Rare earth stocks surge amid U.S.-China trade war fears

Investing.com -- Rare earth mining stocks saw strong gains this week after China announced some export curbs on chipmaking metals to the U.S., raising concerns that the country could leverage its rare earth dominance in a trade war with Washington.

U.S.-based MP Materials Corp (NYSE:MP), the largest rare earths producer outside China, was trading up 7.3% for the week, while Australia-listed Lynas Rare Earths Ltd (ASX:LYC), which operates the biggest rare earths processing plant outside China, added 4.2% this week.

Smaller Australian rare earth miners Arafura Resources Ltd (ASX:ARU) and Australian Rare Earths Ltd (ASX:AR3) rose between 9% and 14% this week, while Chinese metal miners including Jinduicheng Molybdenum Co Ltd (SS:601958) and China Nonferrous Mining Corp Ltd (HK:1258) added about 4% each amid bets that tighter supplies will net them higher prices.

China said on Monday that it will restrict the export of gallium and germanium products - which are used in making semiconductors and other electronics parts - to the U.S. The move was seen as retaliation for U.S. curbs on key semiconductor technology sales to China, imposed earlier this year.

But the restrictions also ramped up concerns that China could limit the export of other materials, particularly rare earths, of which the country is the world’s largest producer.

A top China advisor also said that the gallium and germanium curbs were "just a start," and that countries should brace for more restrictions if they continue to pressure the country.

Rare earths are a group of 17 elements that are used in a variety of industrial, electronic, and military applications, and play a key role in electronics manufacturing. 

China accounts for roughly 70% of total global rare earth production, followed by the U.S. and Australia. The country had in the late-2000s attempted to curb its exports of rare earths, citing environmental and conservation measures. But the World Trade Organization had ruled against such curbs in 2014.