• 4 minutes Europeans and Americans are beginning to see the results of depending on renewables.
  • 7 minutes Is China Rising or Falling? Has it Enraged the World and Lost its Way? How is their Economy Doing?
  • 13 minutes NordStream2
  • 14 hours Monday 9/13 - "High Natural Gas Prices Today Will Send U.S. Production Soaring Next Year" by Irina Slav
  • 4 hours California to ban gasoline for lawn mowers, chain saws, leaf blowers, off road equipment, etc.
  • 22 hours "Here is The Hidden $150 Trillion Agenda Behind The "Crusade" Against Climate Change" - Zero Hedge re: Bank of America REPORT
  • 23 hours GREEN NEW DEAL = BLIZZARD OF LIES
  • 2 days An Indian Opinion on What is Going on in China
  • 2 days "A Very Predictable Global Energy Crisis" by Irina Slav --- MUST READ
  • 2 hours Nord Stream - US/German consultations
  • 2 days Can Technology Keep Coal Plants Alive and Well?
  • 3 days Succession Planning in Human Resources for Vaccinated Individuals in the Oil & Gas Industry
  • 5 days Perfect Energy Storm in Europe: turning our back on fossil fuels is easier said than done!
  • 2 days U.S. : Employers Can Buy Retirement Security for $2.64 an Hour
  • 2 days Storage of gas cylinders
  • 3 days Two Good and Plausible Ideas about Saving Water and Redirecting it to Where it is Needed.
A Novel Solution To The Plastic Pollution Problem

A Novel Solution To The Plastic Pollution Problem

Global initiatives and new technologies…

Russia Could Boost Oil Production To 11.4 Million Bpd

Russia Could Boost Oil Production To 11.4 Million Bpd

Russia is currently pumping 9.9…

Nick Cunningham

Nick Cunningham

Nick Cunningham is an independent journalist, covering oil and gas, energy and environmental policy, and international politics. He is based in Portland, Oregon. 

More Info

Premium Content

Will China Cutoff Rare Earth Exports?

Oil prices sank once again on heighted fears of the U.S.-China trade war, this time because China has threatened to step up its response.

China threatened to cut off exports of rare earth elements to the U.S., a move that would intensify the trade standoff. The materials are used in a wide variety of electronics, including iPhones, electric vehicles, wind turbines, LED lights and even weapons systems.

Hu Xijin, editor-in-chief of the Chinese tabloid Global Times said that the government was “seriously considering” curtailing exports to the United States. But as traders and analysts told CNBC, the statement is murky because it is not necessarily an official threat from the Chinese government.

Still, the Trump administration continues to ratchet up pressure on Beijing, which increases the odds of a response. The U.S. has basically outlawed Chinese tech giant Huawei from doing business with American companies, and has explored additional sanctions on other Chinese companies.

Rare earths would add another complex layer to the trade battle between the two countries. “With the rare earths headline, I think investors are realizing that this is more than just about a trade war,” Michael Katz, partner at Seven Points Capital, told CNBC. In dollar terms, the rare earths trade is rather small. The U.S. has tariffs on $200 billion worth of Chinese imports, while the U.S. only bought about $160 million-worth of rare earths last year, according to Bloomberg. But rare earths’ importance vastly outstrip their dollar value because of the critical role they play in so many different technologies, as well as the lack of alternatives to them.  Related: Why EVs Can’t Do Without Oil

The U.S. depends on China for about 80 percent of its rare earth imports. Rare earth minerals are not exactly rare, but they are costly to produce and have environmental challenges associated with them, which makes setting up a mine difficult. As a result, China controls the vast majority – 71 percent in 2018 – of the global supply.

The possibility of a cutoff sank financial markets. The Dow Jones Industrial Average dropped 200 points when it opened on Wednesday. Crude oil was down more than 2 percent in early trading. “Oil prices are under pressure amid the further escalation of the trade conflict between the U.S. and China,” said Carsten Fritsch, an analyst at Commerzbank AG in Frankfurt.

The move comes a few weeks after President Xi Jingping made what appeared to be a calculated visit to a rare earths processing facility during a domestic tour. But on May 29, the rhetoric escalated. China’s People’s Daily wrote that the U.S. should not underestimate China’s willingness to fight back in the trade war, and used a tough sounding phrase meaning “don’t say I didn’t warn you,” according to Bloomberg, which has historical overtones that analysts understood as a serious threat.

However, there are challenges for China if it decides to go down this path. In 2010, China cut off rare earths exports to Japan over a standoff over the detention of a fishing trawler. The aggressive move drove up prices and sparked interest in alternatives sources of rare earths. China backed off after only a few weeks and resumed shipments. Related: The Next LNG Boom Will Dwarf The Last One

In the U.S., a bipartisan group of Senators are proposing legislation that would ease permitting requirements on setting up new mines aimed at rare earths. The Senators view the issue as a national security concern. The legislation would no doubt receive a boost if China decides to move forward on weaponizing its rare earth exports.

The trade war and the heightened risk of an economic slowdown is now dominating the narrative in the oil market. WTI has sunk to roughly $57 and Brent is down to $67.

Meanwhile, the fundamentals of the oil market still look rather tight, at least in the near term. Brent futures are in a steep state of backwardation on the front end of the curve. “The backwardation of the Brent forward curve is becoming increasingly pronounced. The price gap between the front-month and the following forward contract (July vs. August) has meanwhile reached $1.5.,” Commerzbank wrote in a note. “The last time it was any higher in this segment was in September 2013. That market participants are prepared to pay such a premium for oil that can be delivered at short notice points to tight oil supply.”

By Nick Cunningham of Oilprice.com

More Top Reads From Oilprice.com:


Download The Free Oilprice App Today

Back to homepage





Leave a comment

Leave a comment




EXXON Mobil -0.35
Open57.81 Trading Vol.6.96M Previous Vol.241.7B
BUY 57.15
Sell 57.00
Oilprice - The No. 1 Source for Oil & Energy News