Got a pair of these? There’s more to them than meets the eye – and it may mean global trade war
For most of human history, no one paid all that much attention to the 17 rare earth elements.
An obscure suite of elements that sit in their own corner of the periodic table, they were mostly renowned among chemists and geologists for being tricky and fiddly – incredibly hard to refine, but with chemical facets that made them, well… interesting.
Not so much for a single thing they did by themselves, but for what they did in conjunction with other elements.
Added to alloys, rare earths can make them stronger, more ductile, more heat-resistant, and so on. Think of them as a sort of metallic condiment: a seasoning you add to other substances to make them stronger, harder, better.
A worker prepares to pour the rare earth metal Lanthanum into a mould in a workshop in Inner Mongolia. File pic: Reuters
The best example is probably neodymium. On its own, there’s nothing especially spectacular about this rare earth element. But add it to iron and boron, and you end up with the strongest magnets in the world. Neodymium iron boron magnets are everywhere.
If you have a pair of headphones or earbuds, the speakers inside them (“drivers” is the technical term) are driven by these rare earth magnets.
If you have a pair of Apple AirPods, those magnets aren’t just in the speakers; they’re what’s responsible for the satisfying “click” when the case snaps shut.
One of the many everyday products that rely on rare earth minerals. Pic: Reuters
Rare earth magnets are in your car: in the little motors that raise and lower the windows, inside the functioning of the airbag and the seat adjustment mechanism.
And not just the little things. Most electric vehicles use rare-earth magnets in their motors, enabling them to accelerate more efficiently than the old all-copper ones.
Pic: iStock
More sensitively, from the perspective of Western governments, in the military, there are tonnes of rare earths to be found in submarines, in fighter jets, in tanks and frigates. Much of this is in the form of magnets, but some is in the form of specialised alloys.
So, for instance, there is no making a modern jet engine without yttrium and zirconium, which, together, help those metallic fan blades withstand the extraordinary temperatures inside the engine. Without rare earths, the blades would simply melt.
Miners are seen at the Bayan Obo mine containing rare earth minerals, in Inner Mongolia, China. File pic: Reuters
Yet the amount of this stuff we mine from the ground each year is surprisingly small.
According to Rob West of Thunder Said Energy, the total size of the rare earth market is roughly the same as the North American avocado market. But, says West, those numbers underplay its profound importance.
“Buyers would likely pay over 10-100x more for small but essential quantities of rare earths, if supplies were ever disrupted,” he says.
“You cannot make long-distance fibre cables without erbium. You cannot make a gas turbine or jet engine without yttrium.”
China’s dominance
In short, these things matter. And that brings us to the politics.
Right now, about 70% of the world’s rare earth elements are mined in China.
Roughly 90% of the finished products (in other words, those magnets) are made in China. China is dominant in this field in an extraordinary way.
This is not, it’s worth saying, for geological reasons.
Contrary to what the name suggests, rare earth elements aren’t all that rare. Pull a chunk of soil out of the ground and there will be trace amounts of most of them in there.
True: finding concentrated ores is a bit harder, but even here, it’s not as if they are all in China.
There are plenty of rich rare earth ores in Brazil, India, Australia, and even the US (indeed, the Mountain Pass mine in California is where rare earth mining really began in earnest).
Low cost of Chinese rare earths
The main explanation for Chinese dominance is that China has simply become very good at extracting lots of rare earths at relatively low cost.
According to figures from Benchmark Mineral Intelligence, the prevailing cost of Chinese rare earths is at least three times lower than the cost of similar minerals refined in Europe (to the extent that such things are available).
At this point, perhaps you’re wondering how China has managed to do it – to dominate global production at such low prices.
Part of the explanation, says West, probably comes down to “transfer pricing” – in other words, China being China, refiners and producers are probably able to buy raw materials at below market prices.
Another part of the explanation is that refining rare earth ores is phenomenally energy and carbon-intensive.
Most European and American firms have pulled out of the sector because it is hideously dirty.
A man works at the site of a rare earth metals mine at Nancheng county, Jiangxi province, China. File pic: Reuters
Such qualms are less of an issue in China, especially since most of their mines, including the biggest of all, Bayan Obo in Inner Mongolia, are hundreds if not thousands of miles from the nearest city.
Energy costs are less of a constraint in a country whose grid is still built mostly on a foundation of cheap thermal coal.
Add it all up, and you end up with the situation we have today: where the vast majority of the world’s rare earths, that go into all our devices, come from dirty mines in China, produced at such a low cost that device manufacturers are happy to put them anywhere.
Anyway, that brings us to the politics.
Global trade war flaring up again
In recent months and years, China has periodically introduced controls on rare earth exports.
Last week, it announced the most serious rule change yet, essentially insisting that anyone using Chinese rare earths would have to apply for a licence from them.
It has been seen, in Washington at least, as a declaration of economic war, and, in response, Donald Trump has announced a fresh set of tariffs on China.
In short, the global trade war seems to be flaring up all over again.
Pic: iStock
Where this ends up is anyone’s guess. Tim Worstall, a former scandium expert who has been in and out of the rare earths sector for decades, suspects China might have overplayed its hand.
“The end result here is that there can be two outcomes,” he says.
“A: The entire world’s usage of rare earths is mapped out in detail, end uses, end users, quantities, and times for the Chinese state and depends upon their bureaucracy to administer.
“B: The plentiful rare earths of elsewhere are dug up, and the supply chain is rebuilt outside China.
“My insistence is that B is going to be the outcome, and it’ll be done, intervention or no.”
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In practice, the new rules may simply represent an element in China’s trade negotiations with the US.
So it’s hard to know whether they, or for that matter America’s 100% extra tariffs, will ever really bite.
Either way, it’s yet more evidence of the rocky road the global economy remains on.
Thousands of job cuts at the NHS will go ahead after the £1bn needed to fund the redundancies was approved by the Treasury.
The government had already announced its intention to slash the headcount across both NHS England and the Department of Health by around 18,000 administrative staff and managers, including on local health boards.
The move is designed to remove “unnecessary bureaucracy” and raise £1bn a year by the end of the parliament to improve services for patients by freeing up more cash for operations.
NHS England, the Department of Health and Social Care, and the Treasury had been in talks over how to pay for the £1bn one-off bill for redundancies.
It is understood the Treasury has not granted additional funding for the departures over and above the NHS’s current cash settlement, but the NHS will be permitted to overspend its budget this year to pay for redundancies, recouping the costs further down the line.
‘Every penny will be spent wisely’
Chancellor Rachel Reeves is set to make further announcements regarding the health service in the budget on 26 November.
And addressing the NHS providers’ annual conference in Manchester today, Mr Streeting is expected to say the government will be “protecting investment in the NHS”.
He will add: “I want to reassure taxpayers that every penny they are being asked to pay will be spent wisely.
“Our investment to offer more services at evenings and weekends, arm staff with modern technology, and improving staff retention is working.
“At the same time, cuts to wasteful spending on things like recruitment agencies saw productivity grow by 2.4% in the most recent figures – we are getting better bang for our buck.”
Health Secretary Wes Streeting during a visit to the NHS National Operations Centre in London earlier this year. Pic: PA
Mr Streeting’s speech is due to be given just hours after he became entrenched in rumours of a possible coup attempt against Sir Keir Starmer, whose poll ratings have plummeted ahead of what’s set to be a tough budget.
Mr Streeting’s spokesperson was forced to deny he was doing anything other than concentrating on the health service.
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He is also expected on Wednesday to give NHS leaders the go-ahead for a 50% cut to headcounts in Integrated Care Boards, which plan health services for specific regions.
They have been tasked with transforming the NHS into a neighbourhood health service – as set down in the government’s long-term plans for the NHS.
Those include abolishing NHS England, which will be brought back into the health department within two years.
Watch Wes Streeting on Mornings With Ridge And Frost from 7am on Sky News.
The UK’s jobless rate has risen to a level not seen since late 2020, according to official figures released ahead of the budget.
The Office for National Statistics (ONS) reported a figure of 5% covering the three months to September – up from 4.8% reported last month. It was a larger leap than economists had predicted, and the ONS said that men were worst affected by the shift.
It leaves the jobless rate at its highest level since December 2020-February 2021.
It had stood at 4.1% when Labour took office last year.
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There was no better news for Chancellor Rachel Reeves in wider, experimental, HMRC data released by the ONS, which showed a 32,000 decline in payrolled employment during October.
That suggested a pause to a more recent trend of declines slowing since sharp falls first witnessed in the spring of this year.
It was April when measures introduced in Ms Reeves’s first budget came into effect, with hikes in minimum pay and employer national insurance contributions hammering employment and investment sentiment in the private sector.
It also coincided with peak US trade war uncertainty as Donald Trump ramped up his tariffs.
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Where Reeves stands on tax rises
ONS director of economic statistics Liz McKeown said of the data: “Taken together these figures point to a weakening labour market.
“The number of people on payroll is falling, with revised tax data now showing falls in most of the last 12 months.
“Meanwhile the unemployment rate is up in the latest quarter to a post pandemic high. The number of job vacancies, however, remains broadly unchanged.
“Wage growth in the private sector slowed further, but we continue to see stronger public sector pay growth, reflecting some pay rises being awarded earlier than they were last year.”
In good news, the overall slowing in the pace of wage growth and weakening jobs market should help bolster the case for an interest rate cut by the Bank of England next month, assuming inflationary pressures continue to ease after last week’s rate hold.
The ONS figures were released as the clock ticks down to the chancellor’s second budget due on 26 November.
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The state of UK economy ahead of budget
Ms Reeves used an event in Downing Street last week to prepare the ground for a painful series of measures that are expected to be only partly offset by some announcements to keep Labour MPs onside, as she stares down a black hole in the public finances believed to be in the region of £30bn.
She has signalled a break from Labour’s manifesto tax pledge not to raise income tax, national insurance or VAT, on the grounds that the world has changed since that promise was made.
The chancellor’s gripes include Brexit and the effects of the US trade war.
Nevertheless, a spending priority would appear to be the lifting of the two-child benefit cap. That would take an estimated 350,000 children out of poverty, according to the Child Poverty Action Group.
Liberal Democrat Treasury spokesperson, Daisy Cooper, said of the employment data: “Surely the writing is on the wall now for the chancellor’s jobs tax.
“Everyone except Rachel Reeves seems to have woken up to the fact that forcing small businesses to pay more in tax for giving people jobs would damage job opportunities. Now the proof is staring her in the face.
“The government must reverse their damaging national insurance hike at the budget, and commit to saving the small businesses who employ millions in Britain and are at risk of collapse, if they’re to have any hope of reversing today’s concerning trend.”
The Conservatives accused Ms Reeves of presiding over a “high-tax, anti-business” agenda.
Secretary of State for Work and Pensions, Pat McFadden, said: “Over 329,000 more people have moved into work this year already, but today’s figures are exactly why we’re stepping up our plan to Get Britain Working.
“We’ve introduced the most ambitious employment reforms in a generation to modernise jobcentres, expand youth hubs and tackle ill-health through stronger partnerships with employers.
“And this week we’re going further by launching an independent investigation that will bolster our drive to ensure all young people are earning or learning.
“We’re backing businesses to grow and create jobs by cutting red tape, signing trade deals and securing hundreds of billions in investment, which helped make the UK the fastest growing economy in the G7 in the first half of this year.”
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