A worker unloads rare earths along the Yangtze River's banks in Southwest China's Chongqing Municipality on May 9. Photo: IC

China's rare earth industry faces rising pressure due to overseas COVID-19 outbreaks, with exports falling 20 to 30 percent since April, while domestic demand has yet to return to pre-crisis levels, industry insiders told the Global Times.

Despite a drop in exports, China should still hold its rare earth as a bargain chip in trade talks with the US, or to combat US government' malicious crackdown of Chinese high-tech companies, analysts say. 

The comments came after the Association of China Rare Earth Industry issued a notice on Thursday, which exempted membership fees for member companies in 2020. In the notice, the association admitted that the COVID-19 has inflicted "considerable damage" on China's rare earth industry, causing difficulties of varying degrees in the operations of many rare earth producers.

The association noted that overseas pandemic prevention measures and the fallout of the deadly virus on the world economy have also "exacerbated strains" on the Chinese rare earth industry in terms of production, operations, market expansion and sustainable development. 

China dominates the global rare earth industrial chain and accounts for 95 percent of global rare earth output. Rare earths are indispensable for manufacturing modern electronic products such as smartphones, industrial robots, TVs, vehicles and weapons. 

A manager of a large state-owned rare earth magnet maker based in Ganzhou, East China's Jiangxi Province, told the Global Times on Thursday that some local producers are now running only at 70 percent to 85 percent of their pre-virus capacities. Ganzhou is one of China's largest bases for rare earth minerals.

"The overseas demand for rare-earth minerals and magnets has weakened in recent months due to the pandemic. This has led to a chain effect. My company's overseas shipping volume has declined 20 percent to 30 percent since April. That means thousands in losses to our revenue," the manager said. 

China's major export destinations for rare-earth products include the US, Europe and Japan. 

The manager added that the coronavirus outbreak in late January and early February in China had rocked the company, with production halted for more than a month. The Global Times reported earlier that in February, China's rare earth sector was at 20 percent of its production capacity as companies face shortfalls on logistics and laborer supply.

Wu Chenhui, an independent industry analyst, said border lockdown measures are another barrier that hinders the free flow of rare earth products. "It also affects upstream exploration, which has been forced to cut supply. It will take a long time to return to pre-virus supply levels if downstream demand rises this year," he told the Global Times. But Wu stressed that China should not give up its rare earth card for long-term strategic interests. 

In March, China's rare earth exports grew 19.2 percent year-on-year to 5,551 tons, customs data showed.