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Notes -
China just chose the nuclear option:
TLDR:
China’s Ministry of Commerce just created an extra-territorial export-control net around rare earths and anything made with Chinese rare-earth technology. The bar is set extremely low, so this will ripple through EVs, wind, electronics, and defense supply chains worldwide.
(Assuming that this isn't a ploy designed to be a bargaining chip in order to get Trump to overturn export restrictions on advanced chips).
Now, while rare earths are very much not rare (though they do come from the earth, mostly), 90% of the actual processing happens in China, even if many deposits are elsewhere. Why is that the case? Well, rare-earth mining is not the most eco-friendly of industrial processes, and everyone else prefers it happen outside their backyards.
Just about every consumer and commercial electronic item is wrapped up in this. China dominates processing and magnet making, so the 0.1% trigger will catch a very large share of motors, drives, sensors, HDDs, speakers, drones, missiles, EVs, and wind-turbine components that contain NdFeB or SmCo magnets.
Assuming that a pleasant agreement isn't reached by Trump and Xi, this is going to do numbers on the trout population, and the economy. I don't even have to specify which economy, it's that global. It'll take years to onshore or friend-shore processing, even if deposits could ramp up to meet the demand. Really, I can't stress the chaos this will cause if the Chinese truly exercise their discretion, so we're going to have to strap in and see. Maybe nothing ever happens, maybe it does.
What did people expect? The US places sanctions on China with a clear goal to keep the Chinese economy down and people expect them just to accept it?
The US occupied a neighboring country for 20 years killing hundreds of thousands of people and had massive airforce bases right next to China. Last week Trump talked about retaking the airforce bases so it would be easier to bomb China. The Chinese are just going to accept it? The US just stole tiktok and China is just supposed to accept it?
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They also restrict export on diamond grit and tools. So it is a lot wider. And I think this will hurt too. And it seems is global, not only targeting US
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I’m nearly certain that I’m the only person here that has actually been to a REE processing plant. And while I don’t work in that industry, I’m adjacent to it.
I kind of think people are blowing this out of proportion. It will be painful for some. I doubt 99.9% of people notice. For reasons stated below.
I think you're less unique than you think; most of us have been on 4chan at least once.
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Everyone's focused on rare-earths themselves, but the issue's that this restriction applies to any product with them like motors and batteries - which China truly leads in price and capability.
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Obviously the best solution for the US is to bring all of these capabilities in-house (to one degree or another) but the funniest solution would just be to say "these Chinese have made their ruling, let them enforce it" and then buy secondhand from India, same way the Russians have been getting around our sanctions.
Actually, the best solution would be for the US to perform a magic ritual, invoking Moloch and begging him to supply them with rare earth metals in exchange for sacrificed children - which is more likely to succeed than your proposal. The USA isn't actually capable of replacing China's role in the productive economy in any timeframe that's actually relevant. Do you think the tech and defence industries can sustain a complete pause in production for the 10-15 years it'll take to onshore this stuff? This means no more harddrives, no more lithium batteries etc.
It's not an either/or, the US can pursue onshoring as a permanent long-term solution while pursuing other avenues in the interim.
Replacing China's worldwide economic production isn't necessary; what the US ideally needs to be able to do is fulfill domestic national security needs. Nevertheless, it's worth noting that the US (re)opened a single rare earth mine in 2018 and in a couple of years it supplied 15% of worldwide production.
First off, it does not. It means the Chinese are putting regulations on export. If you read the article it suggest the Chinese will likely ban exports to defense companies. So yes, I suspect the tech and defense industries will actually be able to source harddrives, lithium batteries, etc. for the next 5 - 10 years.
Why? Well, setting aside the fact that the US actually has at least some rare earth mining and refining capability in-country (and is currently, as I understand it, in the process of building more, so 7 - 10 years to have at least some replacement for Chinese goods is probably pessimistic even if you don't assume the US invokes national security to cut through red tape), I'd just remind you that Russia has been able to source actually embargoed items for its military from Western sources despite the US having a much better ability to deploy soft and hard power worldwide to sanction them than China does to sanction the US. If the Chinese move to cut US defense firms out of the loop, that
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Surely Trump backs down here. US MIC hard-needs rare earths, can't do without them.
I think this is a targeted blow against the defence and EV industries, not against chips or electronics generally. Chips have only a tiny amount of rare earths. Only things with Big Motors or Exotic Electronics like military hardware are really affected. HDDs should be fine if we recycle more, F-35s on the other hand are in real trouble.
Yet another huge environmentalist error: https://x.com/skepticaliblog/status/1912469666272059526
I don't think you can actually blame the environmentalists for a corporate executive deciding to cash out and make vast profits in exchange for fucking over his workers and the country he lives in over the long term, or the government failing to protect and nurture critically important businesses. In China, strategically important industries are protected by the government in recognition of how important they are - letting this industry get sold off to China is the equivalent of the CCCP deciding to save on costs by outsourcing all their internal communication infrastructure to Google and Microsoft.
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From your link:
Interestingly enough, I think that chip production does not require tons of rare earth elements. Even if the REE prices increased by a factor of 100, I am not sure if the chips themselves would be much more expensive. Of course, for ceramic capacitors the story is different, and a lot of other tech in data centers uses REE as well.
I think that the US (and it's loose allies, like Taiwan or the Netherlands) leading in chip feature size is them being ahead in a race which is relevant (at least if you believe that AI will not simply fizzle out, and care about who builds the paperclip maximizer).
By contrast, I am not sure that having cheaper REE extraction tech (which China likely has) is much of a game-changer. The price of Neodymium is a few hundred dollars per kilogram. As you need about 1kg for an EV, changing the price to 1000$/kg would increase the price of EVs slightly. For headphones, the relative price hike is probably even smaller.
That being said, investing in US REE refining is probably not a solid business decision. Sure, while China blocks exports your product is competitive, but as soon as they put their stockpiles on the market, you will no longer sell anything.
I think that the best thing you can do as a nation if a competitor controls a market of strategic importance is to (a) have a strategic reserve and (b) pay companies to produce the product at prices far above what the market would pay in moderate quantities, so that once an embargo happens you have some tech which you can scale up. (Arguably, (b) is also the strategy most countries use for military hardware. In three decades, Europe produced 609 Eurofighters. By contrast, in the six years of WW2, 800 thousand airplanes were produced by all combatants. The point of paying astronomical sums for a few Eurofighters is not that they will be very useful, but that if one ever finds oneself in the situation of wanting to spend a decent fraction of the GDP on fighter planes, one can ramp up the production in a few years rather than spending decades developing new planes.)
As a negotiation strategy with Trump, I think China's approach is decent, and as an European I wish them wholeheartedly success in standing up to Trump's protectionism.
Rare earth refining is a regulatory issue on heavy metal contamination for groundwater and waste disposal, which is itself critical to even perform the refining in the first place due to the circular recycling of outputs to generate usable high purity rare earths. You can't just Abundance permitwaive your way to rare earth mastery, you need a whole ecosystem of internal processes to even get something useful to begin with. Rare earths are a definitional misnomer because the elements are everywhere, but what IS rare is the critical processing mass necessary to even get something usable for modern high end technology.
I think what is highly underappreciated is how differentiated rare earth streams actually are. A single refiner can't actually just take in any raw material and convert it to intermediate rare earths, it requires significant chemical injection at many stages of the industrial separation process before it can be refined for intermediate stage. Rare earths is actually a humongously heterogenous process, so institutional knowledge is not 1-1 transferrable across different types of rare earths. Thats not to include all the corrosion effects that happen at transportation stages between facilities which require networked facilities with clear logistics between them. Chinese investments in clean tech and workers safety isn't because they valued human life, its because the usable material at the end of the process is useless if Wangs wang is inside the smelter. This is why you can't do either western permitwaiving or third world bodywasting to get a REE facility spun up at all, let alone quickly or economically viably.
What makes Chinas REE export ban so troubling is that China isn't actually losing out that much economically from it - as OP stated, REE isn't actually that expensive on a unit cost basis. However for receiving so little direct pain this causes huge downstream problems for other manufacturers elsewhere. This is frankly a repeat of the recycling debacle which ended the economic viability of shipping recyclable materials to China for processing, except the economic effects are more directly felt.
Stockpiling for rare earths is also a dead end. End output metals like neodynium etc are oxygen and moisture sensitive, so stockpiling is normally in terms of intermediate products... which still need refiners after that. WW2 saw fighter engines produced by the thousand, but honestly the more relevant example is WW1, where phosphate import restrictions forced Germany to develop the Haber process to continue arms manufacturing. I'm sure there are smart dicks at DARPA who are trying to find materials that can overcome REE or other foreign dependencies, but if it turns out chips and magnets really are only manufacturable in certain locations and reshoring is impossible then honestly the world can turn really ugly really fast.
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Hmm. Major questions for me are:
I wouldn't trust Europe to figure out a way to manufacture toilet paper really. Low cost manufacturing or processing just isn't their strong suit. Either way, no matter where it happens, it'll take a while to even begin to catch up with Chinese output.
I suppose a great deal hinges on how targeted China wants to be with the restrictions, and how capable other states are at circumventing them. A queer state of affairs, but we're setting a thief to catch another thief. If China sticks to crippling specific competitor industries, such as the automotive or military sectors then they should be able to do plenty of damage for little pain. I don't think they really care about the fridge magnet market.
I do wonder how easy it will be to... divert less valuable end-products elsewhere. Are we going to see children's toys selling at record rates so they can be stripped for parts?
Its funny you say that seeing as europe is the world leader in the production and export of toilet paper.
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My entire nation is screaming in pain RN.
Yes, from scraping your anus raw with barely processed wood. The best feature of TP is that the designers managed to make it turn red to let you know it was done!
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The big issue with processing rare earths is the pollution AFAIK so yes, Europe probably not a great place to start. Though I bet the Poles or somebody would be happy to stick some factories in a less-used area and reap the increased influence and military protection that comes with it.
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