Reuters World News - China's dominance in critical minerals

Episode Date: June 7, 2025

Decades ago, China foresaw what the U.S. didn't - a future dependent on critical minerals. Now, the U.S. is playing catch up as China’s export controls threaten global supply chains. Join Laurie Chen, Ernest Scheyder and Jarrett Renshaw to hear the latest on critical minerals, particularly what China’s dominance means for the modern world. Listen to part one here.  Sign up for the Reuters Econ World newsletter ⁠here⁠. Listen to the Reuters Econ World podcast ⁠here⁠. Visit the Thomson Reuters Privacy Statement for information on our privacy and data protection practices. You may also visit megaphone.fm/adchoices to opt out of targeted advertising. Learn more about your ad choices. Visit megaphone.fm/adchoices

A lot of our modern life requires critical minerals. Phones, cars, lights, cameras, they all depend on these deposits of rare earth. And right now, China is in the driver's seat. In April, Beijing suspended exports of a wide range of rare earth metals and magnets after the U.S. imposed heavy tariffs on China. The move has thrown automakers, aerospace manufacturers, semiconductor companies,

and military contractors into something of a panic. Automakers are warning this shortage could force car factories to shut down within weeks. On this weekend episode of Reuters World News, how China came to dominate this supply chain and what it means for global politics going forward.

I'm your host, Jonah Green. I'm joined now by Lori Chen, Ernest Scheider and Jared Renshaw. Lori covers Chinese politics in Beijing. Ernest covers the green energy transition and the minerals that power it. And Jared covers the White House. Welcome all. Hello. Paige, great to be with you. Hello. Hi. Ernest, you were in D.C. this week to attend a minerals conference. I mean, first of all, that sounds very fun. But what does one do there? Yeah. So this is an opportunity for mining companies, processing companies, their investors,

policymakers and regulators to come together and essentially talk about critical mineral supply chains. Now, I got to admit, Jonah, this used to be a very niche conference. I've been going to it for about six or seven years, and they had very few attendees when it first started off. They had more than 500 attendees this time, and I got to tell you, the number one topic was the ways that China has been curtailing supply and the ways that Western manufacturers are looking to gain access to these vital building blocks. So that was topic number one. Yeah, what was the vibe there? Were people freaking out that you could tell? Well, I think there's two things that people are focused on, exactly what Beijing is doing and how automakers can

respond in other manufacturers, but then also what policies, especially around tax credit policies, the U.S. government can or should do to try to encourage more domestic production, not only of the mining side, but the processing side. So we know that there's the big, beautiful bill being debated right now in the U.S. Congress. There's some potential moves to take out certain tax credits. that would help companies that want to make rare earth magnets and processing equipment for these critical minerals inside the United States. And if those tax credits go away, well, then that could have an effect on President Trump's plans to increase the domestic production of these materials. Now, this is also the second time that I can remember, Ernest, that you are on this podcast to talk about critical minerals, which tells you a bit about how critical they are. Now, please refresh our listeners' memories. What are these? What are they used for? Critical mineral is the term means different things, depending on which government you're talking to. But in essence, a critical mineral is a mineral used to make a piece of electronic or other machinery

that you basically don't have a lot of supply of in your own country. So lithium, nickel, cobalt, rare earths, germanium, gallium, these are all considered critical by the U.S. government. And they're all used to power these high-tech devices that are increasingly being used across our electrified economy. So without them, we don't have laptops or cell phones or weapons, so you can see why the Pentagon is extremely focused on these areas. Right now, the United States mines very few of these and processes even fewer of them. But China shrewdly, over the past, call it 30, 40, 50 years, realized that control of these critical minerals would be essential to

dominate the 21st century economy. And that's why China's found itself in such a dominant position right now. And Lori, China controls 90% of the global processing for this. Is that right? Yes, that's correct, because processing is a very kind of labor-intensive, dirty, environmentally destructive process. And China, since it has sort of more lax environmental regulations and a very sort of complete supply chain, it's basically taken control of most of this process. And also China basically controls mostly production of not only light, rare earths, but also, yeah, it has a huge overwhelming dominance in sort of manufacturing heavy rare earths as well and supplying heavy rare earths. How do they become the dominant player in this supply chain?

I think just years of kind of increased focus on his industrial policy. And also, I think China sort of had a taste of what leverage it could wield over other countries in terms of rare earths in 2010 when it banned sort of rare earth exports to Japan entirely over a sort of territorial dispute. So that gave it a taste of the power it could wield over. other countries. And ever since then, it's been sort of trying to, like, very explicitly build up its resilience in supply chains and sort of dominance over the sector and self-reliance as well. And so right now they're being very selective with who gets it, which is causing a bit of a panic. We'll cover in a bit. But first, what reason does Beijing give for restricting

exports now? So this is ostensibly for national security reasons. And also China has been sort of tightening oversight of its defense supply chain, so to make sure none of these critical components or technologies make their way over to the U.S. as well. And this is one area where they have a real kind of stranglehold. I want to point out a lot of China's know-how here came, actually, if we go back to 1951, actually. That year, New York's Columbia University awarded a PhD to a Chinese student, gave him a PhD in chemistry. And he went on to move back to mainland China and basically help create the modern Chinese rare earth industry. So much of that know-how started in the United States, but because in the latter part of the 20th century, mining was just not considered a sexy industry

by U.S. students or academics or investors or others, that's part of the reason why the entire supply chain atrophied inside the United States. And as Lori was saying, China realized the potential there and invested heavily not only in education, but in the mining and processing of these really important materials. What percentage is China mining itself versus buying a mine in a third country and bringing it home to process? I mean, critical minerals are not monolith, right? I mean, there's so many different types and many of them are extracted or mined and processed in very, very different ways. The United States and its allies do have some deposits and processing capabilities for some critical minerals, but not all. And China, though, has dominated that processing or that

middle spot. It does have some deposits of critical minerals within its own borders. It does actually control the world's largest rare earths mine, but it has also invested in mining companies across the globe. So Chinese mining companies operate in the Democratic Republic of the Congo, which has the world's largest supplies of cobalt. They're also huge miners in Indonesia, which has the world's largest supply of nickel. And they're also heavily invested in lithium projects all across the globe. many of those critical minerals make their way back to mainland China for processing, but for things like lithium, for instance. I mean, right now the U.S. has extremely little lithium processing capacity.

The world's largest lithium company is headquartered in North Carolina, and it mines in Chile and Australia. And most of the lithium that it mines in those two countries goes to China for processing. Lori, you've also written about the bureaucrats who are managing all this within China. How are they determining who gets what and licensing these critical minerals? How does it work over there? Yeah, so basically China says that these export licenses are not targeted at any specific country. So before when these restrictions were first implemented last in April,

a lot of people interpreted that as kind of retaliation against the U.S. and a lot of people thought that the U.S. would basically get virtually none of these rare minerals. So what was agreed upon at Geneva? The Chinese basically agreed to allow to basically place the US on the same par as other countries, so basically subjecting them to the same kind of heightened scrutiny and compliance in the application process for these licenses, say, Japan or European countries. So it never sort of promised to remove these export licenses completely. And that's where a lot of these sort of confusion and misunderstanding,

especially from the Trump administration, has come from. So the process of approving them is extremely lengthy and bureaucratic. We've heard from sort of European and US companies that they've been asked to provide, in a lot of cases, quite sensitive and proprietary information relating to IP, all for the purposes of identifying their exact end users, because the Chinese are very paranoid about these rare earths getting into the hands of the defence sector in particular. So to the industries that are utterly dependent on these rare earths, what has been the impact and what are the big fears here if it continues in this world? way. I mean, we heard the warnings from automakers this week. What we've seen as a steady drumbeat in the last few weeks of automakers warning that production could halt by the end of the summer, we've seen German automakers have similar warnings, Indian automakers, U.S. automakers. You say without these critical minerals, particularly the magnets, that eventually they'll run out of

supplies and therefore have to shut production of cars. And obviously, in U.S. and Germany, you know, car manufacturing is a big part of the economy. And so how is the U.S. government responding? Joe Biden put a big priority on critical minerals, and we're seeing Trump take a similar stance. So far, Trump has issued an executive order that leverages something called a Defense Production Act to boost production here in the U.S. He has also issued an executive order on to promote deep sea mining, which is kind of an untested, expensive, capital-intensive process to get these from deep-sea mining beds.

We're seeing in Ukraine, there's a Ukraine-critical minerals deal that has a long, long runway, but could provide some critical minerals to the U.S. And all that taken together is all about trying to get increased domestic production of these things. It's not going to happen tomorrow. It's not going to happen a year from now. This is a real long-term. It's like turning a ship. This is not something that's going to happen overnight. So think about sort of the opposite of what China is doing right now. If it opens the floodgates and puts a bunch of rare earth magnets onto the global market, well, then the price would plummet. So if you invested billions of dollars in a U.S. facility, well, that could go up and smoke. And that has happened before, as Lori was mentioning in 2010, after Beijing blocked exports to Tokyo, they reversed themselves a few months later. And the price of rare earth and the global stage plummeted. So by unlocking some of this capital, the goal by President Trump and his administration is partly, to assuage some of those financial concerns. Now, we'll actually see how successful it is in the coming days, weeks, and months. And I think that also speaks to the Tough Balancing Act that

U.S. presidents have here. Typically, tariffs would be an instrument that you could use to boost domestic production and restrict imports. But as you can see here, that these are vital to the U.S. economy. And we don't have domestic production at a capacity that could sustain that level of economic activity. So it is a tough balancing act and one that's going to have a lot of stops and starts, incremental gains, incremental losses before I think the U.S. finds itself on some kind of solid footing. The word leverage has come up a few times. And the practical effect of Beijing restricting exports is that it gives them leverage over what exactly? Well, you know, the U.S. and China are engaged in these bitter trade disputes. And oh, and I should mention as we were recording this today,

Trump and she spoke on the phone, and we don't yet have a readout as to what that is. Presumably, they haven't solved all of the problems that we're discussing today. But what is the political effect of these export controls? I mean, just as objectively speaking right there, Trump put tariffs on about 145 percent. It rattled the markets. And then in response, China put on these export controls specifically on critical minerals, knowing the type of leverage they have. And I think that has played out.

We have seen global industries upended as a result. We have seen Trump be angry about that. He is accused China of violating some trade agreements that they did in Geneva. And as you mentioned, there is a call, I think maybe even ongoing now. Chinese state media was first to put out a small readout of it. And it was noteworthy did they say that Trump initiated the call. So that's just suggesting that somehow Trump's coming needs to come to the table and needs to need to have this call more than China. Well, he's getting a lot of pressure, right?

No doubt from industry automakers. And Ernie could definitely speak to the pressure since he was there all week about what they're saying. Yeah. I would just add to that that the entire supply chain ranging from those magnet manufacturers, all the way to their customers, things like automakers and others, they need supply of these magnets. and there are very few alternatives out there on the global market. There are really no alternatives fully online in the United States yet, and it'll take a very long time to have the United States even match the capacity for Chinese rivals right now.

So if you are in a business that you are constantly manufacturing a product, like a car or another household appliance or something else that needs these magnets for construction, well, then you are really, really, really going to want to access those Chinese supplies yesterday. And so that, I think, just underscores the huge tension and the pressure that industry is putting on the White House right now. Laurie, you've also written about how diplomats and business executives are stepping into urge Beijing to loosen up. How are they trying to appeal to China? And is it working? I think it's very hard to pinpoint exactly the sort of cause and effect of this. There has been a slight uptick in licenses being approved for U.S. firms and also European

firms, but there's still like hundreds and hundreds outstanding, possibly even thousands. So it's something that's definitely being raised in every single meeting that any sort of developed nations, officials or leaders have with their Chinese counterparts. I think the EU Trade Commissioner Mara Sufkovic also raised it in a meeting with Chinese Commerce Minister Wang Wintaw yesterday. There's still sort of a desperate need for clarification from both sides on how to comply with these sort of licensing restrictions and also. they've just been ceaselessly urging China to speed up the approval of this, despite it being a very

sort of lengthy, a bureaucratic process. A Japanese business delegation is visiting China this week, and that is very much at the top of their agenda when meeting Chinese officials. Can other countries help fill the gap? In talking to folks, I think one thing we see is Trump has set off trade negotiations with dozens of countries that's set to conclude July 8th, I believe. I expect to see a lot of these trade negotiations include language around critical minerals and in some way to boost the supply chain to the extent that these trading partners can work

together to kind of cut China out. So that's something to watch out moving forward as we see the details of these trade deals come to light. Africa is an area that I think will be interesting to look at in the next few years where the U.S., even under Biden, was really trying to make inroads there with trading partners to get critical minerals to the U.S. and create relationships. And China's doing much the same. So that's going to be a real battleground in terms of where maybe the next generation

of critical minerals come from. Thanks again to Jared, Lori, and Ernest for their time and expertise. You can read more on this story on roiders.com or the Reuters app. Reuters World News is produced by Gail Issa, David Spencer, Sharon Reich Garson, Kim Vannell, Christopher Wall, Jasper, and me, Jonah Green. Our senior producers are Tara Oaks and Carmel Crimmons. Our executive producer is Lila Decretzer. Sound design and musical composition by Josh Summer.

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