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Commodities

China boosts rare-earth output amid growing tech war with US

New quota is 30% higher than last year as demand for EVs and robotics soars

Trucks haul ore at a Jiangxi Copper mine in Dexing, China.    © Reuters

BEIJING -- In a move seen as a defensive measure against possible future U.S.-led trade bans, China has increased its production quota for rare-earth metals by close to 30% for the first half of this year.

While being the world's dominant producer of rare earths, China does import the minerals from abroad, primarily from Myanmar, Malaysia and Vietnam. Imports accounted for 47,000 tons, or about a quarter, of China's rare-earth market last year.

On Friday, China's Ministry of Industry and Information Technology and Ministry of Natural Resources jointly announced that the production quota for the first half of this year will be 84,000 tons, a major jump from the 66,000 tons last year and the highest target to date for the first half. 

The move is likely an effort to curb dependence on imported materials.

Rare-earth metals are a crucial component in many high-tech products, from smartphones and electric vehicles to drones and missiles. China recently introduced new regulations on their production and export amid growing tensions with the U.S.

The country is now looking to increase the domestic supply of this valuable material. 

The quota for certain rare earths like dysprosium, used to make magnets for EV motors, were raised by 20%.

The Chinese government gradually lifted its annual quota for rare-earth mining to 140,000 tons from 100,000 tons under its five-year plan through 2020. It announces a quota twice a year. The full-year total could end up breaking records as well.

The push is driven largely by growing demand at home. China wants electric vehicles, hybrids and other eco-friendly vehicles to account for all new cars sold in the country by 2035, and is also looking to boost production of robots.

Concerns that the U.S. could try to cut off China's overseas supply chains likely played a role as well.

Last month, the Chinese government announced draft regulations that would impose state oversight over the entire supply chain of rare earths, from production to exports. Because rare earths are used heavily in the high tech and defense industries, there are concerns that Japanese companies with U.S. clients will face halted shipments of the commodity, among other measures.

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