US weapons industry faces rare earth fix

China is exploring whether it can hurt US defense contractors by limiting supplies of rare earth minerals that are critical to the industry, the Financial Times reported.

Industry executives said government officials had asked them how badly companies in the US and Europe would be affected if China restricted rare earth exports during a bilateral dispute, the FT reported, citing people it didn’t identify involved in the consultation.

The move throws the spotlight back on the group of elements that are used in everything from smartphones to fighter jets and have previously been a focus in the deteriorating trade relationship between China and the US.

China controls most of the world’s mined output, with an even tighter hold of the processing industry, leaving American industries with few avenues to immediately secure short-term supply if curbs were to be put in place.

The foreign ministry in Beijing didn’t immediately respond to a request for comment on a public holiday, while calls to the ministry of industry and information technology went unanswered.

The government last month issued draft guidelines for the sector, with proposals including firms abiding by export regulations and the possibility that the nation restrict or suspend exploration and processing of rare earths to preserve natural resources and protect the environment.

The specter of export curbs arose in 2019 amid a deepening trade war. China accounts for 80 percent of rare earth imports into the US, and Beijing had prepared a plan to restrict shipments as a way to target Washington.

While those restrictions never eventuated, it pushed the American government to seek out ways to cut their reliance on a single source of supply.

Meanwhile, Myanmar’s military coup and declaration of a state of emergency has sparked concern in China over metal and mineral supplies amid already high tin, copper and rare earth prices.

China Rare Earth (0769) jumped by 7.79 percent to HK$0.83 on Tuesday.

Bloomberg and staff reporter

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