US Congress tries to stop reliance on China for rare earths
The measures introduced in the bill would offer tax incentives to American companies engaged in mining, reclaiming and recycling rare earths - critical minerals and metals - from deposits at domestic sites. The bill was drawn up by the Republican Lance Gooden and Democrat Vicente Gonzalez, both of whom represent the state of Texas.
The new bill is Congress’s latest move to place a more local emphasis on industrial supply chains, rather than import materials from China and other competing economies. Rare earths are an important part of the national defence effort, and are vital components in a range of other priority industries, from electric vehicles to renewable energy. There has been concern in the United States that China may begin to limit the volume of rare earths that it exports to America, in light of the simmering trade war between the two nations.
In a telephone interview with Bloomberg, Pini Althaus, CEO of USA Rare Earth, which is currently developing the Round Top Mountain deposit in Texas, commented: “The tax incentive seeks to level the playing field with regard to the subsidies China provides from mine to magnet. It would significantly improve the bottom line of any domestic rare earth project.”
In another interview with Bloomberg, Jim Litinsky, the CEO of MP Materials - currently the only American mining company involved in the exploration of rare minerals - said that the new bill “lowers the cost of capital, which is the goal because China has lowered the cost of capital for their sector, and our sector needs to be able to compete. It’s probably the one thing I’ve seen everyone get behind”.
Copper, iron ore surge as Chinese investors unleash demand
The reopening of major industrial economies is sparking a surge across commodities markets from corn to lumber, with tin climbing above $30,000 a tonne for the first time since 2011 on Thursday.
In the wake of mounting evidence of inflation fuelled by higher raw materials prices, investors are also increasingly focused on when the U.S. Federal Reserve might start throttling back its emergency support.
Many banks say the rally has further to run, particularly for copper, which will benefit from rising investment in new energy sectors. Copper is at the highest in a decade, fueling bets it will rally further to take out the record set in February 2011. Steel demand is surging as economies chart a path back to growth just as the world’s biggest miners have been hampered by operational issues, tightening ore supply.
“The long-term prospects for metals prices are ‘too good’ and point to higher prices in the next few years,” said Commerzbank AG analyst Daniel Briesemann. “The decarbonization trends in many countries, which include switching to electric vehicles and expanding wind and solar power, are likely to generate additional demand for metals.”
Trading house Trafigura Group and several major Wall Street banks including Goldman Sachs Group Inc. and Bank of America Corp. expect copper to extend gains.
Copper rose as much as 1.6% to $10,108.50 a ton on the London Metal Exchange before trading at $10,080 as of 4:07 p.m. in London.
Benchmark spot iron ore prices rose to a record, while futures in Singapore and China climbed.
The boom comes as China’s steelmakers keep output rates above 1 billion tons a year, despite a swath of production curbs aimed at reducing carbon emissions and reining in supply. Instead, those measures have boosted steel prices and profitability at mills, allowing them to better accommodate higher iron ore costs.
Spot iron ore with 62% content hit $201.15 a ton on Thursday, according to Mysteel. Futures in Singapore jumped as much as 5.1% to $196.40 a ton, the highest since contracts were launched in 2013. In Dalian, prices closed 8.8% higher.
Erik Hedborg, Principal Analyst, Steel at CRU Group commented: “Recent production cuts in Tangshan have boosted demand for higher-quality ore and prompted mills to build iron ore inventories as their margins are on the rise. Iron ore producers are enjoying exceptionally high margins as well, around two thirds of seaborne supply only require prices of $50 /dmt to break even.”
Still, some analysts including Commerzbank’s Briesemann expect a short-term correction as metals become detached from fundamentals. There’s also a risk that China could engage in policies that may cool demand for iron ore and copper.
The metals rally has boosted concerns about short-term Chinese demand. Some manufacturers and end-users have been slowing production or pushing back delivery times after costs surged, while weaker-than-expected domestic consumption has opened the arbitrage window for exports.
Tin climbed as much as 2% to $30,280 a ton on the LME, boosted by rising orders for the soldering metal. Tin is at the highest since May 2011, with a 48% gain this year making it the best performing metal on the LME.