Rare Earth Elements (REEs) are essential ingredients in contemporary electrical products such as smartphones, vehicles, and even military equipment. The quality of these products relies mainly on the concentration, types, and purity of these elements. As a result, the supply and demand for REEs have become increasingly sensitive with the emergence of the US-China trade war. Furthermore, these non-renewable resources have gained even more traction, due to dynamic economic growth in the Asia-Pacific region, namely China, India, and ASEAN nations. Many high-tech industries that are underlying this growth, are driven by the utilization of REEs. The market for REEs, dominated by China, represents a new dynamic in the geopolitics of the Asia-Pacific region, enhanced by the US-China trade war.

The term Rare Earth Elements (REEs), could be considered a misnomer. Located mostly in the bottom second row of the periodic table, these REEs are known as lanthanides. Scandium and Yttrium are exceptions, due to their occurrence in the same ore deposits as the lanthanides, attributing similar chemical properties. They have been prioritized as the “Vitamins of Modern Industries” and are indispensable and irreplaceable in electronic, metallurgic, magnetic, catalytic and technological areas. These 17 elements are classified into three groups: including light REEs (the highest demand in the market), Medium REEs, and High REEs, based on increasing atomic number. Each group has its own chemical and physical properties, with different functions in industrial applications. These metals are not easily purified from their the naturally-occurring ores, but are more commonly extracted from carbonates, fluorides, phosphates, oxides or silicates. Getting the highest purity of these elements has been a significant challenge for process engineers.

Their unique silver colour, in combination with high lustre and electrical conductivity, make them very useful in the application of modern industries. The global supply chain of high-tech industries requires these elements, in order to improve the efficiency of their final products. Their exceptional functions are found in high-tech applications such as cancer treatment, rechargeable batteries, advanced ceramics, computers, watches, wind turbines, catalysts in cars and oil refineries, televisions, lighting, lasers, precision lenses, fibre optics, superconductors, and glass polishing. Moreover, REEs are in demand for military equipment including jet engines, missile guidance systems, missile defence system, and satellites.

The rising demand of these elements in the global market has caused international trade to become more volatile. The supply chain is susceptible since REEs are small and concentrated around a handful of suppliers, namely China, Australia, Malaysia, Myanmar, and Russia. There are four stages prior to its readiness for use in product development by factories. The stages consist of exploration, mining with legal commercial permission, processing, and production by isolation of elements based on needs.

Competitive pricing and advanced processing technology in China, put them at the forefront on an international scale. Furthermore, China’s vast reserve and production capacity increases global dependency on Chinese REEs, further strengthening their presence international trade. The shift in monopoly of the REE market began in 1987 after Deng Xiaoping’s statement: “The Middle East has its oil. China has rare earths”. The Senkaku-Diaoyu island disputes between Japan and China in 2010, also impacted the REE supply chain, due to both nations’ involvement in the same market. Currently, the market share of REEs shows China controlling 90% of global exports and 80% of US REEs imports are from China. While the uncertain impacts from the US-China trade war persists, the tariff by China on REE exports to the US remains an obstacle for high- tech product manufacturing. This tit-for-tat game between the two superpowers could push China to intervene in the supply chain of REEs. If this occurs, the potential consequences could be grave and would be felt by all actors involved. However, the REE market could be counter-balanced by other nations by increasing local production, developing mine prospects according to price fluctuations, and reusing, recycling, substituting alternative sources of the minerals, all backed by government policies. The impacts on the REE market were evaluated by inter-locked scenario analysis, described in the review paper published in 2018 by the Materials Research Society on “Rare Earths: A Review of the Landscapes”.

The possible change of China’s policy on REE supply could allow other countries to explore substitutes. ASEAN, however, has paid little attention to the discovery, processing technology, and market segmentation of REEs, albeit a minor supply of the materials by Malaysia and Myanmar. Back in 2012, a Chinese company showed interest in building a REE plant in Laos, but was rejected due to environmental reasons. Most of the ASEAN nations are in the emerging stage of their economies, requiring more electrical products that utilise REEs. However, they lack REE policies and specialised human resources. Japan has placed eyes on Kazakhstan, Vietnam, in addition to its own sources, while India has initiated exploration on its sea floors. The possible economic opening of North Korea could be another key factor, due to its abundant source of REEs.

However, studies have shown that the aforementioned nations might face technological challenges in mineral processing, environmental impact, regulation, and pricing. The best option for developed nations, based on these constraints could be the recycling of REEs from waste. Likely, most nations will continue to depend heavily on China for sustaining the supply chain of REEs, unless policy actions are taken from both demand and supply side. Cambodia could potentially source their own REEs, if more focus was emphasized on their mining and future resource management. Consequently, REEs are not just valuable metals used in production, but significant geopolitical drivers in the Asia-Pacific Region. These elements play a crucial role in the US-China trade war, amplified by the increasing global demand for the manufacturing of electrical products. The views expressed are the author’s own and do not reflect the views of the Asian Vision Institute.