China tightens rare earth regulations amid rising global competition

Company News

by Glenn Dyer

Are the growing number of rare earth projects in Australia and elsewhere starting to force China onto the back foot?

The likes of Lynas (and its expanded product line from 2025), Iluka, Northern Minerals, and Arafura (Nolans) are starting to be felt globally, along with projects in the US, Canada, southern Africa, Sweden, and Norway.

Chinese interests tried to sneak a takeover of Northern Minerals before being stopped by the Australian government last month.

China is obviously starting to feel the heat, and it has reacted defensively by restricting exports of some rare minerals, such as germanium and gallium. Now, the controls are being expanded.

For a tightly controlled, Communist Party-run country, it's odd that ownership has never been made explicit for such a key mineral.

On Saturday, the Chinese government unveiled a list of rare earth regulations aimed at protecting supplies in the name of national security.

The new rules, which start on October 1, will cover the mining, smelting, and trade in rare earths used to make products from magnets in electric vehicles to consumer electronics.

The regulations, issued by the State Council or cabinet, state that rare earth resources belong to the state, and that the government will oversee the development of the industry around rare earths.

That’s a group of 17 minerals, of which China has, in recent years, become the world's dominant producer, accounting for nearly 90% of global refined output.

Their global industrial significance is such that, under a law that entered into force in May, the EU set ambitious 2030 targets for domestic production of minerals crucial in the green transition—particularly rare earths due to their use in permanent magnets that power motors in EVs and wind energy.

The EU sees demand rising sixfold in the decade to 2030 and sevenfold by 2050.

The new Chinese regulations state the State Council will establish a rare earth product traceability information system.

Enterprises operating in rare earth mining, smelting, separation, and the export of rare earth products will be required to establish a product flow record system, shall "truthfully" record the flow, and shall enter it into the traceability system, the State Council said in a statement on Saturday.

China already last year introduced restrictions on exports of the elements germanium and gallium, used widely in the chip-making sector, citing the need to protect national security and interests.

It also banned the export of technology to make rare earth magnets, in addition to imposing a ban on technology to extract and separate rare earths.

Those rules fanned fears that restrictions in rare earth supplies might increase tensions with the West, particularly the United States, which accuses China of using economic coercion to influence other countries. Beijing denies the claim.

China's rare earth regulations also come as the EU gears up to impose provisional tariffs on Chinese EVs on July 4 to protect the 27-state bloc from what it says is a flood of EVs produced with unfair state subsidies, though both sides have said they plan talks on the proposed tariffs.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

Subscribe to our Daily Newsletter?

Would you like to receive our daily news to your inbox?