What is China’s position in rare earth metals?
If you look at China and its output of raw materials, it is the leader in many of the world’s storages. China dominates the market in owning lithium mines, metal ores and other raw materials.
However, the position has changed over the last decades. In ramping up its mining capabilities, it became the world leader in the 2010’s, as well as owning the largest capabilities of processing these ores.
China is the fastest growing economy and industry, which means it also is the largest user of these rare erath metals, that are for example used in electric vehicles and other new high-technology.
Where did China become dependent on raw materials?
Every boom has a downfall and a monopoly is hard to keep in such a massive global economy. And that is what happened to China, when its production was not growing as fast as its industry.
The world started ramping up production of rare earth and raw materials and dropped China’s share down from almost 98% to around 50% of the world’s production.
To keep sustaining its growth and leadership in industrial revolutions and as the forerunner of high-tech, it needed to start importing from other countries.
This vulnerable position has only become larger, as the country grows and is not capable of ramping up its ability to mine more. And this is the biggest problem too: China can easily handle vast amounts of raw materials more than its mining capabilities in the form of processing.
So, to keep processing, its import has now grown over threefold from 2017 to 2022.
What does this mean for the price of raw materials and investing in them?
We know that the market shifts and is based on international trade. For China to start importing and keeping the balance healthy, the market will also see more shifts in pricing.
To invest in these rare earth materials could be a smart move for the future, as companies will start to profit from exporting to China and gaining a high demand.
Having international trade over a national monopoly, will often drive up the price.
However, it is worth noting that China is also looking to invest in overseas projects to increase its capabilities and regain the monopoly it once had.
On the long-term, if this is succesful, the prices of these raw materials from non-Chinese companies, could see a fall again.
It is important to keep track of the momentum and the decisions China will make on this front in the future, to see the full picture of investing in these rare earths materials.