(Bloomberg) -- China will halt the export of a range of rare-earth technologies, potentially making it harder for the US and its allies to bolster Western supplies of strategic raw materials. 

While Beijing already had some limits in place, it has now widened a list of technologies that cannot be transferred overseas to include the processing of rare-earth metals and magnets, according to a document from the Ministry of Commerce. The move by the world’s dominant supplier — arguably the most significant rare-earth move from China in over a decade — puts the vital materials front and center as a tit-for-tat trade war on technology worsens.

“China is flexing its muscle,” said Alicia Garcia Herrero, chief Asia Pacific economist at Natixis SA.

Over the past three decades, China has built a dominant role in mining — and especially in refining rare earths, a cluster of 17 elements used in everything from wind turbines to military hardware and electric vehicles. 

The nation accounted for more than two-thirds of mined rare earths last year, and is home to as much as all global refining capacity, according to US government figures. The country also dominates the supply of rare-earth magnets, the main product deployed in manufactured goods.

The new rules don’t affect shipments of rare-earth products themselves, but appear aimed at frustrating even nascent efforts to develop the industry outside China. Restrictions on a smaller selection of rare earth technologies have been in place since at least 2008. Earlier this year, Beijing imposed limits on exports of gallium and germanium, metals used in parts of the semiconductor, telecommunications and electric-vehicle industries, and on graphite.

The latest move comes as the US and EU grow more concerned about China’s growing exports of clean energy products, from electric vehicles to batteries, and its dominance of key portions of the supply chain. 

The White House is weighing tariff increases on EVs, according to people familiar with the matter — a decision that may have a limited effect on China’s electric car industry given the relatively few models it exports to North America, but one that could be politically significant during a presidential election year in the US. Washington is also looking into Chinese production of legacy semiconductors. The EU, meanwhile, has launched an anti-subsidy investigation into EVs, in response to surging Chinese car imports. 

Beijing’s response in the form of rare earth processing limits may carry more heft than other recent curbs, such as the ones on gallium and germanium, according to Garcia Herrero, given existing strategic reserves. Beijing could be posturing to avoid “additional protectionist measures” from the West on cars and other products.

Critical metals — a category that includes all minerals crucial to vital industries and in short supply domestically, not only rare earths — are increasingly under the spotlight as Western nations increasingly view supplies as a matter of national security, especially as the global energy transition stokes fears of potential shortages in the future.

Why the Fight for ‘Critical Minerals’ Is Heating Up: QuickTake

The US is spearheading a drive to reduce China’s stranglehold over flows of these minerals, from rare earths to lithium and cobalt. President Joe Biden’s flagship climate legislation includes rules aimed at generating more supply domestically or from allied nations. China has responded with restrictions of its own. 

While Biden’s landmark legislation and Europe’s Critical Raw Materials Act promise to unlock new funding for prospective suppliers, Beijing’s latest salvo underscores the technical challenges that Western producers could face in developing refining processes that China has come to master over the decades.

Until relatively recently, there were barely any rare-earth refineries at all outside of China. That means its companies and researchers have built a substantial technological and practical advantage in how to extract and process rare earths, while expertise elsewhere has lagged. While it would not be impossible to replicate Chinese processes, it would likely take time — and require significant policy incentives.

Key Rare Earths Supplier Outside China Gets US Backing for Plant

Compared with the 2008 ban list, the latest iteration has expanded coverage to include all technology for the separation of rare earths and now includes the production of magnets, said Yang Jiawen, an analyst with Shanghai Metals Market. Technology for mining, ore-dressing and smelting was listed as “restricted,” rather than banned.

China’s grip over the global rare-earths market first gained broad international attention in 2010, when China imposed tight restrictions on exports. The US, European Union and Japan eventually forced Beijing to overturn the measures via the World Trade Organization. Concerns about its dominance have lingered since.

--With assistance from Lucille Liu and Winnie Zhu.

(Updates with analyst commentary in paragraph 14.)

©2023 Bloomberg L.P.