Workers handle neodymium bars before they are crushed at Neo Material Technologies Inc.’s Magnequench Tianjin Co. plant in Tianjin, China.
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US President Donald Trump’s push to secure rare earth supply deals across Asia will ultimately weaken China’s dominance in the global supply chain for critical minerals – but analysts said it will take years to build.
In 10 days, Trump has struck deals with Australia, Malaysia, Cambodia and most recently Japan to boost supplies of rare earths and other critical minerals crucial to making batteries, automobiles, defense systems and computer chips.
The flurry of deals – part of Washington’s attempt to counter Beijing’s stranglehold on the sector – comes ahead of his meeting with Chinese President Xi Jinping in Busan on Thursday.
The deals could “benefit immensely from being tied together in a plurilateral agreement with strong commitments, financing and pooling of resources,” said Wendy Cutler, senior vice president at the Asia Society Policy Institute. She expects more such deals to follow under the Trump administration.
Trump and Xi are expected to address several contentious issues that have stalled long-running trade talks, including Beijing’s export controls on rare earths and Washington’s tariff threats and technology restrictions.
In the medium term we will exit the Chinese supply chain, but in the short term there is still a great deal of dependence on China.
Dennis Wilder
Senior Fellow at Georgetown University
The latest victory for Trump was an agreement The aim of the agreement with Japan was to ensure the supply of critical raw materials and processed minerals while committing to financing selected projects within the next six months. Previous pacts with Australia, Malaysia And Thailand It also outlined billion-dollar plans, commitments to fair trade practices and the avoidance of export bans or quotas.
While Trump’s deals could bring much-needed financial support to the industry and potentially challenge Beijing’s stranglehold over rare earths, experts said the effort will be costly and take years to bear fruit.
“What we’re trying to do now is get rid of the Chinese as the primary supply chain, but that will take time,” said Dennis Wilder, a former senior U.S. intelligence official and now a senior fellow at Georgetown University.
“In the medium term we will exit the Chinese supply chain, but in the short term there is still a great deal of dependence on China,” emphasized Wilder.
Goldman Sachs estimates that developing new mines for rare earths will typically take up to a decade, with known reserves for certain elements outside Myanmar and China “very tight”, while building refineries would take about five years.
The bank estimates that China dominates 69% of the market share in rare earth mining, 92% in refining and 98% in magnet manufacturing.
Level playing field
These deals are a “game changer” that could reduce U.S. vulnerability to Beijing’s export controls, stabilize rare earth prices and accelerate innovative domestic refining and recycling, said Brodie Sutherland, CEO of Patriot Critical Minerals Corp, a U.S.-based developer of critical minerals.
With assured access to raw materials from friendly countries, American companies can focus on efficient extraction, ethical mining and value-added processing, Sutherland said.
He also cited longer-term benefits such as lower risk premiums on financing, faster approvals for new sites and “a level playing field against subsidized foreign competitors.”
China has allowed rare earth prices to fluctuate in very “strategic” ways to make projects in other countries unprofitable, said Mike Rosenberg, a professor of strategic management at IESE Business School.
By using public funds to support these projects, global mining and refining companies should be able to make investments that guarantee a reasonable return, Rosenberg added.
However, efforts to diversify and relocate production will inevitably lead to this accept some environmental compromisessaid experts.
Mining and refining rare earths in an environmentally friendly way is “very, very expensive,” Rosenberg stressed, while China has kept costs down by limiting environmental controls.
“Consumers may need to accept higher prices for electronics and green technologies that reflect their true material and environmental costs,” said Patrick Schröder, senior research fellow at the Environment and Society Center at Chatham House.
The policy push has also led to a rally in several U.S.-listed rare earth mining companies this year. Stocks listed in New York MP materials And Trilogy Metals have each more than quadrupled, Energy fuels has tripled while Critical metals is up nearly 90% and USA Rare Earth is up about 75%, according to LSEG data.
Wake-up call
Analysts said Trump likely rushed to sign those deals to gain influence ahead of his meeting with Xi in Seoul this week.
U.S. officials said earlier this week that they expected China to briefly delay by a year the imposition of export controls on critical minerals as part of a broader trade deal A rally in mining stocks is cooling down.
“Beijing’s recent threat of sweeping extraterritorial export restrictions in this sector was a necessary wake-up call for partners around the world,” said Cutler of the Asia Society Policy Institute.
China may have miscalculated export controls that have rattled the global economy and spread the trade war to other nations, Georgetown University’s Wilder said, noting that “this is not in China’s interest.”
“It was a useful weapon when it was aimed at the United States, but it becomes less useful when you try to expand it to the rest of the world,” Wilder said. “Because then in many ways you bring the rest of the world into the United States.”
