According to CCTV, a “relevant official” from the National Development and Reform Commission was reported to have said products made from rare earth materials should not be used against China’s development, CNBC reports. To give you an example of the influence China has over the worlds rare earth elements (REE’s), the Mountain Pass Mine, once a powerhouse producer of REEs from 1965 to 1985, was completely shut down from 2002 to 2012 because of China, forcing its owner Molycorp into eventual bankruptcy in 2015.
According to Roskill, global REE production in 2008 was approximately 119,220 mt, of which only approximately 4,220 mt originated from outside of China, and U.S government officials are very aware of the threat this poses to REE market stability, as expressed by Mike Pompeo on May 11, 2017
The defense industry in the U.S obtains 100% of its REE’s from China, and a 2016 Government Accountability Office report called this a “bedrock national security issue”, and rightfully so. Below are some detailed charts showing each REE’s use and source county (source:U.S. Geological Survey)
China also controls about 85 percent of the REE’s used in consumer products, an astronomical number. As you may know, REE’s are essential to the entire tech industry, and without them, the United States would cease to function.
The PRC already manages mining levels. South China Morning Post reports that, due to production quotas, the country became a net importer of rare earth last year.
Chen Daoyin, a Shanghai-based political researcher said, “We have to be prepared for the possibility that economic confrontation with the US may persist over the long term.” A statement like that makes you wonder if all the tariff negotiations headlines we have been inundated with lately are just smoke and mirrors. Are these negotiations even serious, or just formalities? We are going to have to wait and see, but if we were to make a judgment based upon the way events have unfolded so far, it wouldn’t be surprising if this was the case. Trump sure loves tweeting about China, which makes you wonder if somebody has access to his tweets before the rest of us. Whoever did could potentially make billions off this information — Yes, BILLIONS, no hyperbole. Fire and Fury, remember that? The VIX went up how much? Every time he tweets or says anything about the stock market, the reaction is fierce. Wouldn’t you love to be the guy who knows what he is going to tweet before everybody else!