REE

One of the key components in the trade negotiations and even in the peace negotiations with Ukraine, has been the Rare Earth Elements (REE) production and refining. Why are they so important? Rare earth minerals are used in phones, satellites, lasers, radars, but importantly specially nowadays, it’s a key component in missile guidance systems. Why are they called rare earth? It’s not because they’re not abundant, but because the refining process is very costly and complex. As you can see in the chart below, China currently mines 70% of the global REE, but more importantly, refines 87% of the total production. That’s the big bargain chip China holds in the trade negotiations. The have stopped or reduced shipping of REE to the U.S. after liberation day, and now as part of the latest negotiations, they will resume those shippings in exchange for lower tariffs. It appears that what China really wants are the NVDA chips for the AI infrastructure. And that’s the U.S. bargain chip, but that appears to be out of the negotiations. Interestingly, Ukraine mines 5% of REE global production. And that’s why it was used by Trump in his talks with Zelensky to continue supporting Ukraine in its war with Russia.

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