Why this Chinese rare earths company could be caught out in the US-China trade war
The viability of Shenghe Resources Holding’s rare earths mine in California could be affected by Beijing’s plan to impose tariffs of 25pc on US exports
Shenghe Resources Holding, part of a consortium that bought the Mountain Pass mine in California last year, faces the risk of seeing the project – currently under trial operation for reopening – become financially unviable after Beijing plans to imposed a 25 per cent tariff on US rare earth ores.
After the Trump administration imposed a 10 per cent duty on processed Chinese rare earth materials early last month as part of a trade action affecting US$200 billion of Chinese goods, Beijing said it would retaliate by slapping between 5 and 25 per cent tariffs on a wide range of US products, including pre-processed rare earth ores. The implementation and timing are subject to Beijing’s final decision.
“If the tariffs on US ores were to be imposed and last for some time, it will absolutely have implications on the viability of the Mountain Pass project in the US,” said Ryan Castilloux, managing director of rare earth and electric battery metals consultancy Adamas Intelligence.
“[Beijing] is throwing the baby out with the bath water, they are sacrificing something good in order to have the impact they want via the tariffs.”
The mine was bought just over a year ago by Shenghe, QTT Financial and JHL Capital for US$20.5 million in an auction of Molycorp’s assets. The Colorado-based company went bankrupt after overextending its balance sheet by embarking on building processing facilities designed to produce high value downstream products.
