The Price Of China’s Tech Metal Monopoly

by Admin on October 28, 2010 · 4 comments

in China, In The Media, Rare Earths

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By Patrick Thibodeau – ComputerWorld – Published: October 28, 2010

WASHINGTON — China produces 97% of the world’s supply of rare earth elements, and it’s using that monopoly power against the U.S. by cutting exports and raising prices, as well as leveraging it as an incentive for electronics makers to increase or shift production to China.

China announced in 2000 that it was setting export quotas. At the time, it exported 75% of the rare earth ore for processing outside of China, but today its exports are at about 15%, said Jack Lifton, an analyst at Technology Metals Research in Carpentersville, Ill.

Export declines are expected next year, and prices for some elements are skyrocketing, he added.

But companies that manufacture goods that use rare earth elements in China and then export those goods are not affected by the export reductions and price spikes. This creates an incentive for manufacturers to keep their production in China and move new production there as well, said Lifton. “From the Chinese point of view, that’s perfect — they want jobs created in China,” he said.

“We knew this was coming, and as usual in America, we never bother with anything until it’s a crisis,” said Lifton. “We sent the mining of ores to China because it was cheaper there. Now, it’s payback time for our shortsightedness.”

China’s rare earth elements monopoly may be seen as part of an indigenous innovation policy, a program where China-originated technology is owned by Chinese companies. The geopolitical implications of China’s monopoly were illustrated last month when it blocked rare earth exports to Japan following Japan’s detaining of Chinese fishing boat captain over a disputed island area.

Yaron Vorona, executive director of the Technology and Rare Earth Metals Center, which is part of the Institute for the Analysis of Global Security, says that China is using its monopoly to gain strategic advantage. “Whether they intend for it to be a strategic threat or not is a very good question,” he said, at the Critical and Rare Metals Summit here on Wednesday.

Congress is beginning to take action. Last month the U.S. House of Representatives passed the Rare Earths and Critical Metals Act of 2010, which offers some loan guarantees and funds some research efforts. However, that the legislation was criticized at Wednesday’s meeting as not going far enough to provide the funding.

“China has no incentive to support supply chains outside of its own country,” said Keith Delaney, executive director of the Rare Earth Industry and Technology Association, and re-creating rare earth production, which includes separating, refining, alloying and component making, can take a decade or longer.

Rare earth elements, such as neodymium, are used to make hard-drive magnets. They are also used in cell phones, monitors and many defense systems, because they have unique capabilities, such as the ability to withstand demagnetization at very high temperatures, according to a recent U.S. Government Accountability Office report.

By shifting production to China, the U.S. also set itself on the path of losing technical expertise in the production and processing of rare earth elements as the workers who were once in this industry get older.

Peter Dent is vice president of business development at Electron Energy Corp., which makes rare earth magnets. He said that because the company’s customers include the U.S. Defense Dept., it has to hire U.S. workers for defense projects.

But Dent said that finding U.S. workers with the right education, and some experience with magnets, is becoming difficult. But “China has research centers with thousands of qualified people,” he said.

There’s discussion about creating substitutes to rare earth materials that could reduce some of the demand, but substitution is difficult and not quickly accomplished, according to Gareth Hatch, another analyst at Technology Metals Research. He said the focus should be on producing rare earth materials.

In the U.S., Molycorp Inc. is working on resuming production in Mountain Pass, Calif., the site of a longstanding rare earth mine.

The Congressional Research Service, in a report last month, warned of potential shortfall of rare earth elements as demand rises. By 2014, global demand may exceed 200,000 tons per year, but production may only reach 160,000 tons. But, “in the long run, however, the [U.S. Geological Survey] expects that reserves and undiscovered resources are large enough to meet demand,” said the report.

Long term, “I really don’t think there will be an issue” in meeting supply needs, said Hatch, “it’s just getting through the next one to two years.”

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1 Chris October 29, 2010 at 10:46 am

” According to a report published by the Institute for the Analysis of Global Security (IAGS), a non-profit think tank in the US, China controls around 97 per cent of the global rare earth elements market and almost 60 per cent of all known global rare earth resources, which are needed to produce trillions of dollars worth of high-tech electronic goods including everything from smart phones to hybrid cars to wind turbines. ”

Holy smolley…..60% of resources ?

Wow.

http://www.rsc.org/chemistryworld/News/2010/October/29101001.asp

Mining with a seperation plant at each, Molycor & Ucore, with a central processing for both being Moly is lights and Ucore is heavies.

Out of ALL the articles on REE’s, that comment by Mr. Lifton is the smartest & to the point yet.

2 D. Carlton Rossi October 29, 2010 at 11:30 am

It could also be said we were short-sighted when we were not aware zirconium oxides were used for making thinner, lighter eyeglass lenses.

3 Chris October 29, 2010 at 1:40 pm

“Baotou is a significant portion of the Earth’s light rare earths accessible resource. It’s a monster deposit,” says Jack Lifton, founding principal, Technology Metals Research. “And as a businessman I’m saying, ‘And you’re telling me you’re going to compete with that?’”
http://blogs.forbes.com/gadyepstein/2010/10/29/names-you-need-to-know-in-2011-baotou-rare-earths-capital-of-the-world/?partner=yahootix

Maybe eventually the media will wake up and stop lumping light and heavy REE’s simply as “rare earths” without establishing the huge differences of the two.

Quest is so far the closest to Ucore’s readings of 50/50 but Ucore is moving into a section that had initial reading of 97% heavies.

Quest is also projected to not be in production until 2016, Ucore is 3-5 years.

Also Ucore has U.S. govt investigating their deposit for Terbium and Dysprosium, which are just two of the REE’s China does NOT have.

That chart comparison is in Quest’s presentation.

http://ucoreraremetals.com/news2.asp?ID=131

4 gobucks October 29, 2010 at 3:50 pm

I know exactly why there is so much noise out of the DOE and other govt agencies about finding alternatives.

It has very little to do with actually finding those alternatives.

It’s because their scientists and engineers can put together grandiose proposals to do R&D, get hundreds of millions of dollars in funding and perpetuate their empires.

The chances that those projects would actually bear fruit are poor.

As Dr. Hatch pointed out, finding substitutes is a serious problem. And in most cases, the potential substitutes are inferior performers.

One gets the impression that the govt executives think that rare earths were tapped for high tech applications because the developers LIKED spending more money on expensive materials. Please. Rare earths were tapped because of their unique properties. In many cases, nothing else would do the job. If the developers could have gotten away with using cheaper stuff, they would have done so at the outset.

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