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Chinese rare-earth stocks rally after Xi's plant visit amid trade war

Didymium oxide, a combination of neodymium and praseodymium, is part of a family of minerals vital to producing the powerful magnets used in the engines of Toyota's Prius hybrid and generators in wind turbines.   © Reuters

HONG KONG (Nikkei Markets) -- Shares of Chinese rare-earth companies jumped in Hong Kong and mainland China on Tuesday amid speculation Beijing could use the materials, which are used in the production of electronics, electric vehicles and defense equipment, as a bargaining chip in the Sino-American trade war.

Shares of China Rare Earth Holdings, a company that makes rare-earth and refractory products, soared as much as 132% in Hong Kong, while shares of JL Mag Rare-Earth, which develops and makes material used in high-performance magnets, jumped by the day's 10% limit in Shenzhen.

The gains came after state-run Xinhua reported that President Xi Jinping on Monday visited a JL Mag facility in Jiangxi province and inspected its production process and operations.

"The message is that semiconductor technologies are in the U.S., but the raw materials essential to those technologies rely on Chinese supply. Without the crucial supplies from China, the U.S. cannot produce its leading technologies," said Frankie Chan, an analyst at Emperor Securities, adding that the gains represented "pure speculation."

China is known to be the world's largest producer of rare-earth metals and minerals and also a processor of rare-earth ores. The U.S. Trade Representative's office last year included rare earths on a provisional list of tariffs on Chinese goods, but removed them later from the final list, according to a Reuters report.

-- Amy Lam

 

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