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China could maximize the damage done to the US economy by not only dramatically reducing the flow of rare earth materials, but by limiting the supply of small, powerful magnets that use them.
Permanent rare earth magnets are the largest single market for minerals and China accounts for more than 90% of global production. Their widespread use in all areas, from vacuum cleaners to vehicles, to fighter jets, could hurt many US industries if China decides to block their offer in the context of a growing trade war between the world's largest economies .
Bloomberg
Blocking shipments of rare earth metals and alloys to the United States is "manageable if processing outside of China is built quickly," wrote a report by analysts at Citigroup Inc., including Oliver Nugent. "The impact became much more serious if the ban was extended to products made from rare earths – especially magnets and motors, or through third-party vendors. "
China said it was preparing to use its dominance of the global rare earths sector to thwart US measures that include the blacklist of Huawei Technologies Co. The elements are often overlooked, but modern life would be impossible without them said Secretary of Commerce Wilbur Ross. said this week that the US released a report that promised "unprecedented action" to ensure supply. The main economic planning body of the Chinese state is studying export control proposals and will soon put in place measures.
Chinese exports of magnets totaled $ 1.7 billion last year, Citigroup said. The United States imported approximately $ 395 million, of which $ 257 million came from China, masking potential economic harm to downstream industries, magnets used in miniature engines that perform essential functions in automobiles, wind turbines and many home appliances.
"The industrial value added at risk in the event of a supply chain breakdown is difficult to quantify, but is subject to multiple increases," said Citigroup. "While Japan and other countries other than China likely have a magnet capacity available to divert further supply to the United States, discussions with experts suggest that the United States is not the only country in the world. infrastructure and technical knowledge to react quickly are of a very limited extent. "
Add to this that many magnet factories outside of China – the largest in Japan and Germany – still depend on China for their rare earth inputs. According to Citigroup, of the 50,000 tons of ore mined outside China, only about 8,600 tons are not integrated into the Asian nation.
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