Row Over Exotic Minerals That Make Modern Life Tick

by Admin on October 21, 2010 · 8 comments

in China, In The Media, Rare Earths

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By Olivia Lang – BBC News – Published October 21, 2010

They might not dominate headlines like diamonds or oil, but rare earths are some of the world’s most valued resources.

These metals are found in almost every 21st Century household, and used globally to make high-tech products, from weapons, to flat-screen TVs and mobile phones.

What’s more, China produces 97% of them.

But with much of the world’s economy depending on these metals, a report that China is curtailing its exports to Europe and the US by almost a third next year has rattled manufacturers and policymakers.

China denies the recent claim, but has previously stated that it will restrict exports to protect supplies and prevent mines being over-exploited, while also meeting an increase in domestic demand.

Governments are now increasingly worried about shortages, while Japan has said it will need to consider stockpiling. Meanwhile, prices are soaring.

‘Stranglehold’

The 17 elements known as rare earth minerals – numbers 57 to 71, as well as a couple of others, on the periodic table – are found outside China, but most of the mines in other countries have long closed down.

Until the mid-1980s, the US dominated production, but then China entered the market. Soon, China had cornered it; as Deng Xiaoping said in 1992, “Arabia has oil, China has rare earth”.

China has been tightening export quotas since 2006, sparking increasing concern about its ability to disrupt supply chains.

The issue re-entered the spotlight in September, after the arrest by Japan of a Chinese fisherman in disputed waters initiated a row between the two countries.

Japan, whose firms account for 56% of China’s rare earth exports, claimed that China then restricted earth metal supplies in response.

In a New York Times op-ed last month, economist Paul Krugman wrote: “On one side, the affair highlights the fecklessness of US policymakers, who did nothing while an unreliable regime acquired a stranglehold on key materials.”

“On the other side, the incident shows a Chinese government that is dangerously trigger-happy, willing to wage economic warfare on the slightest provocation,” he added.

China claims it was not a policy decision, but rather the choices of individual companies expressing condemnation of Japan.

In any case, that restriction, and now the 30% reduction claim (which the US is set to investigate), has sent the future of these metals to the top of policy agendas – with observers now questioning whether the world can continue to rely so much on China.

‘Stick but no carrots’

The consequences of a squeeze on rare earths would be considerable across the developed world, says Professor Animesh Jha from the University of Leeds.

“The Chinese definitely feel they have total control of it – just like the Middle East had control over oil,” he says.

He says it is about asserting political as well as economic power – as the Japan incident demonstrates. And, in his opinion, the reason for China’s rumoured restrictions to the US and Europe are not disconnected from the US and Chinese row over currency.

“It upsets the trade balance, they are holding the stick but no carrots. They want to say, ‘We are not going to buck our currency up and we want to be tough’.”

But, then again, why shouldn’t China use its own resources for its own interests, asks Jack Lifton, director of Technology Metals Research.

“I don’t see what my right is to someone else’s property. They are on Chinese soil. The Chinese are saying, ‘You have the resources. Go mine them and use them for yourselves’.”

Besides, he says, China is not preventing other countries buying the end product: “I don’t see this as a surprise. China has openly said it does not want to be a raw material supplier, it has always said it wants to manufacture goods.”

But, he says, China will use it to its political advantage if it can, like with Japan – and other countries have been slow to wake up to this.

“It hasn’t sunk in to the Western elite that they can’t tell China what to do,” he adds.

‘Run dry’

Essentially, it underscores the need to source rare earths from non-Chinese minerals, says Professor Jha.

“It’s very dangerous to rely on limited resources from politically unsafe places. I don’t think we should be held hostage to China,” he says.

In any case, China has warned that its reserves – most of which come from mines in Chinese Inner Mongolia – dropped by 37% between 1996 and 2003, suggesting future supply could run dry.

But where else would manufacturers source them?

According to Professor Jha, there are extensive deposits elsewhere which can be tapped into. More than one third of rare earths are found outside of China.

Mines are being developed in the US and Australia, which Mr Lifton says should reassure the world of business. Molycorp, owners of the Mountain Pass mine in California, aim to produce one sixth of global supply by 2012.

“Both mines are very large and can supply the world indefinitely,” Mr Lifton says.

“This crisis is literally on a countdown clock. At one point the Chinese won’t have leverage as others come into production.”

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1 William October 21, 2010 at 12:34 pm

I have been strongly apposed to outsourcing which the American and European manufacturing have adopted and now are suffering the consequences of supply. With that outsourcing mentality intellectual
property rights have been lost along with employment opportunities that are crucial to any countries economy. You must have a rotating dollar to keep the economy going. Once that rotation stops, a depressed economic condition starts to brew. I’m not saying a depression is going to happen but until another source in the next two years is found for the manufacturers outside of China of a supply of rare earth elements, we will see some drastic reductions in technology output in both the European and American economies.

2 fran October 21, 2010 at 1:55 pm

QUESTION–???

beyond military applications, how many USA[inside our borders] industrial sites made use of REEs in production during the past year? what products? what contribution to GDP? how many production manhours?

in other words, if the USA had not received REEs, what would have been the impact?

please put these dire circumstances into some understandable perspective.

THANK YOU.

3 Chris October 21, 2010 at 3:48 pm

DOD Near Completion of Report on Military’s Use of Rare Earth Minerals

” Department of Defense officials are expected to sign off as early as this week on a report detailing just how dependent the U.S. military is on rare earth minerals.”

” The survey is now finished, and is currently being reviewed by key military officials, DOD spokeswoman Cheryl Irwin said. ”

http://washingtonindependent.com/101244/dod-near-completion-of-report-on-militarys-use-of-rare-earth-minerals

4 Gareth Hatch October 21, 2010 at 3:59 pm

Fran: based on forecasts from Dudley Kingsnorth, and working backwards a little, I would estimate that the US uses around 10-12% of the world’s production of rare earth raw materials right now, which at a run rate of around 100-120,000 tonnes total per year at present, is roughly 10-14,000 tonnes per year. Around half of this goes into the catalyst business.

5 gobucks October 21, 2010 at 6:41 pm

What kind of world is it where the customers feel they have a RIGHT to the product of someone else’s labor?

Oh, yes. Ayn Rand wrote about that.

6 Chris October 22, 2010 at 7:04 am

Markey presses Pentagon on China’s rare earth policy

” Markey is asking Defense Secretary Robert Gates which rare earth elements are of specific concern to defense applications and the status of the market. ”

From Ucore rare metals September 2, 2010 :

Federal Agency Increases Involvement in Bokan Heavy Rare Earth Project

” Of particular interest are terbium and dysprosium, which are among the most scarce and valuable metals in the world, and which have been found in anomalously high grades in the Bokan area. “The U.S. government is quite interested in these minerals because they are of military importance,” said Dr. Mariano. ”

Couple days ago, Ucore’s press release was only for 50% of it’s 18 holes with other 9 pending. That also does not include Sunday Lake, that is where the intial drilling was 4 meters at 95% heavy REE’s.

With what they have so far, they’ve said is enough to supply U.S. needs for decades. So anything from here on out is icing on what’s turning into a very large cake. I laugh at how hard the stock got hit, games and people still don’t get that not all of these REE’s are the same, even the media still simply blankets’em all as the same, “rare earth elements”.

Mr. Lifton was who helped me understand a while ago the differance and how light REE’s will be oversupplied. Guess the media needs to at least youtube Mr. Lifton for a simple 10/20 min video !

From Mr. Lifton October 01, 2010: There is no way that a non-Chinese rare-earth mine will be able to outproduce the Chinese mines in Inner Mongolia, in total production of eiher neodymium or lanthanum, the two most widely used of all of the rare-earth metals; but even the Chinese believe that they will not be able to meet the demand for dysprosium and terbium beyond this decade.

If the demand for dysprosium and terbium doubles, then there will be a major shortage of dysprosium and terbium beginning by 2015. I am betting that Chinese, Japanese and Korean investors will focus on neodymium and, perhaps, lanthanum only in the short term, but on dysprosium and terbium for the long term. ”

And how many non-chinese deposits are rich in Dy and Terb ???

Let’s see which ones the U.S. military identifies. ( hmmm )

7 Chris October 22, 2010 at 7:15 am
8 Chris October 22, 2010 at 3:56 pm

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