Will electric cars and solar panels become more expensive? Increasingly rare raw materials

Following a crackdown on gallium, germanium and graphite, Beijing has tightened controls on rare earth exports. For the first time, the Asian giant will ask traders for detailed information about the import and shipment of precious metals. Importers of crude oil, iron ore, copper ore concentrates and potash fertilizers were also asked to report their orders and shipments. Among all the elements, rare earth elements are the only strategic material that should be included in the export list.

Under the new regulations, traders must submit a document showing the country of origin, the date of signing the contract, the quantity of materials and details of the final destination. This step falls to the China Chamber of Commerce for Metals, Minerals and Chemicals Importers and Exporters, a Beijing-based semi-official trade body tasked with collecting, compiling and analyzing data. These will also be sent to the Chinese Ministry of Commerce.

geopolitical weapon

The measure was announced last November 7 by the Chinese Ministry of Commerce, after coming into force on October 31: the measure will last for two years, from October 2023 to October 2025. The reasons why Beijing decided to determine how many rare earths can leave the earth are the borders of the People’s Republic and what their final destinations are. But precedents lead one to believe that this is just another diplomatic weapon that China wants to use, above all, to the detriment of the United States and the European Union.

Of course, there is also a national aspect. Beijing has adopted greater controls over its strategic materials industry for several years, primarily to respond to environmental and internal efficiency needs. In fact, components of commonly used technologies are produced from critical raw materials, and their demand may increase in the future. In fact, we are talking about lithium-ion batteries, wind turbines, photovoltaic panels, heat pumps, data transmission cables, smartphones, tablets and computers.

We sit on a mine: a map of forgotten treasures

In fact, market forecasts for the next few years say there will be a significant increase in demand for certain raw materials, which could lead to serious disruptions in supply chains, with clear impacts on the final price of affected goods, from automobiles to technologies. Giant Asian invests a lot. Currently, China accounts for 63 percent of global rare earth mining, 85 percent of processing, and 92 percent of global production. Rare earth alloys and magnets controlled by China are also critical components used in the military sector to produce missiles, firearms, radars and stealth aircraft.

China could easily decide to limit access to rare earths to attack its geopolitical rivals, which could have disastrous consequences for the entire world. In the past, Beijing has decided to take a similar measure to attack Japan by blocking access to rare earths over a dispute related to the territorial waters of the East China Sea. Later in 2019, China threatened to include some products using rare earth elements in technology export restrictions in response to pressure from the Trump administration on telecom giant Huawei.

Short circuit in China’s electric car

Brussels’ attempts to take action

It is impossible to ignore the risk of relying on Beijing for these components. Increasing demand for some raw materials in the European Union has made these materials “critical” due to their low availability and strategic importance. According to European Commission forecasts, demand will increase five to six times by 2030. The problem is that the continent is heavily dependent on supplies from outside the EU: for example, Turkey supplies 98 percent of its borate supply, while South Africa supplies 71 percent of its borate supply. platinum group metal needs.

And then there is China. Given that Europe imports 97 percent of the EU’s magnesium supply each year and 86 percent of the EU’s rare earths come from China, it is clear that European countries are among those most exposed to Beijing’s moves . Therefore, Brussels aims to reduce dependence on the supply of raw materials that are considered strategic for the economic growth of member states and their transition to green energy. The recent agreement between governments and the EU Parliament on new rules to restart the extraction, refining and recycling of critical raw materials needs to be read from this perspective. The stated goal is to increase Europe’s capacity to stockpile strategic materials for the ecological and digital transition, such as lithium for electric cars, as well as strategic materials for the defense and aerospace sectors. The challenge is to reduce supply costs and dependence on a small group of third countries, primarily China. But Beijing is not unprepared.