Pax Silica makes navigating global critical minerals supply war harder

The Pax Silica Declaration, a US-led initiative, has brought two ASEAN nations, the Philippines and Singapore, into a cartel focused on securing a new supply chain for critical minerals. These minerals are crucial for AI models, semiconductors, and other Western technologies. China, however, is likely to respond by increasing its refining capacity and acquiring more rare earth deposits from countries like Myanmar, which are in need of financial aid.

Currently, 25 countries have signed the Pax Silica Declaration, including several ASEAN countries with known deposits of rare earth. These countries, such as Vietnam, Indonesia, Myanmar, Malaysia, and Thailand, have not joined the cartel, which aims to block cheaper Chinese refined components from entering Western markets that rely on US military hardware and commercial electronics.

The cartel's goal is to start a tech war with China, which holds nearly 48% of the global rare earth reserves and controls over 90% of the world's refining and processing capacity.

The US has also announced plans to ban defense products containing Chinese-derived rare earth magnets from its markets and those of Pax Silica signatories, citing security concerns. This decision was influenced by an incident involving the British Royal Navy, where cameras on surveillance drones were sending signals to a Chinese IP address.

The Philippines, currently the Asean Chair, is supporting the Pax Silica initiative by designating a site for major manufacturing and data centers in semiconductors, AI hardware, and critical minerals. US Under Secretary for Economic Affairs, Jacob Helberg, emphasized the importance of breaking up China's control over the supply value chain in critical minerals, as 90% of critical inputs come from a single country, effectively creating a "hostage chain". The competition for rare earth deposits has now also begun in the ASEAN region.