"Threatened to restrict exports of rare earths this group of seventeen obscure minerals on which the military and tech industries depend overwhelmingly produced in China. Katie Martin discusses, how the world came to be so dependent on one country for such an essential part of the industrial supply chain with Lucy Hornby and Henry Saunderson. So Henry, first of all, what exactly are these rare earths Serara, sir group of seventeen brother obscure minerals with funny names? They're not actually technically geologically rare, but China's over mass dominant position in the world's production of them, but they are critical than integral part of modern life. And they used in everything from our mobile phones, to satellite surveillance in the oil industry, even emergency rooms, and in scanners so life as we know it couldn't really continue without them. And they all suddenly thrust into the spotlight, right? I mean how have the markets reacted to China's threat? Markets have rather very quickly and both the prices for some railroads have shot up. But also share prices for rare earth companies listed in China have gone up a lot and also some companies outside China, for instance, this two listed in London show pices for those companies have gone up a lot. So the market is reacting, very quickly and hope for the rare earth, producers will see the benefits of higher prices, I guess, majorly so Henry mean give us some examples, you know, I'm wondering around with my mobile phone has back got this stuff in it. You walk through the ways that touch daily lines. Yes. So you're apple iphone does have lots of rare earths, and when it vibrates that's actually a little motor that contains rare earths, and there's rarest in the speaker in the camera and your apple has paid a lot attention to this. And I was looking at the report the other day and they said recycled supply Aurora's is not. Widely available so rare us the critical to Lord technology. But really, what people are focused on is rare earth, magnets. And that's because the growth area because electric cars uses powerful magnets in electric Motors. And also, they used them wind turbines. If you look at industries growing quickly, that's where people paying a lot of focus and also because China has not only dominant share producing rare us. But also producing these magnets over ninety percent share in these magnets. So these future industries of coming very reliant on China. Yes, an interesting point. I mean, how did China manage to make it self so dominant hair, and it's anything other countries can do to step up production in the event that supplies a withheld, there is some production outside China, and there are some emerging projects, but the problem has been capital, getting investment, and also competing with China on cost because China has the scale assuredly being low cost because of late. And environmental reasons, but also the last time a crisis over rarer throughout a lot of people go burned by new projects of investors got burn. So the question this time around is who's willing to put up the money. Can you compete with China and also will consumers pay a premium for non China supply? This is a huge question in the market, which is a consumer's willing to pay more to guarantee their supply chains on dominated by China. And so would it be possible for China to target only the US or will they send to be sweet? Other countries into the mix. China has a huge dominant share on the processing and the production of rare earth products. Most rare earths produced by China are consumed within China. So it'd be hard for China to just target rare earth exports to the US because they're in a lot of different different products, and probably harm Japan and other countries that doesn't want to harm. But China could cutoff, for instance, experts magnets, which would be hugely that. Mental to supply chains industries. So this is just raised the whole specter of China's dominance over these supply chains. How easy would it be for another supplier, just to step into the breach replace China? People are looking at sourcing production, but it's not as simple as just finding a rare earth mine digging it up. You know, it needs to be separated processed and not com. Be environmentally damaging. So you need to get environmental permits. We need to be processed separated, and then put into products. So it is quite a long supply chain, someone like apple would be quite a few steps removed from the actual mind. And I think people are just waking up now to China's dominance on this sort of intermediate section of the supply, chain, which is the processing, which can be energy intensive can use acid in the west just hasn't built these things, partly because as I said environmental permits, and things like that. But as a result, we waken off and China has huge dominance in this area. Area, and we kind of didn't see it coming. I think that's true. I think in the era of globalization in eighties nineties people in America were willing to ship all this stuff to China because they thought, well, we don't want the environmental liabilities and is more efficient for them to do it at a lower cost. And that was the whole theory of how markets work, right? But as a result in this era, where trade and other things that are weapon, these vulnerabilities, so Lee seen is thinking of this Chinese dominance, who's a strategic decision or is there a bit of luck involved? I think it was a bit of luck. Really? I mean back in the eighties China was looking to export anything they could to get hard currency. And so they had a lot of this stuff it's pretty toxic. And it's not that difficult to mind. So that's a combination that really lends itself well to all sorts of wildcat miners who don't have a lot of environmental or necessarily health protection around the people who work for them. So all of a sudden China was. Producing tons of this stuff at a lower price than anybody else. And so it swept into the markets there and pushed the few other minds of there were out of business. The other issue is that China initially was just exporting this as a raw material and you still had a lot of processing going on in Japan Korea, other Asian nations. But there was a face off starting around two thousand six and going through about two thousand ten two thousand eleven where China and Japan were at odds in during that time. China's attempts to cut raw material supplied to Japan ended up, meaning that a whole lot of the processing industry moved here to China. So it's really a case often of unintended consequences, what is it? That's provoked China into making its latest threat to restrict Expos. Is this the threat that we should take seriously was at a post, during I think there's a lot of posturing and a lot of overreacting whenever you get a situation where you have a super specific industry. Every and a lot of defense strategists weaving theories around it. So China is posturing a bit partly because they don't have necessarily as many retaliation nurtures against the US as the US does against China's. So this one then looks very, very tempting. It's very satisfying for nationalists in China to say, hey, you know, we can really hit you where it counts. But you also have Chinese nationalist and environmentalists, and patriots, who are pushing for experts to be stopped so that the environmental damage can be reduced. You know, they're very conscious of the fact that China takes it on the teeth for the sake of these consumers in the rich world, or even in rich cities in China. And so, they some of them feel that if they could only reduce the exports, they could also stop some of the really damaging mining that's going on. Meanwhile guaranteed people in the defense industries in strategic sectors in the US. Will immediately go into hyper drive over it as well. And then in between, of course, you have a lot of speculators. You know, people who wanna with the sup to get extra money from trading in these markets, because they're very small and very illiquid markets. So I think there's a bit of real threat, and there's a whole lot of posturing and hype, how is trying to use this dominance in rarest in disputes before. And you think this might be something that is an increasingly common tool this available to them. Well, I think you've seen ever since Donald Trump took office. You've seen a willingness by the US to use trade as a political and diplomatic weapon with other countries. Now, this is something that China does have a habit of doing, but I think when the US does it so overtly, it allows China to really double down as well. Is this a riskless exercise in the photo of China? What would be the risk to China to self putting this threaten to practice? Well, there's a couple of risks. I mean one. Is the law of unintended consequences, so, you know, you threaten to cut off the raw material. And then you get a lot of other people enthusiastic about starting minds elsewhere. You lose your monopoly another thing that has happened in the past is when China has made these threats or even when China has adopted policies to reduce its exports, what ends up happening is it helps catapult China up the value chain? That's positive if what you care about is China's industry and the value added of that industry. It's negative, if what you care about is trying to limit the extremely toxic mining practices, because it just increases the demand for this stuff. And of course, it's negative internationally because it leads to these very aggressive, very aggravated international disputes. And you know in a climate like this, you just really don't wanna play with that fire."