assembled into modules that are used to form a battery pack.[6] The country also hosts roughly 75% of the world's lithium-ion battery megafactories.[6] This makes China the largest consumer of the minerals it refines.[4][5]

The rare earth elements (or rare earths) are 17 elements that have magnetic and conductive properties.[7] They are used extensively in electronic gadgets such as cellphones, and in national defense equipment. Despite their name, the elements are not so rare, as they can be found widely.[8] However, they are not often found in economically exploitable concentrations.[7][8] Their mining is also environmentally hazardous.[8] The rare earths were discovered and first put to industrial use in the United States. But lower labor costs and less strict environmental regulations in China have now enabled the country to be the world's predominant supplier of rare earths.[7][8]

History of the dispute

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In the 2000s, China began to restrict the rare earths industry out of a desire to control foreign investment in strategic industries, and exports of rare earths decreased.[9]: 5  Because China was the world's biggest supplier of rare earths at the time it instituted export restrictions in the 2000s, its policies resulted in major disruption to global supply and significant price increases.[9]: 5 

The American news program 60 Minutes broadcast a segment on the dispute in which the news anchor said that, due to the ubiquity of the use of the rare earths, especially in weaponry, the Chinese restrictions posed a national security threat to the US.[10]

China was accused of unofficially banning of rare earths exports to Japan during a diplomatic standoff between the two countries after the 2010 Senkaku boat collision incident, though China denies such reports. Critics pointed at this incident to argue that China was not above using its dominance in rare earths production to gain leverage in international negotiations.[11][10]

The WTO case

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The US brought a case to WTO's Dispute Settlement Body against the Chinese restrictions. The European Union and Japan also joined the case on the US side. The US argued that the Chinese restrictions were in breach of the accession treaty that China had signed when it joined the WTO in 2001. The treaty disallowed export duties and quotas, except for goods specifically listed. Rare earths were not among the goods specifically listed.[12]

China argued that its restrictions were legal because WTO regulations allow countries to impose export duties and quotas for reasons of conservation and to protect plant, animal, and human safety.[12][13]

The WTO ruled against China, determining that its export controls were not justifiable according to the exceptions that China had contended.[9]: 5 

Response to the WTO ruling

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China expressed disappointment with the ruling (NYT) and filed an appeal repeating its conservation argument. The Appellate panel of the WTO, however, upheld the ruling. The US Trade Representative hailed the ruling as a victory for openness and fairness around the world. China dropped its export restrictions in January 2015.[14]

China complied with the ruling, which also prompted increased policy coordination by central ministries and provided the impetus for further domestic reform.[9]: 5 

As a result of the higher prices China charged outside of China prior to the WTO ruling, many rare earth mining companies in the U.S. and Europe were able to raise capital, and in some instances publicly, through stock sales. Chevron Mining spun off the Molycorp-owned Mountain Pass rare earth mine as a free-standing public company in 2008. However, in response to the WTO action and this growth in competition, China dropped the price of rare earths significantly, making these entities less attractive for investment and, in the case of Molycorp, unsustainable, forcing it into bankruptcy in June 2015.[15] In June 2017, the Molycorp mine was sold out of bankruptcy at auction and was purchased by MP Mine Operations LLC, a company in which Shenghe Resources, a Chinese minority shareholder, is granted the exclusive right to market all rare earths from the mine. [16]

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The rare earths dispute formed part of the storyline in Season 2 of the Netflix series House of Cards (Real Clear World) and Call of Duty: Black Ops II.[17]

From February to May 2015, the Thyssen Bornemisza Museum ran an art exhibition titled RARE EARTHS related to the dispute, featuring seventeen commissioned works, one for each element. Contemporary artists from The European Union, China, Mexico, Congo and Russia contributed works. Artist and political activist Ai Weiwei was among the artists who contributed.[18]

See also

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References

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  1. ^ "中国的稀土状况与政策_白皮书_中国政府网". 中国政府网_中央人民政府门户网站 (in Chinese). 2023-05-26. Retrieved 2025-03-04.
  2. ^ "国务院关于促进稀土行业持续健康发展的若干意见__2011年第15号国务院公报_中国政府网". 中国政府网_中央人民政府门户网站 (in Chinese). 2024-12-25. Retrieved 2025-03-04.
  3. ^ 世界貿易組織關於中國大陸限制原物料出口案之研究. 當代中國研究系列 (in Chinese). 思行文化. 2014. p. 579. ISBN 978-986-5681-24-1. Retrieved 2025-03-04.
  4. ^ a b U.S. Geological Survey, Mineral Commodity Summaries (PDF) (Report). U.S. Geological Survey. January 2020. Retrieved 9 November 2022.
  5. ^ a b c d e China's Role in Supplying Critical Minerals for the Global Energy Transition (PDF) (Report). The Brooking Institute. July 2022. Retrieved 9 November 2022.
  6. ^ a b Pettitt, J. (15 January 2022). "How the U.S. fell behind in lithium, the "white gold" of electric vehicles". CNBC. Retrieved 9 November 2022.
  7. ^ a b c Yap, Chuin-Wei (January 15, 2015). "China Ends Rare-Earth Minerals Export Quotas". Wall Street Journal. Retrieved 10 April 2015.
  8. ^ a b c d Overland, Indra (2019-03-01). "The geopolitics of renewable energy: Debunking four emerging myths". Energy Research & Social Science. 49: 36–40. doi:10.1016/j.erss.2018.10.018. hdl:11250/2579292. ISSN 2214-6296.
  9. ^ a b c d Zhou, Weihuan; Crochet, Victor; Wang, Haoxue (2025-01-30). "Demystifying China's Critical Minerals Strategies: Rethinking 'De-risking' Supply Chains". World Trade Review: 1–25. doi:10.1017/S1474745624000193. ISSN 1474-7456.
  10. ^ a b Stahl, Lesley (22 March 2015). "Modern Devices under china's Grip". 60 minutes.
  11. ^ Trakimavicius, Lukas (25 February 2021). "EU, U.S. exploring new sources of Rare Earth Minerals, should China limit exports". Energy Post. Retrieved 25 February 2021.
  12. ^ a b "China — Measures Related to the Exportation of Rare Earths, Tungsten and Molybdenum". WTO. Retrieved 10 April 2015.
  13. ^ Gavin, Brigid (3 August 2013). "China's growing conflict with the WTO". Intereconomics. 48 (4): 254–261. doi:10.1007/s10272-013-0467-6. hdl:10419/126399. S2CID 155077045.
  14. ^ "China Drops Its Export Limits on Rare Earths". The New York Times. 5 January 2015.
  15. ^ Miller, John (June 25, 2015). "Molycorp Files for Bankruptcy Protection". Wall Street Journal.
  16. ^ Brickley, Peg (June 23, 2017). "Mountain Pass Mine Approved for Sale to JHL, QVT, Shenghe". Wall Street Journal. Archived from the original on March 12, 2022. Retrieved August 7, 2017.
  17. ^ "Despite what Black Ops II says, rare earth minerals will not cause a U.S.-China cold war". Foreign Policy. 2012-11-26. Retrieved 2019-11-28.
  18. ^ "Thyssen-Bornemisza Art Contemporary". Tba21.org. Retrieved 2015-09-30.
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