China fired a verbal rocket at U.S. arms maker Lockheed Martin last month only to unleash a response which threatens its most strategically important industry, rare earths.
Because rare-earth elements have essential uses in a range of civil and military technologies, such as weapons guidance systems, China’s control of supply is a powerful commercial and diplomatic bargaining chip.
Earlier threats to cut-off supplies of the elements, especially the two most important heavy rare earths, neodymium and praseodymium, have caused short-term disturbances in the market with China eventually backing off in case it pushed too hard and international customers developed their own supplies.
A decade ago a dispute with Japan led to a Chinese rare earth embargo, but it sparked a response in the form of Japanese financial backing for a new rare earth mine in Australia and an associated processing facility in Malaysia.
This time around China is using threats of a rare earth embargo on Lockheed Martin following the U.S. company winning a contract to upgrade batteries of Patriot air defence missiles in Taiwan.