SHANGHAI (Reuters) – Shares in rare earth-related companies in China soared on Tuesday, a day after Chinese President Xi Jinping visited a rare earth firm in southern China, sparking speculation the sector could be the next front in the Sino-U.S. trade war.
Xi on Monday visit JL MAG Rare-Earth Co Ltd in Jiangxi province, state media reported.
China accounted for 80% of the rare earths, a group of 17 chemical elements used in high technology consumer electronics and military equipment, imported by the U.S. from 2014 to 2017.
So far, China’s rare earths exports have been spared from recent tariffs by the United States, which has decided not to impose import duties on those and some other critical minerals from China as part of the trade war.
Beijing, however, has raised tariffs on imports of U.S. rare earth metal ores from 10 percent to 25 percent from June 1, making it less economical to process the material in China.
Analysts said that Xi’s visit might indicate China is considering using rare earths as a weapon in the trade war, which provided support for the shares of the Chinese firms.
“No question it’s saber rattling,” said Ryan Castilloux, managing director of Adamas Intelligence, a consultancy that tracks the rare earths market. “I think China would be reluctant to cut off supplies to anyone just yet, but the optics are designed to send a clear message – we know your vulnerabilities.”
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