Asia rare earth stocks fall after U.S.-China extend trade truce to January

Asian rare earth stocks experienced a decline on Thursday following the United States and China's decision to prolong their trade truce by two months. This extension aims to provide more time for negotiations on a broader economic deal, allowing both countries to assess the flow of critical minerals between their economies. Several major Asian rare earth stock tickers saw reductions, with Shenghe Resources falling 2.1%, China Rare Earth Nonferrous Metals down 1.1%, and China Northern Rare Earth Hi-Tech slipping 1.1% in Shanghai. Australian firm Lynas Rare Earths plummeted 2%, while Iluka Resources experienced a 0.5% decrease.

The U.S.-China trade agreement, known as the Busan Agreement, was temporarily extended until January 10, surpassing its initial expiration date of November 10. This agreement had previously eased trade tensions and included provisions affecting critical minerals. China had previously agreed to halt some rare-earth export controls, while U.S. officials have continued to urge Beijing to expedite and ensure the reliability of rare-earth shipments. Reports indicated that China was still behind schedule on certain rare-earth delivery commitments.

The extension of the trade truce appears to have reduced the immediate risk of renewed tariff hikes and export restrictions, which have been major sources of volatility in the rare-earth sector. It is crucial to note that China controls up to 70% of global rare-earth mining, accounts for around 85% of refining capacity, and produces about 90% of rare-earth metal alloys and magnets. Consequently, the sector is highly sensitive to U.S.-China trade negotiations.

Despite the extension of the trade truce, the underlying supply dispute between the U.S. and China remains unresolved. U.S. officials have expressed concerns about China's lagging rare-earth deliveries, with shipments of Chinese rare-earth magnets to the U.S. declining by 20% in August, according to Chinese customs data. The two nations are anticipated to utilize the additional time to strive for a comprehensive economic agreement, with agriculture, rare-earth supplies, tariffs, and other trade issues still under discussion.