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Reuters
7 minutes ago
- Reuters
US rare earth pricing system is poised to challenge China's dominance
LONDON, July 14 (Reuters) - U.S. efforts to break China's dominance of the rare earths market and to drive investment in its own industry have moved up a gear with a Washington-backed plan to create a separate, higher pricing system. The West has struggled to weaken China's grip on 90% of the supply of rare earths, in part because low prices set in China have removed the incentive for investment elsewhere. Miners in the West have long called for a separate pricing system to help them compete in supplying the rare earths group of 17 metals needed to make super-strong magnets of strategic importance. They are used in military applications such as drone and fighter jets, as well as to power motors in EVs and wind turbines. Under a deal made public last week, the U.S. Department of Defense will guarantee a minimum price for its sole domestic rare earth miner MP Materials (MP.N), opens new tab, at nearly twice the current market level. Las Vegas-based MP already produces mined and processed rare earths and said it expects to start commercial magnet production at its Texas facility around the end of this year. Analysts say the pricing deal, which takes effect immediately, should have global implications - positive for producers, but may increase costs for consumers, such as automakers and in turn their customers. "This benchmark is now a new centre of gravity in the industry that will pull prices up," said Ryan Castilloux, managing director of consultancy Adamas Intelligence. The DoD will pay MP the difference between $110 per kilogram for the two most-popular rare earths and the market price, currently set by China, but if the price rises above $110, the DoD will get 30% of additional profits. Castilloux said other indirect beneficiaries of the pricing system may include companies, such as Belgian chemicals group Solvay ( opens new tab, which launched an expansion in April. "It will give Solvay and others the impetus to command a similar price level. It will give them a floor to stand on, you could say," Castilloux added. While Solvay declined to comment, other rare earth miners, developers and their shareholders welcomed the news. Aclara Resources ( opens new tab is developing rare earths mines in Chile and Brazil, as well as planning a separation plant in the United States. Alvaro Castellon, the company's strategy and development manager, told Reuters the deal added "new strategic paths" for the company. MP Materials, which suffered a net loss of $65.4 million last year largely because of China's low pricing, will build up magnet production at its Texas plant initially to 1,000 metric tons a year, later expanding to 3,000 tons a year. Under last Thursday's deal, the DoD will become its largest shareholder with a 15% stake and MP will construct a second rare earth magnet manufacturing facility in the U.S., eventually adding 7,000 tons per year. In total, production would be 10,000 tons a year - equalling U.S. consumption of magnets in 2024. That does not include, however, the 30,000 tons imported by the United States already installed in assembled products, Adamas consultancy said. It predicts global demand for rare earth permanent magnets will more than double over the next decade to about 607,000 tons, with the U.S. seeing the strongest percentage annual growth rate in coming years at 17%. The world's reliance upon China for much of this demand was brought into focus by China's curbs on its exports as trade negotiations continue between the United States and China. So far Western governments have had little success in trying to help their own industries to compete. Attempts to agree stronger pricing have been confined to piecemeal deals that set premiums for magnets. Dominic Raab, a former deputy prime minister and former foreign secretary for the United Kingdom, said he was not surprised the Trump administration had concluded that tax breaks alone would not create the level of investment required. "The next step is, can they scale it up?" asked Raab, now head of global affairs at Appian Capital Advisory, a private equity firm that invests in mining projects. The $110 level for neodymium and praseodymium, or NdPr, guaranteed by the DoD is slightly above a $75-to-$105 per kg range that consultancy Project Blue reckons would be needed to support enough production to meet demand in coming years. It compares to a current level of about $63. David Merriman of Project Blue said it was unclear how commercial industrial consumers would respond to higher prices and whether it would make them invest in rare earths as they have more diverse supply sources. "Major non-government backed consumers are less likely to follow this same investment pattern, however, as they are not so clearly aligned to a particular regional supply route," he said. A spokesperson for German auto giant Volkswagen ( opens new tab declined to comment on pricing when asked about the DoD floor level but said: "We welcome all efforts to strengthen long-term stability and diversification in global supply chains for critical materials."
Times
9 minutes ago
- Times
EU has few cards with Donald Trump, and it's bad at playing them
Donald Trump is treating the European Union like a plaything. Over the past three months, the president has made repeated unilateral threats of tariffs against the bloc, moving deadlines and throwing negotiations into turmoil at the drop of a Truth Social post. The latest skirmish was over the weekend, when Trump derailed hopes of a tentative 'deal' with Brussels negotiators by threatening a sweeping 30 per cent levy on the bloc from August 1. That's down from the 50 per cent he threatened in May but above the 10 per cent minimum that the EU was hoping to land on and which the UK has already secured. • Trump slaps 30% tariff on EU and says trade deficit is 'threat to security' Trump's capriciousness towards the Continent is a reflection of the US's strong negotiating position vis-à-vis the EU, compared to China. The contrast in rhetoric and strategy from the White House on the two trade negotiations is stark. With Beijing, America's subservient dependence on China's raw materials export licences, and the fact that Beijing's mercantilist export model has continued unabashed this year, shows who holds most of the cards in US-China trade negotiations. So much so that the administration was quick to 'celebrate' a Geneva accord with Beijing that, a month on, no one knows the details of. Europe simply doesn't boast anywhere near the negotiating leverage over Trump that China wields. It cannot easily weaponise Americans' love for luxury clothing or German cars, and instead is hampered by economies such as Ireland — an open small trading nation — whose economic fortunes hinge on retaining giant American multinationals on its shores. Ireland would be hit by import taxes in areas like pharmaceuticals, and even more so if Trump's larger threats force 'repatriation' of US multinationals. • Ireland has most to lose if tariffs force companies back to US Europe's messy economic relationship with the US skews the tariff talks odds in favour of the other side. But so does the nature of the EU itself. Of all the US's major trade-negotiation partners, Brussels has been uniquely ill equipped to handle Trump. The bloc has approached the head-to-head with its quintessentially legal and technocratic set of asks just as it would a conventional trade agreement. The past week alone has underlined why the technicalities of tariff levels or goods trade simply don't matter to Trump. He is using tariffs, for example, to beat up the centre-left government of Brazil, which runs a trade surplus with the US, to defend his ally Jair Bolsonaro. The Europeans this month gave up their right to impose a 15 per cent tax on US tech giants, hoping it would help pave the wave for a 10 per cent tariff deal — to no avail. It's little surprise that Bernd Lange, a German MEP and head of the European parliament's trade committee, was incandescent at Trump's 'impertinent slap in the face'. This just isn't how Brussels is used to doing things. • Trump threatens Brazil with 50% tariffs 'over Bolsonaro witch hunt' Member states are also divided about what to do next. Brussels has said it will delay planned counter-tariffs on metals that were due to come into force this week, in order to try and placate Trump. A new round of counter-measures worth €72 billion was agreed by EU trade ministers yesterday, but there is no guarantee they will ever be used. A more aggressive move to prepare ways to hit the US with an anti-coercion instrument has been left in reserve. It's no surprise that Trump keeps moving the goalposts. • Trump's tariff may make normal trade impossible, says EU negotiator A 30 per cent minimum tariff, if it comes into force, would result in a 1.25 per cent hit to the bloc's GDP over the next 18 months, according to figures from Goldman Sachs. The other growing worry for some European companies is the strength of the euro, which has brought complaints from the Continent's exporters and has also depressed earnings valuations for its businesses in recent weeks. This is a 'triple whammy' of hits for some of the most export-oriented firms in the bloc, where trade with the rest of the world accounts for about a fifth of total GDP. The euro has gained 13 per cent against the dollar this year and is about 6 per cent stronger on a trade-weighted basis — a sustained and impressive appreciation for a currency that most thought was heading to below $1.00 at the start of the year. Similar to the 'should we or shouldn't we retaliate against Trump?' issue, Europeans are unsure how to feel about their rapidly strengthening currency. There is a reasonably simple mechanical relationship between a strong exchange rate and variables such as inflation. A rough rule of thumb for the euro is that a 1 per cent trade-weighted appreciation will lower average consumer prices by about 0.1 per cent. The pass-through is usually even higher when the euro's strength is down to 'external' factors — such as worries about the dollar — rather than internal factors such as improved growth. This means the eurozone's inflation target of 2 per cent is almost certain to undershoot to about 1.6 per cent next year and could fall even further in 2027. The European Central Bank will then find itself in the familiar position of having to cut interest rates to ultra-low levels to stimulate price growth — much as it has done for the past decade with the exception of 2022-2023. But the ECB and its president, Christine Lagarde, have also made it clear that they think the world is entering a 'global euro moment' where the single currency can benefit from the dollar's sustained decline and worries over its reserve status. This is an unusually pointed political intervention by the ECB, which has been historically 'neutral' on the reserve status of the euro. Previously, it has been the European Commission that has pushed the 'internationalisation' of the euro as an explicit stated aim — despite having no tools at its disposal to achieve this. A number of factors need to be in place before the euro can play a role anything like the dollar in the world's financial system; a likely eurozone safe asset through commonly issued debt is one of them. A reserve currency is also a strong, rather than undervalued one. The ECB should be careful what it wishes for.
Reuters
9 minutes ago
- Reuters
Global smartphone shipments growth slows in Q2 as tariff uncertainty weighs
July 14 - The growth of global smartphone shipments slowed in the second quarter as buyers, wary of U.S. tariff-driven economic uncertainty, curbed spending, especially on low-end devices, data from research firm International Data Corp showed on Monday. Shipments increased by 1% in the April-June quarter to 295.2 million units, according to the preliminary data, slower than the 1.5% growth recorded in the previous quarter. Demand in China declined in the second quarter, as subsidies failed to stimulate demand, with Apple (AAPL.O), opens new tab seeing a 1% drop. Overall demand has tapered as consumers deprioritize spending on smartphones, especially in low-end segments. Sellers have continued to push higher price points to make up for the slowdown in unit shipments by offering AI in more affordable devices, IDC said. "In the face of ongoing political challenges, the impact of war, and the complexities posed by tariffs, the 1% growth in the smartphone market stands as a critical indicator that the market is poised to return to growth," said Anthony Scarsella, research director for Client Devices at IDC. "Economic uncertainty tends to compress demand at the lower end of the market, where price sensitivity is highest. As a result, low-end Android is witnessing a crunch weighing down overall market growth," said Nabila Popal, senior research director for Worldwide Client Devices. Samsung ( opens new tab saw the highest growth, with shipments increasing 7.9% to 58 million units in the quarter. Apple roughly maintained its market share as the second-top smartphone seller, with a growth of 1.5% in shipments. IDC had in May slashed its 2025 global smartphone shipment growth forecast to 0.6% from 2.3%, citing tariff-driven economic uncertainty and a pullback in consumer spending. GRAPHIC
