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CNBC
2 days ago
- Business
- CNBC
Japan is better prepared than the West for China's rare-earth mineral squeeze
Japan has been quietly blazing a trail for supply chain resilience. Long before China in early April imposed an export ban on several rare earth elements and magnets widely used in the automotive, robotics and defense sectors, Japan became something of a canary in the coal mine for Beijing's mineral dominance. The East Asian country was thrust into panic mode in 2010 when China implemented an export ban on rare earths that specifically targeted Tokyo following a heated territorial dispute. The embargo only lasted for around two months, but it was enough to incentivize the world's fourth-largest economy to change its approach to supply chain security. Alongside stockpiling, recycling and promoting alternative technologies, Japan has since invested heavily into non-China rare-earth projects — notably Australia's Lynas, the world's largest rare earth producer outside of China. As a result, Japan's overall dependence on Chinese rare earths has dropped to below 60% from more than 90% at the time of the incident, according to data provided by Argus Media. Jonathan Rowntree — CEO of Niron Magnetics, which produces rare earth-free permanent magnets — said the U.S.-based company was born a decade ago following the world's first rare earth crisis that "had a particularly significant impact on Japan, albeit less so on the rest of the world." "Because of that, Japan's actually much more prepared this time around than most other countries," Rowntree told CNBC by email. "They've stockpiled more, invested in Lynas, and secured Western rare earth supply to meet some of that demand through a combination of Lynas, the Australian mines, and their Malaysian processing facility," he added. Japan reportedly plans to further reduce its reliance on Chinese rare earth imports to below 50% this year. CNBC has reached out to the Japanese government for comment. China is the undisputed leader of the critical minerals supply chain, producing nearly 70% of the world's supply of rare earths from mines and processing almost 90%, which means it is importing these materials from other countries and refining them. Western officials have repeatedly flagged Beijing's supply chain dominance as a strategic challenge, particularly given that critical mineral demand is expected to grow exponentially, as the clean energy transition picks up pace. Japan's supply chain transformation is seen as both a template for Western nations — and a stark reminder of just how difficult it is to escape China's critical mineral orbit. Japan has enjoyed success through Lynas and its international supply chains by not only investing in rare earth mining but also in the facilities needed to process and refine the materials into usable goods, according to Nils Backeberg, founder and director at consultancy Project Blue. Still, the country has a long way to go to cut its dependency on China in some key areas, Backeberg told CNBC. This is especially true for heavy rare earth elements, which are generally less abundant in the Earth's crust, elevating their value. "Not a lot of heavy rare earths come out of Lynas, and most of the ones that do actually get sent to China for further refinement," Backeberg said, adding that China's latest export ban underscores Beijing's importance in heavy rare earths. But Lynas has continued to make progress in this area. Over the past month or so, the company has announced breakthroughs in two heavy rare earths, claiming to have produced them outside China for the first time. China's latest rare earth export curbs were implemented as part of a response to U.S. President Donald Trump's tariff increase on Beijing's products. "When the tariff war started and tariffs were put on China, the first thing that China did was say 'we're going to stop exporting rare earths.' A few weeks later, we couldn't manufacture a car in America or in Europe, so it is a real problem," Eldur Olafsson, CEO of Greenland-focused mining company Amaroq, told CNBC's "Europe Early Edition" on Thursday. "No country in the Western world wants one country to corner the market," Olafsson said. Western auto industry groups have been hit particularly hard by the export curbs, with many increasingly concerned about production outages. The disruption also extended to Japanese automakers. Suzuki Motor suspended production of its popular Swift car model earlier this month, with local media attributing the step to China's rare earth export restrictions. A Suzuki Motor spokesperson did not respond to a CNBC request for comment. Meanwhile, Japanese car giant Nissan said it was exploring ways to minimize the impact of China's export controls by working with Japan's government and the Japan Automobile Manufacturers Association. "We need to continue finding alternatives for the future, keeping flexibility and keeping our options open," Nissan CEO Ivan Espinosa told CNBC earlier this month. Looking ahead, Niron Magnetics's Rowntree said an all-encompassing government and industry approach would be needed to tackle China's mineral dominance, from accelerating permits for domestic mines to investing in new alternatives to provide sufficient magnet supplies. "Everyone has seen that this supply bottleneck is an issue. We've all known for a long time that this could happen, but now it has actually happened," Rowntree said. "I think many customers share my view — that this issue is unlikely to disappear and that we need to have alternatives in the West to address it." Europe's domestic production of rare earths is limited. Just like the U.S., the region heavily relies on imports, particularly from China, although plans are underway to develop domestic resources and processing capabilities. For instance, Belgian chemical group Solvay, which operates the largest rare earths processing plant outside of China in La Rochelle, France, aims to supply 30% of Europe's processed rare earths demand for permanent magnets by 2030. Gracelin Baskaran, director of the critical minerals security program at the Center for Strategic and International Studies (CSIS), a Washington-based think tank, said the U.S. and European Union will need to work together to create a market for non-Chinese rare earths. "The West is creating a nascent rare earths industry outside of China at a time when prices are low and companies are grappling with profitability," Baskaran told CNBC by email. Tax credits and subsidies will be "essential" to ensure that non-Chinese projects can build and scale up, Baskaran said, noting that rare earths go into nearly every modern industry.
Bloomberg
3 days ago
- Business
- Bloomberg
Russia Oil Revenue Dented by Strong Ruble as Global Prices Jump
Russia is barely benefiting from the recent surge in oil prices because of its strengthening currency, keeping the Kremlin's revenue under pressure. As hostilities between Iran and Israel lifted global oil prices, Russia's Urals crude rose to more than $60 a barrel on June 13, according to data from Argus Media Ltd. That meant it had recovered all but 10% of its losses since the start of the year.
Mint
5 days ago
- Business
- Mint
If Iran's oil is cut off, China will pay the price
Israel hasn't attacked Iran's energy export hubs so far. If it does, China could find itself cut off from a flow of cheap oil. Iran exports around 1.7 million barrels of crude a day, less than 2% of global demand. The U.S. reimposed sanctions on Tehran's oil exports in late 2018, a few months after President Trump withdrew from the Iran nuclear deal during his first term. Most countries won't touch Iran's sanctioned crude, so Tehran is forced to sell at a discount and find covert ways to get it onto the market. It uses a 'dark fleet" of tankers that sail with their transponders turned off to ship cargoes of oil. More than 90% of Iran's oil exports now go to China, according to commodities data company Kpler. Most of it is bought by small Chinese 'teapot" refineries clustered in the Shandong region that operate independently from state-owned oil companies. They switched to illicit Iranian oil en masse in 2022 to protect their margins. The discount on Iran's oil compared with a similar grade of non-sanctioned crude such as Oman Export Blend is currently around $2 a barrel, according to Tom Reed, vice president of China crude at commodity data provider Argus Media. The gap has narrowed recently because of worries that conflict with Israel and stricter enforcement of U.S. sanctions could disrupt Iranian supply. The discount has been wider in the past, averaging $11 in 2023 and $4 in 2024. With few alternative buyers for Iranian oil, Chinese refineries have leverage. Last year, an official from Iran's Chamber of Commerce characterized the trading relationship as 'a colonial trap." As the sanctioned oil is paid for in renminbi rather than in dollars, Iran has few choices about where to spend its crude earnings except on Chinese goods, reinforcing its dependency on one country. If Israel's goal is to seek regime change in Iran, it may feel tempted to cut off Tehran's oil funds. A strike on Kharg Island in the Persian Gulf, where most of Iran's tankers set sail from, would stop the bulk of the country's oil exports. This would shock oil markets and could alienate the White House. Trump doesn't want to see Americans paying higher gasoline prices at the pump. But the Organization of the Petroleum Exporting Countries Plus group of producers has a lot of spare capacity that could be returned to the market relatively quickly. Saudi Arabia and the United Arab Emirates combined have more than four million barrels of oil a day on the sidelines. A Goldman Sachs analysis found that these two producers replaced around 80% of lost barrels within around six months in previous supply shocks. This safety valve could ease tensions in the oil market if needed. But Iran's top customer would still feel the pinch if its energy exports are disrupted. For the first time in years, China's private refineries would have to pay full price for a barrel of oil. Write to Carol Ryan at
Miami Herald
5 days ago
- Business
- Miami Herald
Oil prices drop, but Iran-Israel conflict raises many risks
The intense rounds of air attacks between Israel and Iran have analysts and traders poring over scenarios for the direction of energy markets. A wide range of outcomes are possible, with prices in the most extreme cases soaring above $120 a barrel, analysts at Deutsche Bank wrote in a note, but also drifting down to $50 a barrel next year. The initial round of Israeli attacks sent oil prices 7% higher Friday. Still, at about $74 a barrel, Brent crude remains below the $80 average for 2024, the Deutsche Bank analysts wrote. The market continued to waver, though, and by Monday, oil prices had fallen about 3%. Such relatively modest levels may seem surprising with fighting raging in a region that produces about 25 million barrels a day, according to Rystad Energy, a consulting firm. The conflict is also flaring up at a crucial time for oil markets with the start of the summer driving season, when demand rises. An initial bump in oil prices, followed by a fall. Despite increasing risks, traders appear to be skeptical about the possibility of disruption. They are assuming that if international mediation manages to halt the fighting, prices could fall sharply. 'As long as supply has not been disrupted, I don't think we are going to see huge jumps in oil prices, because the geopolitical risk premium is already factored in,' said Bachar El-Halabi, senior energy markets analyst at Argus Media, a commodities research firm. A nightmare scenario that could double oil prices. On the other hand, some analysts think the market is being complacent. 'We see the risk of a serious supply outage increasing significantly in an extended war scenario,' Helima Croft, head of global commodity strategy at investment bank RBC Capital Markets, wrote in a note to clients. The most worrisome scenario would be if Iran's leaders close down the Strait of Hormuz, the narrow passageway that leads from the Persian Gulf and, eventually, to the Indian Ocean. About one-third of the volume of crude oil exported by sea as well as 20% of the world's liquefied natural gas, another vital commodity, flow through this cliff-lined channel bordered on the north by Iran, according to Rystad. Deutsche Bank analysts think that if Iran were to block the strait for two months, prices could soar to $124 a barrel. But an effort to halt shipping is likely to bring a response from the United States, which has ships from the 5th Fleet based in Bahrain on the Persian Gulf, and other countries. And closing the strait would harm Iran, which exports most of its oil from terminals on Kharg Island in the gulf. Prolonged fighting could push oil to $90 a barrel. Deutsche Bank figures that based on current prices, the market is now assuming the loss of some of Iran's exports, which recently have been about 1.5 million barrels a day. Most of this oil goes to China, but the small refineries there, which are Iran's main customers, would need to find other sources of oil if these flows stopped. Analysts may be focusing too much on the potential for closure of the strait, said Croft, who added that it would be 'exceedingly difficult' to pull off for an extended period. Instead, the Iranian navy could scare tanker owners by harassing cargo ships, which could disrupt shipping. Iran could also encourage militia proxies in neighboring Iraq to threaten Baghdad's oil infrastructure, which exports more than 3 million barrels a day. The cost of hiring tankers to carry oil from the region has jumped, according to Kpler, a firm that tracks shipping. But Kpler analysts said Monday that, so far, the flow of oil from the region was 'as normal.' If the fighting is prolonged, analysts including Croft said that Israel might hit Iran's energy export installations to curb Tehran's ability to finance its nuclear program. In that case, analysts said, OPEC members including Saudi Arabia and the United Arab Emirates would increase output, but perhaps not by enough to fully offset the loss of Iranian crude. Analysts at Goldman Sachs modeled one scenario in which Brent crude jumps to $90 a barrel after the loss of Iranian production but falls back toward $60 a barrel in 2026 as supply recovers. This article originally appeared in The New York Times. Copyright 2025
Bloomberg
5 days ago
- Business
- Bloomberg
Romania Set for Biggest Wheat Crop Since 1997, Argus Says
Romania is expected to see its largest wheat harvest in records dating back to 1997 in the next season, setting it up for another year as one of Europe's top exporters. Output is expected to reach 12.2 million tons for the 2025-26 season that starts in July, Argus Media said in a forecast after a crop tour earlier in June. That compares to an estimated 10.2 million tons in the current season.
