China’s BAN on Rare Earth: The Major Shifts Coming to the EV Industry

China is mulling a new export ban on rare earth magnets, as the United States plans to push a sweeping set of rules, calling for over half of all passenger cars sold in the country to be electric by 2032. Are the two countries on a collision course? And as the United States works to reduce reliance on China, will efforts like these actually dig the West into deeper dependence? Some lawmakers say yes. This is a HUGE story.

China is planning an export ban on rare earth magnets on the grounds of “national security,” according to recent reports. These magnets are found in electric vehicles, wind turbine motors, and military planes. The United States and other Western countries are pushing toward what the government calls decarbonization, while China looks to corner the growing electric vehicle market because it currently dominates in this sector of rare earth magnets and minerals.

If this ban comes into action, it’ll put a dent in the goals of the United States and Europe, which don’t manufacture or mine these minerals on their own. 

The US is vulnerable to a China ban on rare earth materials as the US imports 78% of its rare earth materials from China. The rare earth mineral demand forecast by UBS is to increase by 655% in a 100% EV world. 

With the US-China trade war deteriorating it is becoming increasingly likely that China may ban exports of rare earth materials o the USA. This would lead to a scramble by the US and other countries to source non-Chinese rare earth minerals. 

I recently posted an episode called, “How did China come to dominate the world of electric cars?”<> Most people have not realized the extent of what has happened, China became a world leader in making and buying electric vehicles. All this happened In just the past two years, the number of EVs sold annually in China grew from 1.3 million to a whopping 6.8 million, making 2022 the eighth consecutive year in which China was the world’s largest market for EVs.

The Chinese government took steps to invest in related technologies as early as 2001; that year, EV technology was introduced as a priority science research project in China’s Five-Year Plan, the country’s highest-level economic blueprint. 

Over 70% of the critical materials like cobalt, nickel sulfate, lithium hydroxide, and graphite are controlled by China. They have the ultimate control of the sector, which China has clearly pursued for years well before others companies even figured that this was something important. Chinese-made EV batteries are not only available at a discount but also are available in much higher quantities because the manufacturing capacity has been built out in China. However, this makes other car companies beholden to China, which controls the bulk of the supply chain for batteries.

Rare earths are used in the drives of computers, mobile phones, mp3 players, and cameras. They are also used in hybrid electric motors, luxury electric car motors, wind turbines, aerospace, military applications, maglev trains, and other consumer products like televisions, washing machines, vacuum cleaners, and like.

Certainly, the two key rare earths used for permanent magnets in EV motors are neodymium (Nd) and praseodymium (Pr). Even despite the trade war threatening supply, these two key ‘magnet rare earth materials will see surging demand from the EV boom. In fact, in a 100% EV world demand for the magnet rare earths is forecast by UBS to increase by 655%.

As I have said in the past China will use their control of rare earth minerals to squeeze the US and the world. China has a history of manipulating the rare earth market due to its dominant role in the supply chain. The USA currently imports 100% of these minerals, mainly from Canada and Brazil (from a Chinese company).

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