Shares of rare earth miners skyrocket after Beijing threatens to cut off the minerals

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Chinese President Xi Jinping discusses the production process and operation of the JL MAG Rare-Earth Co. as well as the development of the rare earth industry in the city of Ganzhou in east China’s Jiangxi Province on May 20, 2019.

Xie Huanchi | Xinhua News Agency | Getty Images

Shares of rare earth miners in Asia Pacific surged in morning trade on Wednesday after Beijing made a veiled threat toward Washington regarding the materials.

In China, shares of JL Mag Rare-Earth skyrocketed around 10% while Innuovo Technology jumped 9.95%. Lynas in Australia — one of the few rare earth miners outside of China — saw its shares surge more than 10%.

The moves came after a Chinese official recently cautioned that products made from rare earth minerals should not be used against the country’s development.

The comment, reported by CCTV, was taken as a thinly veiled threat aimed at the U.S. and its technology companies that are dependent on the materials. Chinese President Xi Jinping recently visited rare earth mining and processing facilities, adding to speculation that China could make the minerals more expensive or unavailable if the trade war continues to expand.

At present, China is the world’s largest producer of rare earths, a critical component in the manufacturing of products ranging from smartphones to electric vehicles.

‘We’ve been here before’

One analyst said such instances of China using economics and supply chains to exert pressure on the political front were not new.

“We’ve been here before,” Fraser Howie, an independent analyst, told CNBC’s “Street Signs” on Wednesday, citing past altercations between China and countries such as Japan and Norway.

In 2010, China banned the export of rare earth minerals to Japan after Tokyo detained a Chinese fishing trawler captain.

Meanwhile, Norway saw its exports of salmon to China plummet after Beijing placed curbs on them — a move widely seen to be in retaliation to a Norwegian committee’s decision in 2010 to award the Nobel Peace Prize to a Chinese dissident.

“What it tells you is that you do not want China having a critical role in your supply chain,” Howie said. “Don’t become too dependent on China.”

On the subject of rare earths, the analyst said the minerals are “actually found in many places.”

“China has the largest mining capacity, largely because for environmental issues the States has pulled back from mining rare earths,” he said.

Another analyst said the issue surrounding the supply of rare earths is “clearly” a part of the ongoing battle for technological supremacy between Washington and Beijing.

“Technology is where this battle is going to be fought out, even if we do get a trade deal on bilateral goods,” Alastair Newton, director at Alavan Business Advisory, told CNBC’s “Squawk Box” on Wednesday.

— CNBC’s Patti Domm contributed to this report.

Watch: The US-China dispute is more about tech than trade, says former diplomat

Source: CNBC

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