China is the world’s biggest producer of rare-earth elements, which are necessary for many advanced products from planes to semiconductors, accounting for more than 90 percent of global supply, according to media reports
Experts said that in China, the industry remains largely trapped in overcapacity in the upstream exaction of rare-earth elements, and is in dire need of moving up the industry chain to higher-end production. Xi’s trip was meant to boost that process.
“China’s rare-earth industry structure is very imbalanced and profit margins have been squeezed in the international market,” Lin said.
Apart from illegal rare-earth mining and smuggling that dilutes the industry’s profitability, much of the profit squeeze is attributable to the low threshold and low added value in the difficult and dangerous process of extracting rare-earth elements from ore. This part of the industry chain imposes high environmental cost but yields limited profits, analysts said.
“Consequently, although China is the biggest exporter of rare-earth elements in the international market, we are not making as much profit as we should,” Chen Zhanheng, a vice secretary-general of the Association of China Rare Earth Industry, told the Global Times on Monday.
The trade war between China and the US also highlighted the urgency for China to speed the upgrading process. “To secure and improve our independent R&D ability in the area is meaningful to the development of key industries, and increasingly crucial given the trade friction that is going on between China and the US,” Lin said.
In recent years, the Chinese government has been making efforts to reshape the industry and encourage companies to improve their R&D ability in the advanced processing of rare-earth elements.
In a statement released by the Ministry of Industry and Information Technology in 2016, the government pooled the sector’s resources by merging numerous rare-earth companies into six large ones to dominate the industry. As of 2016, some specific rare-earth products, including hydrogen storage materials, reached 70 percent of global production.
China has also been the country with the most rare-earth related patent filings in recent years, showing its determination to upgrade its production techniques.
The Cost of rare earth magnet is increasing also, the NdFeB price has been increased a lot since China-US trade war started.