Comparative advantage is determined by comparing the opportunity cost of producing rare earth magnet in China to the world price, China mainland devotes over 80% production of neodymium magnet for global market, the percentage will be larger if we put other rare earth magnet line into it, especially for those higher coercivity magnet with heavy rare earth dysprosium. At present, Linus Corp in Australia declared setting up plan for their rare earth separation plant in Texas,USA. Another share holder is a local American company called Blue line. Sales revenue of Linus increased by 33% for rare earth oxide due to prosperity of electric automobile industry, according to financial report for last season.
Plenty of HEV manufactures were keen to build and guarantee the rare earth magnet supply chain. Another reason is Laos forbidden light rare earth export to China due to local trade protection policy. Finally, demanding curve climbing to a high peak even though the cost of rare earth rises recently. Main influence is oxide of neodymium and praseodymium, which is two basic raw materials of neodymium magnet.
(Based on today’s statistics at 21st May, 2019 for Chinese market)
Free trade increases the total surplus, but for an exporting business, consumer surplus is transferred to producers of the exported rare earth magnet. Tariff of US still remain the same as before during trade-war period. Chinese relevant bureau of rare earth industry conducted a research in Jiang xi province where the main industrial zone to separate HRE for rare earth magnet industry. I could not help but wonder, is there an message during this special moment? Does Chinese government will take limit the export quotas of rare earth product to fight against USA?
The answer is negative, Chinese minister of foreign affairs claims that “trading business should be founded on fairness and respect each other.” in a local media interview.