China's Dominance in Rare Minerals: A Strategic Trap or Economic Reality?
September 1, 202593 ViewsRead Time: 2 minutes
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In the conference hall of "Risen Nonferrous Metals" company, part of the "China Rare Earth Group", Zhang Shigang stands confidently to talk about his country's dominance in the rare minerals market. His statements were not just boasting; they reflected an economic reality that has accumulated over three decades of government-supported strategic planning.
This dominance did not come from nowhere. China today controls 70% of global mining operations for rare minerals, 90% of separation and processing operations, and 93% of the permanent magnet industry that goes into everything from smartphones to electric cars and fighter jets.
But the real story lies in how China reached this position. The answer goes back to the 1990s, when the late Chinese leader Deng Xiaoping made his famous remark: "The Middle East has oil, and China has rare elements." From that moment, a systematic strategy based on state support and bearing short-term losses to achieve long-term gains began.
The low prices imposed by China were not just a pricing policy; they were a strategic weapon that trapped competitors into surrender. As John Ormerod, an expert in the magnet industry, says: "Customers would go to China for a quote, then ask you to match it, which was simply impossible."
The result was the closure of the last two American magnet production companies by 2010, and the shipping of equipment from General Motors' "Magnetek" factory in Indiana to factories in Tianjin and Ningbo, China.
Today, the United States, Europe, and Japan face an existential dilemma: either continue to rely on low-cost Chinese supply chains or bear exorbitant costs to build alternative supply chains. Grace Lynn Bhaskaran from the Center for Strategic and International Studies questions: "Why would they buy from a high-cost producer if cheaper alternatives are available?".
Western attempts to escape this trap remain limited. Washington's guarantee of a doubled price for "MP Materials" in Las Vegas, and its commitment to purchase the entire output of a future magnet factory, seems like a drop in the ocean of Chinese dominance.
The real challenge lies not in building new mines or modern factories, but in confronting a unique Chinese economic model, where the state bears temporary losses in exchange for long-term control over strategic markets. This equation has made decoupling from China "costly and perhaps impossible in the near term," as the Financial Times states.
This dominance did not come from nowhere. China today controls 70% of global mining operations for rare minerals, 90% of separation and processing operations, and 93% of the permanent magnet industry that goes into everything from smartphones to electric cars and fighter jets.
But the real story lies in how China reached this position. The answer goes back to the 1990s, when the late Chinese leader Deng Xiaoping made his famous remark: "The Middle East has oil, and China has rare elements." From that moment, a systematic strategy based on state support and bearing short-term losses to achieve long-term gains began.
The low prices imposed by China were not just a pricing policy; they were a strategic weapon that trapped competitors into surrender. As John Ormerod, an expert in the magnet industry, says: "Customers would go to China for a quote, then ask you to match it, which was simply impossible."
The result was the closure of the last two American magnet production companies by 2010, and the shipping of equipment from General Motors' "Magnetek" factory in Indiana to factories in Tianjin and Ningbo, China.
Today, the United States, Europe, and Japan face an existential dilemma: either continue to rely on low-cost Chinese supply chains or bear exorbitant costs to build alternative supply chains. Grace Lynn Bhaskaran from the Center for Strategic and International Studies questions: "Why would they buy from a high-cost producer if cheaper alternatives are available?".
Western attempts to escape this trap remain limited. Washington's guarantee of a doubled price for "MP Materials" in Las Vegas, and its commitment to purchase the entire output of a future magnet factory, seems like a drop in the ocean of Chinese dominance.
The real challenge lies not in building new mines or modern factories, but in confronting a unique Chinese economic model, where the state bears temporary losses in exchange for long-term control over strategic markets. This equation has made decoupling from China "costly and perhaps impossible in the near term," as the Financial Times states.
