Shares of Chinese rare-earth miners were heavily sold off following Tesla Inc.’s surprise announcement that the electric-vehicle maker will drop the use of the material in its future models.
Citing health and environmental risks that accompany mining the material, Colin Campbell, a Tesla official, said its next drive unit will use a permanent magnet motor that doesn’t use rare earths. The comments, made at Tesla’s investor meeting, caused JL Mag Rare-Earth Co. and Jiangsu Huahong Technology Stock Co. to close down more than 7% in mainland China.
The sector saw short-lived rallies in 2019 and 2020 on speculation that Beijing may limit the export of the crucial metal amid trade tensions with the US. Developing sources of strategic minerals outside China has been flagged as a key priority for President Joe Biden. While rare-earth miners are plunging on the news, there are doubts about the feasibility of substitutes for the mineral.
Campbell’s comments that Tesla has designed its own transistor package that can use 75% less silicon carbide than previously also sparked selloffs in some related stocks. Rohm Co. closed down 5.2% in Tokyo, after Wolfspeed Inc. slid 5.4% in post-market US trading Wednesday.
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