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China's tightening grip on its rare earths sector
Smuggling was rampant in China when China, during a diplomatic spat in 2010, restricted rare earth exports from China to Japan. When China imposed new restrictions on April of this year, it caused shortages in the auto industry within two months, leading to some to stop production. Beijing, through quotas and consolidation, has transformed a sector that was once unruly, accounting for 90% of the rare earth processing capacity into a powerful diplomatic tool. Here's a brief summary of the ways in which the number one producer of rare earths has tightened the grip on the industry. CONSOLIDATION China started its crackdown in the mining and processing sector 15 years ago. There were hundreds of miners. In 2013, ten producers controlled nearly all mining. Today, only two giants are state-owned: China Rare Earth Group (CREG) and China Northern Rare Earth Group High-Tech. David Abraham, associate professor at Boise State University in Idaho, said that the consolidation process, which lasted for more than a decade, gave Beijing greater control while also curbing environmental damage caused illegal and reckless mining. In the past, rogue miner's illegal supply chain delivered ore to non-authorised separation facilities. The finished products were then disguised and sent abroad. In 2014, it was estimated that 40,000 metric tonnes of rare earth oxides had been smuggled abroad. This is half the amount exported by official means. Magnet makers have not been consolidated as much as the upstream mining sector. There are dozens of magnet producers and processors in China, such JL Mag Rare-Earth, and Ningbo Yunsheng. China has introduced a tracking system in its rare earth magnet industry since June. Companies are required to provide information, including customer details and volume of transactions. The ultimate goal is to track the entire chain. QUOTAS China's production quota system (introduced in 2006) has been used to control the supply, along with its consolidation. Quotas are set for mining, smelting, and separation. They are usually issued twice a years and widely monitored to gauge global supply. Beijing has gradually reduced the number of groups eligible for quotas. In 2024, there will only be two state-owned companies, as opposed to six before. China's supply growth has been dramatically reduced since 2024, when the total mining production quota increased only 5.9% annually compared to a 21.4% annual increase in 2023. Analysts and traders predict that mining output quotas will either remain flat this year or increase by as much as 5% compared to 2024. Beijing restricts the export of technology as well. Since long, the tools and methods used to separate and extract rare earths are banned. It extended the ban in late 2023 to include technology used to manufacture rare earth magnets. Staff Reporting; Editing by Lewis Jackson, Sonali Paul
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China's export controls on rare earths are bad for business, but good for Beijing
China's export restriction on rare earths has brought the global auto supply to a standstill and the U.S. president Donald Trump to the negotiation table. They're a major headache for businesses in the United States, who are already suffering from a slowing economy. Beijing cut rare earth and magnetic exports in April as a retaliation to U.S. Tariffs. This has led to a drop in magnet makers' overseas sales, at a time when they are also facing pressure from an economy that is weak and EVs, one of their main markets. Even after the U.S. announced on June 27, a deal with China to restart rare earths production, it is unlikely that magnet makers will see any relief anytime soon. In a WeChat post 12 hours after the announcement, Baotou Rare Earth Products Exchange (a state-backed trading site) noted that stock was piling up at warehouses. Export curbs caused a 75% decline in magnet exports within two months of the restrictions being imposed, and several automakers were forced to temporarily halt production. In May, Baotou Exchange, located in Inner Mongolia and one of China's rare-earth hubs, stated that the restrictions had caused a crisis for local magnet manufacturers. Public filings reveal that while China consumes 90% of rare earth magnets worldwide, exports will range from 18% to 50 % of revenue by 2024 for the 11 largest publicly traded magnet producers based on capacity. Ellie Saklatvala is the head of metal prices at commodities information provider Argus. They have temporarily lost a large part of their clientele, and there is no guarantee that they will ever regain this customer base. Few major listed companies that deal with rare earths have directly commented on how the controls may affect their business. Two rare earth magnet manufacturers, who spoke on the condition of anonymity due to the sensitive nature of this issue, said that revenue was expected to drop in 2018. It's difficult to say how much we will lose for the moment, but it will be a big impact on our export business," said one rare earth magnet producer, who requested anonymity because of the sensitive nature of the issue. According to a second source who declined to give their name, small and medium sized producers reduced production by 15% between April and May. EXPORT CURBS IMPACT UNDERESTIMATED China's rare-earth magnet manufacturers are also victims of their own success, much like the U.S. chipmaker Nvidia. In April, after the announcement of export restrictions, the share prices of listed magnet manufacturers plummeted. They were caught in the geopolitical crossfire between Washington's tariffs on imports and China's response. They have recovered from their lows in the last three months. Cory Combs is the head of Trivium China's critical mineral research. He said that there was no reasonable forecast for the future of this industry. He said: "I can see different market outlooks that are more or less positive depending on assumptions. But none of them result in a sustained rise in the share price as we are seeing." He said that many magnet manufacturers are also privately owned, and therefore share prices can only give a limited picture. Many producers were already facing weaker conditions in their home countries, such as a price battle among electric vehicle manufacturers, a key segment of customers, which has seen manufacturers demanding discounts from suppliers. Four sources, who spoke anonymously, said that the highly customized nature of magnet products made it difficult to resell them domestically. This forced magnet makers to keep the cargos in storage while they waited for licenses. CONSOLIDATION MAY BE IMPACTED BY DIFFICULTIES In its annual report, released late April, Baotou Tianhe Magnetics Technology Co reported the export restrictions and warned that export revenues could fall if the global situation worsened. Yantai Zhenghai Magnetics announced last week that it had obtained export licenses, and that production was as usual. Investors are referred to the upcoming financial filings of Yantai Zhenghai Magnetics for more specific results. According to Argus, Saklatvala, a return to the old status quo will be unlikely if rare earth controls are implemented similarly to those for other critical minerals such as germanium and Antimony. China implemented export controls on antimony and germanium in 2023 and 2024. Customs data show that despite the fact that most of these materials are used by civil industries which should have no problem obtaining licenses in theory, exports still haven't recovered. Europe receives only a fraction of the antimony that it imported from China prior to export controls being imposed in September last year. These shortages have already caused major problems for the lead-acid batteries commonly used in gasoline engines. Saklatvala said that, "looking at China's recent controls on exports of other critical minerals such as antimony", it was clear that exports can take longer to normalise and resume than anticipated. David Abraham, an affiliate professor at Boise State University in Idaho, says that the large amount of information requested by authorities is a permanent change to the industry, which will cause delays and increase costs for producers. He said that "in a sense, it's impossible to go back." He said that in an industry with hundreds of manufacturers the pressures may lead to a consolidation. "I don't know if Beijing views that as a negative thing because more consolidation is helpful to control and understand where materials go."
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Copper prices drop amid uncertainty about US trade talks
The Shanghai Futures Exchange (SFE) and London Metal Exchange (LME) saw copper prices fall on Monday due to concerns about U.S.-China trade negotiations, and the uncertainty around potential tariffs before President Trump's deadline of July 9. As of 0707 GMT the three-month contract for copper on the LME dropped 0.68%, to $9,797 a metric ton. The most traded contract on SHFE fell 1.12%, to 79270 yuan (11,051.78) per ton. Trump announced on Sunday that the U.S. was close to finalising a number of trade agreements. He will inform about a dozen nations starting on Monday of increased tariff rates. The higher rates are scheduled to go into effect on August 1. "Markets worry that Trump's policy could trigger a slowdown in the global economy and harm demand for industrial commodities," ANZ stated. A Shanghai-based metals analyst from a futures firm said that "Copper prices are expected to soften due to the recent rise in copper stocks on LME and SHFE and the dampened consumer enthusiasm over higher prices." Copper inventories By July 4, SHFE-monitored storages had gained for the third week in a row, rising by 3.7% to reach 84,589 tonnes. This was 73.7% less than the previous year. Total Copper Stocks The LME registered warehouses saw a rise of 5% in four days, up to Friday. SHFE tin fell 2.03% to 263,520 Yuan per ton. Nickel dropped 1.6% to 125,540 Yuan. Zinc declined 1.16% at 22,090 Yuan. Aluminium lost 1.11% at 20,410 Yuan. Lead shed 0.35% at 17,210 Yan. LME tin fell by 1.36%, to $33,245, Nickel dropped by 1.3%, to $15,090. Aluminium went down 1.14%, to $2.560.5. Zinc was down 0.95%, to $2.698, and Lead was down 0.78%, to $2.042.5. Click or to see the latest news in metals, and other related stories.
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Typhoon Danas hits southern Taiwan with winds records, injuring dozens
Early on Monday morning, Typhoon Danas slammed southern Taiwan with strong winds and heavy rain. Two people were killed and more than 500 injured in the rare attack to the densely-populated west coast of Taiwan. Taiwan is frequently hit by typhoons, but they usually land on the sparsely-populated and mountainous east coast that faces the Pacific. The storm, which reached winds of up to 220 km/hr as it ripped through Yunlin in the southwest county after landing on Taiwan's southern shores late Sunday night, forced businesses and schools to close along the west coast. Government data revealed that over 700 trees had been felled in western cities and towns, and road signs had been ripped and scattered across the streets. Local television footage showed that in the southern city Tainan, concrete poles snapped at their base, while a wooden temple gate collapsed. Taiwan's weather authority had listed Typhoon Danas as the second strongest storm at one time. Since then, it has weakened and is expected to hit eastern China this week. In a Facebook post, President Lai Ching Te urged citizens to prepare for the typhoon. Government data revealed that power was cut to over 700,000 homes and more than 300 domestic and foreign flights were cancelled. North-South high-speed rail service was reduced. According to the National Fire Agency, one person died when a tree fell on them while they were driving. Another person died after a respirator malfunctioned because of a power outage. No major damage was reported in the Tainan Science Park, which houses tech giants like TSMC. According to CCTV, maritime officials in Zhejiang Province, eastern China, raised their emergency response level to the second highest level on Monday. CCTV reported that as of 10 am (0200 GMT), 64 ferry routes and 121 passenger vessels had been suspended in the province. As a precaution, authorities also suspended 181 construction projects including wind farms. According to the China Meteorological Administration, Danas will gradually approach coastal areas between Zhejiang’s Taizhou city and Fuzhou in the neighbouring Fujian Province. (Reporting by Yimou Lee; Additional reporting by Ethan Wang and Ryan Woo in Beijing; Editing by Saad Sayeed) (Reporting by Yimou Le; Additional reporting in Beijing by Ethan Wang, Ryan Woo; Editing by Saad sayeed)
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EU delays signing climate pledge with China, FT reports
A top climate official said in comments published by the Financial Times on Monday that the European Union will not sign a joint climate pledge with China during a summit to celebrate a half-century diplomatic relationship. EU climate targets are some of the most ambitious in the world, but have always been based on domestic emission reductions. It faces a deadline of mid-September to submit to the United Nations a new climate target for 2035. Officials from the EU said that Brussels refused Beijing's repeated demands for a climate agreement after the summit between the second and third largest economies of the world, unless China promised to do more to reduce greenhouse gas emissions. Wopke H. Hoekstra, Climate Commissioner at the Dutch newspaper De Tijd, said: "There's only merit to having a statement from our perspective when there are also nuts to crack and ambition to display." China is likely to miss its five-year target of a 18% reduction in carbon intensity. The European Commission has not responded to an immediate request for comment. Reporting by Dheeraj K. in Bengaluru, Editing by Tom Hogue & Clarence Fernandez
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Vietnam imposes antidumping tariffs on hot-rolled Steel from China
Vietnam has implemented an anti-dumping tax of up to 27,83% on certain hot-rolled coils steel products that originate from China, after a similar tariff had expired. The ministry stated in a press release that the tariff will remain in effect for five years. In March, the Ministry imposed a temporary anti-dumping levie that lasted 120 days. Baoshan Iron & Steel, Maanshan Iron & Steel are among the companies that will be hit with the 27.83% duty. Guangxi Liuzhou Iron and Steel Group also faces duties of 23,1%, which is higher than the 19,38% rate imposed by March, according the statement. It said that "Domestic Production suffered significant damage." There is a direct correlation between damage to the domestic industry and the dumping of imports from China. Vietnam launched an investigation into anti-dumping in July last year following complaints by Vietnamese producers. Vietnam's government reported that between January and September of last year, the country imported 8.8 million tonnes of hot-rolled metal, of which 72% came from China. Reporting by Phuong nghuyen, Editing by David Stanway
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Amman's copper concentrate export is being questioned by Indonesian Minister
Indonesia's Interior Affairs Minister Tito Karnavian said on Monday that he had asked the country’s mining ministry to lift a ban on Amman Mineral International's export of copper concentrate, citing the effect it has on the local economies. Tito Karnavian said that the Nusatenggara Barat Province, where Amman Mineral International operates, saw its economy contract by 1.47 percent annually in the first three months of the year. This was due to the inability of the company to export concentrates while their smelters are being upgraded. Indonesia has banned the export of copper concentrates, as well as other raw minerals. This is to encourage metal-processing at home. Amman, however, was allowed to continue exporting until December 2024 when the new smelter was expected to be operational. Amman's newest smelter made its first copper cathode in March. This material is used to make wires, cable and electronic products. However, the company stated that it would take time for "optimal, sustained operations" to be achieved. Tito said at a government meeting that he had asked the minister of energy and minerals if there was a way to export while the smelter is being built. He did not reveal the answer. A spokesperson in Amman and officials at the ministry of mining did not respond immediately to requests for comment. Amman stated in February that it had asked the government for flexibility to allow the company to export copper concentrator. Amman's copper-smelter can produce up to 220,000 metric tonnes of copper cathode annually. Reporting by Bernadette Cristina Munthe and Fransiska Nangoy, Editing by Harikrishnan Nair
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INDIA BONDS - India bonds remain steady as traders wait for new triggers
Indian government bonds were barely traded in early Monday deals, as traders did not react to any new domestic or global signals. As of 10:10 am IST, the yield on the benchmark bond for a 10-year term was 6.2926% compared to Friday's closing of 6.2947%. The trading volume was low at the beginning of the week. However, investors will be keeping an eye on U.S. Treasury counterparts, who have been trending lower since Asian hours. The yield on the 10-year U.S. Treasury note was at 4.3319 percent, slightly lower than Thursday's increase, following data showing that more jobs were created in June than anticipated. Brent crude futures fell 0.72% to $66.76 per barrel. A trader in a primary dealer said, "Foreigners have been buying Indian Bonds lately. We are closely monitoring that for future direction." "Public sector banks are selling bonds for a while, so someone will have to absorb this. If foreign investors continue buying, we could see a rally in bonds." The trader said that bonds would still trade in a range. The 10-year yield should be between 6.28% and 6.32%. Foreign investors increased their purchases of Indian government securities under the Fully Accessible Route last week. CCIL data revealed that investors bought bonds worth 87 billion rupees (about $1.02 billion) under the FAR in this period. State-run banks sold net bonds last week worth approximately 143 billion rupees. Early deals in India's overnight swap index (OIS), which is a derivative of the Indian stock market, showed little change as trading volumes were low. The liquid five-year swap rate was a fraction lower, at 5.67%. $1 = 85.7075 Indian Rupees (Reporting and editing by Khushi malhotra)
What matters most to world markets in a tight US election race
The U.S. governmental election, the most substantial vote for financial markets in an electionpacked year, is weeks away.
With Democratic Vice President Kamala Harris and Republican Donald Trump locked in a close race to win the Nov. 5 election, we take a look at what matters most for world markets.
EUROPE IN THE BALANCE
For European equity markets, a Trump triumph might spell trouble for export-heavy sectors, especially German car manufacturers such as BMW but likewise LVMH and other luxury items makers as issues of restored trade stress loom.
Barclays has actually cautioned of possible high single-digit portion drops in European profits need to trade conflicts reignite. Trump has drifted plans for blanket tariffs of 10-20%. on virtually all imports to enhance U.S. manufacturing.
On the other hand, a Harris win would be a reasonably much better. result for European equities. This could stimulate sustainable. energy, a possible tailwind for utilities with big U.S. jobs like Orsted and Iberdrola.
Over the longer term, however, her plans to raise corporate. taxes from 21% to 28% might suppress margins for American companies and. European dollar earners alike. A further cut under Trump would. likely be invited on both sides of the Atlantic.
The election might have implications for the war in Ukraine. Trump and some Republican Politicians in Congress have actually questioned the worth. of U.S. funding for Ukraine's two-year fight versus Russia,. while Democrats have actually pressed to strengthen Ukraine.
Aerospace and defense stocks have acquired over 80%. considering that Russia invaded Ukraine in 2022.
CURRENCY SWINGS
Trade tariffs are crucial for traders on the planet's. most-actively traded currencies.
The euro, trading below September's 14-month peaks at around. $ 1.09, is viewed as remaining in the losing camp if a Trump. win ways higher universal tariffs.
A Trump win, in the eyes of the marketplace, would take. euro/dollar to the $1.05 location, whereas a win for Harris. would see the rate relocate the opposite direction, above $1.15,. stated BlueBay Property Management CIO Mark Dowding.
Geopolitical risks, particularly in the Middle East, that. set off a surge in oil costs and harm economic growth, likewise. make the euro vulnerable, analysts stated.
ING included that a Trump win might also hurt the Australian. and New Zealand dollars-- currencies of economies depending on. trade from China, a main target of higher tariffs. Around 37% of. Australia's and 29% of New Zealand's exports land in China, ING. noted.
The Swedish and Norwegian currencies were likewise seen as. susceptible to worldwide trade characteristics, while Canada's dollar could. suffer if a Harris win is viewed negatively for the U.S. economy.
CHINA LIVE ROULETTE
Among the greatest stakes gambles in global markets right. now is whether to place bets on China, where federal government stimulus. pledges have revived financier interest that might be canceled. out by tariff walkings or trade wars under Trump.
Investors expect Harris to pursue targeted tariffs and Trump. to lean towards more aggressive, disruptive policies.
If Trump wins, the (political) rhetoric towards Chinese. companies would be horrible, Edmond de Rothschild worldwide. equities manager Christophe Foliot said.
That would likely increase China scepticism amongst U.S. investors and magnify a trend for multinationals to remove. made-in-China elements from their supply chains, he added.
China deals with even more hits from a Trump administration. potentially cutting Chinese companies' access to brand-new. technologies, which would restrict efficiency, Oxford Economics. said.
And threat consultancy Eurasia Group said a Trump victory. would press EU countries to likewise decouple from China.
Goldman Sachs strategists approximate that Chinese stocks could. fall by 13% if Trump levies a 60% tariff on Chinese goods.
But threats of an export slump might also inspire Beijing to. follow up monetary stimulus with more considerable state costs. programs.
Potential new U.S. tariffs on Chinese items might increase. the intensity and durability (of stimulus), Goldman said.
EM ON THE LINE
Emerging market (EM) equities are, on paper, prepared to shine. after underperforming their developed-world peers for the better. part of a decade. The U.S. Federal Reserve has actually begun rate. cuts and the dollar, food and fuel rates are falling-- huge. increases for importing nations.
Investors state that a Harris win, indicating broad policy. continuity from President Joe Biden, could provide the assets a. tailwind.
But a Trump win, accompanied by worldwide tariffs, might come. down hard on any extreme optimism. Most investors state Mexico,. with strong U.S. trade ties, has the most to lose; those wagering. on a Trump win often switch on Mexico's peso.
JPMorgan cautioned financiers to remain neutral till the U.S. election risk has passed, and UBS alerted that the highest Trump. tariffs threaten losses of as much as 11% for EM equities in 2025.
The Swiss bank also said that its EM Threat Hunger index is. near 15-year highs, suggesting financiers are not fully prices. in the drawback risk of Trump tariffs to EM possessions broadly.
(source: Reuters)