On April 4th, the Ministry of Commerce, in conjunction with the General Administration of Customs, issued an announcement regarding the implementation of export control measures on seven categories of medium and heavy rare earth-related items, including samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium, which will take effect from the date of publication.Data released by the United States Geological Survey indicates that in 2024, China's rare earth production will account for nearly 70% of the global total, and from 2020 to 2023, the amount of rare earths imported by the United States from China accounted for 70% of total imports.Interviews with reporters revealed that in the short term, there may be a shortage of medium and heavy rare earths overseas, leading to an increase in the price differential between domestic and international markets, which could drive up domestic medium and heavy rare earth prices, replicating the upward trends seen in metals like antimony and bismuth, benefiting industry leaders.<h2>China Implements Export Controls on Certain Medium and Heavy Rare Earths</h2>On April 4th, the Ministry of Commerce and the General Administration of Customs announced the decision to implement export controls on certain medium and heavy rare earth-related items, effective from the date of publication. The announcement mentioned that in order to safeguard national security and interests and fulfill international obligations related to non-proliferation, export controls will be imposed on items related to samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium. These items have dual-use properties, and imposing export controls on them is a common international practice.The medium and heavy rare earths subject to these export controls have dual-use properties. Previously, the &#34;Regulations of the People's Republic of China on the Export Control of Dual-Use Items&#34; issued by the State Council indicated that the country implements a licensing system for the export of dual-use items. The Ministry of Commerce establishes a risk management system for the end users and end uses of dual-use items, assessing and verifying the end users and end uses to strengthen management.In addition to the items included in this export control, such as samarium, gadolinium, and terbium, the &#34;Regulations of the People's Republic of China on the Export Control of Dual-Use Items&#34; also applies to tungsten, tellurium, bismuth, molybdenum, and indium-related items announced by the Ministry of Commerce and the General Administration of Customs in February.<img src="https://imageproxy.pbkrs.com/https://mmbiz-qpic.wscn.net/sz_mmbiz_jpg/xbUOr6jbzYJEEvsibMyf2S8VGNBHCW2OV6SroricicoM82uicsDpcb1yBSibTHxvBOGkNZb8V7U4SJAOHEe1n7206Gw/640/query-ZnJvbT1hcHBtc2cmd3hfZm10PWpwZWc?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://mmbiz-qpic.wscn.net/sz_mmbiz_jpg/xbUOr6jbzYJEEvsibMyf2S8VGNBHCW2OV6SroricicoM82uicsDpcb1yBSibTHxvBOGkNZb8V7U4SJAOHEe1n7206Gw/640/query-ZnJvbT1hcHBtc2cmd3hfZm10PWpwZWc"/>As early as 2015, China abolished the export quota management for rare earths and switched to an export licensing management system. &#34;Compared to before, the range of rare earth products covered by this export control is broader, including not only upstream oxides and metal products but also downstream application products, such as alloy products, target materials, neodymium-iron-boron magnetic materials (including dysprosium and terbium), and samarium-cobalt permanent magnets,&#34; said Liu Bo, chief analyst of non-ferrous metals at Western Securities.It is understood that while countries like the United States and Australia have certain medium and heavy rare earth resources, the overall grade is relatively low and difficult to mine, and the medium and heavy rare earth elements are not complete. China is currently the only country in the world capable of producing all 17 rare earth elements, and in the short term, it is difficult to find alternatives for the supply of heavy rare earth elements. Shanghai Steel Union analysis indicates that the main countries importing rare earth oxides and metals from China are Japan, the United States, and South KoreaThe report released by the United States Geological Survey shows that from 2020 to 2023, 70% of the rare earth compounds and metals imported by the United States came from China, while the proportions of rare earth imports from Malaysia and Japan were 13% and 6%, respectively. Rare earths are primarily used in catalysts in the United States, with other applications including ceramics and glass, metallurgical applications, alloys, and polishing. A large amount of rare earths is imported in the form of finished permanent magnets.<h2>Short-term Price Increase for Domestic and Foreign Rare Earth Products</h2>Since 2025, the fundamentals and prices of rare earth products have shown signs of recovery. China Rare Earth stated in February that rare earths are known as the &#34;vitamins&#34; of modern industry, and the development of new industries such as energy-saving motors and humanoid robots in recent years has provided new space for rare earth applications. The company indicated during its investor communication event in February that entering 2025, the supply-demand relationship has improved due to factors such as support from upstream production costs, contraction of imported ores, and further increases in downstream demand, along with the implementation of the &#34;Rare Earth Management Regulations&#34; promoting the healthy development of industry order.Data from Shanghai Steel Union shows that since 2025, the price of dysprosium oxide has shown fluctuations, oscillating between 1605 and 1740 yuan/kg. Meanwhile, the prices of gadolinium oxide, yttrium oxide, and terbium oxide have slightly increased since the beginning of the year, with prices on April 3 being 169,000 yuan/ton, 51,500 yuan/ton, and 6,630 yuan/kg, respectively.<img src="https://imageproxy.pbkrs.com/https://mmbiz-qpic.wscn.net/sz_mmbiz_png/xbUOr6jbzYJEEvsibMyf2S8VGNBHCW2OVPhGZwg6OC0gxKXiaiansYWVBRzRZHnVKaQPdeJDCN5hMv3nbJ2CXSgyA/640/query-ZnJvbT1hcHBtc2cmd3hfZm10PXBuZw?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://mmbiz-qpic.wscn.net/sz_mmbiz_png/xbUOr6jbzYJEEvsibMyf2S8VGNBHCW2OVPhGZwg6OC0gxKXiaiansYWVBRzRZHnVKaQPdeJDCN5hMv3nbJ2CXSgyA/640/query-ZnJvbT1hcHBtc2cmd3hfZm10PXBuZw"/>Price trend of domestic dysprosium oxide since 2025, data source: Shanghai Steel UnionLiu Bo stated that overseas medium and heavy rare earths will enter a state of shortage, predicting that the prices of rare earth-related products on the control list will rise significantly in the short term, with the price gap between domestic and foreign markets widening, and the price trend may resemble that of antimony, bismuth, germanium, and other minor metals that have already implemented export controls.Taking antimony as an example, export controls on antimony and related items will be implemented starting September 15, 2024. On April 3, the domestic price of antimony ingots was 255,000 yuan/ton, having increased by 59.4% since the implementation.As for physical enterprises, Shanghai Steel Union analyzed that export restrictions will lead to an increase in the spot inventory of certain medium and heavy rare earth products domestically, and companies may reduce production levels.Liu Bo believes that although in the short term, the export controls on medium and heavy rare earths may have a certain negative impact on production and operation enterprises, in the long term, medium and heavy rare earths are not only a resource commodity but also a strategic chip for maintaining national security. As an important countermeasure resource for China, the supply of rare earth resources is expected to be highly controlled and guaranteed, and related production and operation enterprises are also expected to receive significant attention and support from the stateIn Liu Bo's view, as a strategic metal in China, the current rare earth prices are still at the bottom of the cycle. Under the export control policy, the rise in prices of medium and heavy rare earths in the international market may drive up domestic medium and heavy rare earth prices. In the long term, policy support provides long-term support for the price center of rare earths, and related companies are expected to benefit.<h2>These Companies Hold Resources</h2>In the current era of &#34;resources are king,&#34; which enterprises hold medium and heavy rare earth resources?As a giant state-owned enterprise in the rare earth industry, China Rare Earth Group possesses a relatively rich supply of medium and heavy rare earth resources. For the year 2024, the total mining quota for ion-type (medium and heavy rare earths) in the country is set at 19,150 tons, with all quotas allocated to China Rare Earth Group. Sources close to China Rare Earth Group revealed that the group's export proportion of rare earth products is not high.Guangsheng Nonferrous, a subsidiary of China Rare Earth Group, holds medium and heavy rare earth resources in Guangdong Province. According to Guangsheng Nonferrous's 2024 annual report, Guangdong Province is a major producer of ion-type rare earth resources in China, especially rich in medium and heavy rare earth reserves. The company owns several rare earth mines, including the Rengju Rare Earth Mine, Wufeng Rare Earth Mine, and Xinfeng Rare Earth Mine, with rare earth resource reserves close to 120,000 tons.China's rare earth resources exhibit a distribution characteristic of &#34;light in the north and heavy in the south.&#34; Although the Baotou Steel Group's Baiyun Obo Rare Earth Mine in the north mainly contains light rare earth resources, its overall rare earth content is high, and its reserves are large, making the absolute reserves of medium and heavy rare earths also significant. It is reported that the light rare earth reserves of the Baiyun Obo Mine rank first in the world; medium and heavy rare earths account for 2%, approximately 6.6 million tons, exceeding the total reserves of the seven southern provinces.As one of the leading companies in China's rare earth industry, Northern Rare Earth is primarily focused on producing light rare earth products while actively planning to build a complete production line for medium and heavy rare earth metals and alloys. In 2022, Northern Rare Earth established an experimental production line for medium and heavy rare earth products at Ruixin Company, capable of large-scale production of medium and heavy rare earth metal products.Shenghe Resources' 2024 semi-annual report disclosed that the company has rare earth smelting and separation bases in Sichuan and Jiangxi, with the Jiangxi base primarily using ion-type rare earth ores as raw materials. In the first half of 2024, the company produced 14,156.74 tons of rare earth oxides, 19,636.74 tons of rare earth salts, and 12,549.74 tons of rare earth rare metals.Xiamen Tungsten's 2023 annual report shows that the company has a complete industrial chain from rare earth mining and selection, smelting and separation to deep processing products such as rare earth luminescent materials, rare earth metals, high-performance magnetic materials, and optoelectronic crystals, making it a key national rare earth group. In 2023, the company produced 4,088 tons of rare earth oxides, 2,222 tons of rare earth metals, and 7,620 tons of magnetic materials.This article is sourced from: Shanghai Securities Journal,Original Title: &#34;How Significant is the Impact of Rare Earth Controls?&#34;Risk Warning and DisclaimerThe market carries risks, and investment should be approached with caution. This article does not constitute personal investment advice and does not take into account the specific investment goals, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article align with their specific circumstances. Investment based on this is at one's own risk

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On April 4th, the Ministry of Commerce of China and the General Administration of Customs announced export controls on 7 categories of medium and heavy rare earths, including samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium. This move aims to safeguard national security and is expected to lead to a shortage of medium and heavy rare earths overseas, driving up domestic prices. China dominates the global rare earth market, with production expected to account for nearly 70% in 2024. The scope of these control measures is broader, covering various rare earth products, reflecting the country's strict management of dual-use items

- On April 4, the Ministry of Commerce and the General Administration of Customs announced export controls on seven categories of heavy rare earth elements, effective immediately.  
- China currently produces nearly 70% of the world's rare earths, and the U.S. has relied on China for 70% of its rare earth imports from 2020 to 2023.  
- The export restrictions are expected to lead to a short-term shortage of heavy rare earths overseas, potentially increasing domestic prices and benefiting leading companies in the industry.

How significant is the impact of rare earth controls?