China merges mining assets to create rare earths mining giant

Now that aggressive foreign policy toward China has attracted bipartisan consensus, evidenced by the fact that President Biden has opted to keep certain tariffs imposed by the Trump Administration in place, Beijing is looking for new ways to squeeze Washington. China could very well upset the apple cart by cutting off supplies of 17 rare earth metals critical for the production of tech gadgets.

China is believed to control up to 90% of global supplies of rare earth metals. Only a small number of rare earth mining operations exist outside China.

Whereas rare earth metals were previously mined by six major Chinese firms, China is merging assets from several state-owned firms to create China Rare Earth Group. The new mining giant will be based in resource-rich Jiangxi Province; it’s expected to allow Beijing more leverage over the supply, and by extension, the price, of these incredibly valuable commodities that are essential for the production of chips and other components used in high-tech products from computers to weapons systems.

Washington has long worried that Beijing might use its control over rare earth supplies toward “strategic ends”, and WSJ reports that this latest push to consolidate the industry comes at a time of “increased sensitivity” toward the West. Beijing has also cited environmental concerns, since opening new mines can irradiate entire neighborhoods.

The US has taken some steps to encourage more rare earth production in Australia, a staunch ally that has also recently curried Beijing’s wrath. Back in February this year, the US Defense Department signed a technology investment agreement with Australia’s Lynas Rare Earths which the Pentagon called “the largest rare earth element mining and processing company outside of China.”

According to the terms of the deal, Lynas will establish a light rare-earth processing facility in Texas. President Biden has also issued an executive order naming rare-earth minerals as one of four key areas in need of more robust policy options to reduce supply-chain risks. Beijing has been coy about its plans. ‘China has no intention to use rare earths as a countermeasure against any country,’ the state-run Global Times wrote earlier this year, However, it added that this remains an option when “foreign companies hurt China’s interests.”

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