INDUSTRY BULLETIN: China / US Trade War escalates with threat of cuts to rare earth exports

June 6, 2019

The world is watching as the trade war between China and the United States escalates, threatening supplies of critical materials. On May 29, Chinese media reported that the country may cut rare earth element (REE) exports to the US.

"Waging a trade war against China, the United States risks losing the supply of materials that are vital to sustaining its technological strength," began a commentary published last Wednesday in the Communist newspaper People's Daily.

If China limits REE exports, it will not just be American companies that will find themselves short on manufacturing materials, once their current supply is exhausted. Most companies will only have a three to six month cushion, cautions Ryan Castilloux, managing director at Adamas Intelligence, a research firm that focuses on strategic metals.

REE pricing has already surged. Neodymium pricing increased 9.86% since the beginning of 2019, according to trading on a Contract for Difference that tracks the benchmark market for this commodity. Chinese domestic price of dysprosium has risen by 31.5% and terbium by 15% in the last month alone.

Manufacturing sectors that would be impacted by rare earth shortages include electric vehicles, wind turbines, solar panels, most high tech electronic devices, medical equipment, defense and aerospace products and more.

“China could shut down nearly every automobile, computer, smartphone and aircraft assembly line outside of China if they chose to embargo these materials,” James Kennedy, president of ThREE Consulting, wrote in the American publication National Defense last week.

Another new development impacting future REE supply was the announcement that the Chinese government is now prohibiting imports of heavy REE concentrates from Myanmar. The implementation of this measure at the beginning of May 2019 is significant, as Myanmar provided 50% of heavy REE feedstock material to the Chinese upstream REE industry in 2018.

Further, Lynas Corporation’s Mount Weld rare earths mine in Western Australia and processing plant in Malaysia continue to operate under a cloud of uncertainty, due to concerns expressed by the Malaysian government around the storage and disposal of radioactive waste materials at the plant site in Malaysia. This creates additional risk on security of REE supply outside China.

As disclosed in Avalon’s news release dated April 2, 2019, Avalon has partnered with a private Australian firm, Cheetah Resources, to advance the Nechalacho Rare Earth Elements Project and is now well positioned to bring a new supply of Nd-Pr concentrates to the market in the near term.

For more information, please visit the company’s website at www.AvalonAM.com; or, for questions or feedback, email Avalon at [email protected].

About Avalon Advanced Materials Inc.

Avalon Advanced Materials Inc. is a Canadian mineral development company specializing in niche market metals and minerals with growing demand in new technology. The Company has three advanced stage projects, all 100%-owned, providing investors with exposure to lithium, tin and indium, as well as rare earth elements, tantalum, niobium, and zirconium. Avalon is currently focusing on developing its Separation Rapids Lithium Project, Kenora, ON and its East Kemptville Tin-Indium Project, Yarmouth, NS to production, while continuing to advance its Nechalacho Rare Earth Elements asset. Social responsibility and environmental stewardship are corporate cornerstones.