China’s threat to weaponize rare earth metals
In China Could Use Rare Earth Exports as Ammo against US Tech, we discussed how China is planning to use its rare earth minerals as a weapon against the US in the ongoing trade war. Rare earth minerals are a group of 17 chemical elements that have wide applications from technology to military equipment. China produces about 95% of the world’s rare earth minerals and thus has a dominant position as a rare earth producer. The US depends on China for as much as 80% of its imports.
China’s rare earth exports shrink in May
In another indication that China (FXI) could be taking rare earth export control seriously, its rare earth exports slumped by 16% month-over-month and 18.2% year-over-year to 3,640 tons in May. This is also the second consecutive month of negative export growth for the minerals.
Independent rare earth analyst Wu Chenhui told Global Times that the decline in May might have more to do with China’s crackdown on illegal rare earth extraction rather than the US-China trade war. He, however, predicts that the impact of China’s intention to curb exports might manifest in the trade data over the next few months.
Rare earth stocks
The VanEck Vectors Rare Earth/Strategic Metals ETF (REMX) provides exposure to companies involved in rare earth mining. This ETF has been rising due to China’s threats. Tronox Holdings (TROX) is the only US-listed company in REMX’s top 20 holdings. The Rare Element Resource (REEMF), a US-based company that explores for mineral properties, has skyrocketed by 467% year-to-date due to China’s threats.