Rare materials and high-tech, risks of the new act about Chinese export.
Chinese export restriction. A new law that governs the exportation of sensitive materials and technologies by asking companies and international consumers to observe all conditions required: otherwise, there will be penalties. Restrictions for rare metals’ export get stricter.
A massive acceleration to the commercial and technological war between USA and China has been given by the declaration of the Export Control Law (Ecl) from the Standing Committee of the Chinese National Assembly. This was the response from Pechino about Trump’s amministration on technological issues.
Thanks to this act, Pechino will be able to protect China’s national safety and interests, reinforcing legal foundation in order to define severe restrictions concerning the export of sensitive goods. Products that will be subject to this stricht control will be, for example, dual-use goods (militar and civil applications), nuclear goods, and, in general, all technologies essential for the Country’s safety. But this list won’t be the ultimate one, since the departments of the State Council and of the Military Commission will gradually be allowed to update it. In this case, the Export control Departmens will decide if licences will be given for foreign trade.
This measure is similar to the one that USA Government took against Huawei and other chinese companies such as Semiconductor Manufacturing International Corporation.
In fact, conditions will be decided according to National interest and safety, geographical destination, product’s background, final use, record of empoyees involved and, finally, current domestic and international regulations.
Ecl doesn’t have fixed aims, considering that neither USA, nor European allies are mentioned. Anyway, in case there will be security threaths by others, Chinese Popular Republic will surely respond in the same way. As noted by the director of the Mercator Institute for China Studies, Mikko Huotari, “this act will probably create many difficulties to other European companies. United States, China and UE are day by day intensifying their export control that, for this reason, will increase costs in order to meet these new regulations.
But when will China start to apply this new normative system? On one side, it is a necessary decision in order to guard against the american firmness; on the other one, Pechino is probably preparing for the weaponization of its commercial papers. DIa Piper, multinational legal consultancy agency, had noticed that this new normative system replaced the concept of “national safety” with “national safety and interests “of the Chinese Popular Republic, expanding the legal ways to legitimate the export control. Among the products that will be subject to these restrictions there are rare materials. Because of their applications in industrial fields, renewable energies, weapon systems and of USA’s and UE’s heavy dependence by Pechino, would bring high risks to these commodity market, such as niobium, titanium, tungsten, cobalt and antimony. Also, joint venture and R&D agreements bind together many Chinese companies that deal with technology.
Regarding rare metals, trade as already responded to these changes. Analysts affirm that rare earth magnets’ industry, which is one of the most important supply chain in China, has now much higher prices because of the high demand and Ecl risks. “Japan, USA and European countries are now buying huge quantities of rare materials to apply them in the production of advanced manufactures, in order not to face importation difficulties from China after the approval of the new normatives” affirms Zhou Shijian, former VP of the Chamber of Commerce for chinese metals and minerals. Moreover, Zhou has made it clear that Pechino could use rare earth materials as a “mean of retaliation” against the american restrictions to Huawei chip.
Both privates and western policymaker are concerned about this chinese players’ offer; especially the automotive industries, since they use a great quantity of neodymium and dextrose for electric vehicle. According to a research from Ubs investment back, Ev market growth will cause a doubling of NdPr exides prices within 2024. To be able to satisfy this market’s demand, the offer for these two metals should triple within 2030 (each electric vehicle needs five times of rare materials quantity compared to combustion engines).
Price increasing is a great incentive for the investments, as shown by 30 million dollars hedged in an extraction site in Greenland by an association of american, european and australian institutional investors. “Kvanefjeld Rare Earth is a global project about rare earth materials metallurgical composition, low-cost and of large availability ” explained the project manager, because the island seems to be well placed for being the base for a future international supply chain of rare metals”.
On corporate side, UE is highly deploying the European Raw Materials Alliance. Bernd Schafer, CEO of the European consortium Eit Raw Materials, says: “ without a reliable and sustainable access to rare materials, we’re dealing with the Green Deal and UE competitiveness. Erma’s principal aim is to ensure these materials’ supplies, by checking the chances to invest for a sustainable and socially responsible access in Europe, from primary and secondary sources. In a condition in which China places restrictions on this whole sector, these efforts become essential to guarantee the diversification of a supply chain that is already affected by a state of distrust and geopolitical competition. Also, the new Pechino’s five-years plans for the “emergent strategic companies” seem to move towards the domestic consumption and to rely on a massive foreign exporting.
This process of chinese “industrial supply chain modernization” means “less exportation of raw material, including rare earths materials, and a consequent increase of products export with higher added value, that will raise the prices” affirms Zhou Hongchun, State Council resercher on Global Times. What will be long-term aims of this act (if a domestic protection in such a hostile global trade context, or a form of retaliation against Washington) and the effects over the business? We will find…
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