Can Beijing watch its rare earth monopoly falter? In recent months, while the trade conflict between China and the United States continues to escalate and the communist regime has already announced restrictions on the export of two critical minerals (gallium and germanium) for the electronics, most manufacturers seek to circumvent Beijing’s domination. And they could well have found in Vietnam the beginning of an alternative.
The Reuters agency revealed on Tuesday that two equipment manufacturers – one South Korean, the other Chinese – had chosen to set up in the country their production of magnets – essential components for electric vehicles, telephony, wind turbines, or weapons – from rare earths (a group of 17 minerals with specific electromagnetic properties).
Star Group Industrial (SGI) and the Chinese group Baotou INST Magnetic are thus responding to the demand of their customers, in the automotive industry or even in the smartphone industry, who are seeking to reduce their exposure to Beijing. They do so all the more willingly as Vietnam is in the process of beefing up its extraction and production capacities. China, of course, today accounts for 60% of the extraction and more than 90% of the refining of rare earths, according to the International Energy Agency.
According to the US Geological Survey, it is also the one with the largest reserves in the world with 44 million tons. It thus weighs a third of the identified reserves. But Vietnam and Brazil, with 22 million tons of reserves, also have a subsoil rich in minerals.
Hanoi knows this well. In July, the local government announced a grand plan to produce up to 2.02 million tons of rare earths per year from its subsoil by 2030, thanks in particular to nine mines in the north of the country. . Between 2021 and 2022, it had multiplied this production tenfold, from 400 to 4,000 tonnes. Getting to the target mentioned for 2030 is a hell of an industrial gamble. But like the investment by SGI and Baotou INST Magnetic, the progressive technological decoupling between China and the Western world could push other manufacturers to choose the Asian neighbour. In other words, to invest in projects against a drawing right, a proven model in the minerals industry.
The Korean group, for example, hopes to produce up to 5,000 tons of neodymium magnets per year by 2025. Enough to produce up to 2 million electric vehicles. As for Baotou, Apple’s supplier, it has rented capacity in the north of the country to meet the demands of the Californian group. Apple, precisely, started in the spring via its supplier Foxconn its first Macbook assembly line in the country.
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Detoxification in Beijing, however, will not be for tomorrow. With nine tons of refined rare earths out of ten in the world, China has enormous pricing power, which it does not hesitate to use to curb the emergence of competitors. In addition, the Middle Kingdom also dominates the production of magnets. According to data from the economic intelligence firm Adamas, its market share stands at 92%, against barely 1% for Vietnam.
