Amid escalating tensions in the tech and trade war between the United States and China, the latter has announced a ban on the export of certain rare minerals to the United States.[1] These minerals, including gallium, germanium, and antimony, are crucial for manufacturing defense technologies like tanks and military communications, advanced technologies such as chips and semiconductors, and clean energy products like wind turbines and electric car motors.[2] Currently, China is the largest rare minerals producer and refiner, holding a near-monopoly on the market.
The global rare minerals market was valued at around $14 billion in 2023 and is projected to grow to around $33 billion by 2032.[3] This expected growth underscores the increasing demand for these essential materials for advanced technologies and clean energy projects.
According to recent data, China handles about 60% of global rare mineral mining and approximately 85% to 90% of rare mineral processing.[4] Additionally, China dominates the export market for alloys and magnets, accounting for around 90% of global exports.[5] China’s dominance in this sector is relatively recent, having entered the market in the 1980s and 1990s and solidified its position through strategic price subsidies.[6] This is not the first instance of China leveraging its market control. In 2010, it halted rare mineral exports to Japan during a territorial dispute, forcing Japan to diversify its supply chain for these products.[7] Given this context, the current escalation may compel the United States and other industrialized countries to follow this path and diversify their supply sources.
According to a report by the International Energy Agency (IEA), mining has historically contributed between 13% and 19% of Latin America’s foreign direct investment.[8] The region already supplies about 40% of the global copper production (Chile 27%, Peru 10%, and Mexico 3%) and 35% of the global lithium supply (Chile 26% and Argentina 6%).[9] Latin America also holds significant potential for rare minerals. For instance, Brazil alone has around one-fifth of the world’s rare mineral reserves but currently accounts for only 0.2% of global production.[10] Despite such potential, Latin America lags in rare minerals exploration, with only 7% of the global exploration budget allocated to the region.[11] This presents a unique opportunity for growth and development in the region.
In addition, Latin American countries may benefit from the current need for supply chain diversification by attracting investment to develop their mineral refining and processing capacities. Some rare minerals are by-products of processing other minerals. For example, gallium is a by-product of aluminum processing[12] and germanium is a by-product of zinc processing.[13] Currently, Latin America mines the resources and exports the raw materials for processing elsewhere. For example, although Chile produces 27% of global copper production, its global processing capacity is only 10%.[14] Thus, the current need to diversify the supply chain for minerals presents another opportunity for Latin America.
While Latin American countries are well-positioned to capitalize on new opportunities in the rare minerals sector, they face significant challenges. Many mining projects are situated in or near ecologically rich areas or Indigenous communities, leading to potential social and environmental opposition. To address these challenges, it is crucial to engage key stakeholders early in the process. This proactive approach may help secure the necessary social license by ensuring that the concerns of local communities and environmental groups are addressed.
In conclusion, the escalating tech and trade tensions between the United States and China, marked by China’s recent ban on the export of crucial rare minerals, underscore the importance of industrialized countries like the United States diversifying their supply chains. Latin America, with its abundant resources, is strategically positioned to capitalize on these shifting market dynamics. By attracting investment in exploration and development, and by developing its refining and processing capacity, Latin American countries stand to gain and can emerge as key players in the global rare minerals market, fostering a more balanced and resilient global supply chain. To fully realize this potential, it will be crucial to address social and environmental challenges, enhancing the opportunity for sustainable and inclusive growth in the region.
[1] China Bans Rare Mineral Exports to the US, The New York Times, Dec. 3, 2024.
[2] What China’s Ban on Rare Earths Processing Technology Exports Means, Center for Strategic and International Studies, Jan. 8, 2024.
[3] Rare Earth Metals Market to grow by USD 33,464.1 Million in 2032, Growth Driven by Demand for Renewable Energy Technologies, Yahoo Finance, Jan. 18, 2024.
[4] What China’s Ban on Rare Earths Processing Technology Exports Means, Center for Strategic and International Studies, Jan. 8, 2024.
[5] Id.
[6] China Dominates the Rare Earths Market. This U.S. Mine Is Trying to Change That, Politico, Dec. 14, 2022.
[7] How Japan solved its rare earth minerals dependency issue, World Economic Forum, Oct. 13, 2023.
[8] Latin America’s Opportunity in Critical Minerals for the Clean Energy Transition, International Energy Agency, April 7, 2023.
[9] Latin America’s Share in the Production and Reserves of Selected Minerals, International Energy Agency, Oct. 24, 2022.
[10] Latin America’s Opportunity in Critical Minerals for the Clean Energy Transition, International Energy Agency, April 7, 2023.
[11] Id.
[12] China banned exports of a few rare minerals to the US. Things could get messier, MIT Technology Review, Dec. 12, 2024.
[13] Germanium Deposits in the United States, United States Geological Survey, June 1, 2020.
[14] Share of processing volume by country for selected minerals, 2019, International Energy Agency, April 7, 2021.