COLD WAR II: China’s Threat to Ban Critical Minerals Exports Is a Bluff.

A price shock for critical raw materials would not necessarily be a bad thing. A sharp rise in energy prices across Europe was the first tangible sign of Russia’s decision to curb gas supplies. Similarly, a full-fledged Chinese export ban on any critical raw material would send global prices for that substance spiking. In 2021, for instance, the temporary shutdown of some Chinese magnesium smelters fueled a 260 percent rise in magnesium prices, affecting the automotive, aerospace, and other sectors. However, higher prices for critical raw materials whose production is dominated by China might not have as big an impact as many fear.

For one, the monetary value of these commodities remains small. For example, the European Union’s annual import bills for critical raw materials range from $5 million in the case of beryllium (used for satellites, semiconductors, and weapons) to $4 billion for palladium (a critical component for catalytic converters), with imports for most minerals at just a few hundred million dollars. These numbers are mere rounding errors in the EU’s annual $3 trillion import bill. In other words, the issue with critical raw materials is their availability, not their price. Second, China’s domination of the sector stems from its strategy of flooding the market to depress prices—a textbook case of dumping to suppress the competition. Higher prices for critical minerals would therefore boost the competitiveness of non-Chinese producers and help them enter the market. There are precedents: After gallium prices rose in 2021, a German company announced that it would restart production.

Sanctions and embargoes rarely change behaviors. Well, they do — just generally not in the way that the people imposing them intended.