(MENAFN- Khaleej Times) The trade war between the United States and China apparently has no signs of wavering anytime soon. And barring a surprise breakthrough, more and more weapons could be unveiled by either side.
Beijing just brandished something in its arsenal that is very potent.
On Wednesday, China threatened to cut off exports of rare earths to the US, a key component in the manufacturing of a number of critical products and even every day items.
"I think China's current objective is to put pressure on the US for more American concessions in the trade talks and compel the US to be less harsh on Huawei and other Chinese tech companies," said Li Mingjiang, China programme coordinator at the S. Rajaratnam School of International Studies in Singapore.
China's dominance in the rare earth market is said to have reached its zenith in 2010, when it controlled around 95 per cent of production.
Investing News reported that rare earths production worldwide was at 170,000 metric tonnes last year, up over 22 per cent from 2017.
China produced 120,000 MT of rare earths in 2018, up from 105,000 MT the previous year. That means over two-thirds of overall production came from the country. Six state-owned firms are mandated in the industry - though illegal extraction is also happening.
The closest to China is Australia, but at a very distant 20,000 MT - though production has ramped up steadily over the years.
The US, meanwhile, is at third with 15,000 MT - from zero in 2016 and 2017. The reason: Its only rare earths facility, the Mountain Pass Mine in California, was shut down for maintenance in the fourth quarter of 2015 and was only reopened in the first quarter of last year.
Those that round out the top 10 are even farther away: Myanmar (5,000 MT), Russia (2,600 MT), India (1,800 MT), Brazil (1,000 MT), Thailand (1,000 MT), Burundi (1,000 MT) and Vietnam (400 MT).
What are rare earths?
Rare earth elements, as they are technically known, are a group of 17 chemical elements. It consists of yttrium and the 15 lanthanide elements - lanthanum, cerium, praseodymium, neodymium, promethium, samarium, europium, gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium and lutetium. Scandium is found in most rare earth element deposits and is sometimes classified as such too.
All of these are metals; as such, they are also referred to as rare earth metals, which have many similar properties and that often causes them to be found together in geologic deposits. They are also referred to as rare earth oxides because many of them are typically sold as oxide compounds.
Where are they used?
You may not even know it, but rare earths are one of the most important manufacturing components in several products. And you don't have to look that far: That smartphone in your hand has parts that contain some of them. Batteries, fluorescent lights, compact discs, magnets, x-rays and computer memory also contain them. In turn, these items are, obviously, used in other products that are equally widely-used.
Rare earths are also used as catalysts and phosphors that, in turn, are utilised to control air pollution, illuminated screens on electronic devices and polishing of optical-quality glass, among others, which are among the verticals that are experiencing higher demand.
Another important use of rare earths are in military and defence, such as night-vision goggles, communications and GPS equipment, and precision-guided weapons. The US, boasting the biggest military globally, is benefitting from rare earths, helping it to also remain the world's most powerful.
Using substitutes, such as more common elements, for rare earths in these products is possible, but they do not give the same quality or performance, and could even be costlier.
Are they really 'rare'?
The name implies that, but actually they're not. However, given the low chances of finding them in concentrations high enough for reasonable extraction, this makes them very difficult to mine.
To put this into perspective, lutetium and thulium are the two least-abundant rare earths. However, they each have an average crustal abundance that is almost 200 times greater than that of gold.
Meanwhile, the most abundant are cerium, lanthanum, neodymium and yttrium, all of which have about the same abundance such as more common industrial metals, such as chromium, lead, molybdenum, nickel, tin, tungsten and zinc.
How did China become a rare earth 'superpower'?
The first rare earth mineral to be discovered was 'ytterbite' (later renamed to gadolinite) in 1787, a mineral composed of iron, silicon, yttrium and cerium, among other elements. It was named after the Swedish village it was discovered in, Ytterby.
In the middle of the 20th century, there was little demand for rare earth minerals, but as soon as colour television boomed, its use spiked, particularly europium. The Mountain Pass Mine took advantage of this and became the dominant miner at the time.
However, as technology advanced - especially in the defence and consumer electronics fields - the use of rare earths in critical components became clearer. China entered the fray in 1980, and for the next two decades was able to produce and sell rare earth minerals at lower costs, proving difficult for the Mountain Pass Mine and other mines elsewhere to keep up; some even completely ceased operations.
Given the context of China's dominance in the rare earths sector, it won't be surprising that the US should feel jilted by Beijing's threat to cut off exports. The stakes are high - especially in areas that American companies excel in. And it's also unnerving markets.
"It's that potential escalation and continued focus on a disruptive impact of a ban on rare earth exports which is rattling the markets again," said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.
"Into this there's really not much upside to be found with industrial metals, which thrive on growth and demand. If the demand side starts to fade away, then it's difficult to see what would be holding metals up."
With inputs from agencies
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