Archive for October 26th, 2010

Tuesday, October 26, 2010

Rare Earth Elements: Strategic Commodities?

China’s response seemed to take an especially nefarious turn when it apparently suspended its export of rare-earth minerals, the Economist wrote on September 24 this year, which are vital to making electronics components used in everything from handheld gadgets to cars. The alleged – semi- or unofficial – Chinese stop of rare earth minerals to Japan was said to be part of China’s reaction to the arrest of Chinese fishermen by Japan in September.

Ambrose Evans-Pritchard, a historian and a columnist with the Telegraph‘s international business editor, noted on August 1 that

The United States and Europe have been remarkably insouciant about supplies of rare earth minerals so crucial to frontier technologies, from hybrid engines to mobile phones, superconductors, radar and smart bombs.

Lack of strategic planning by the West has allowed China to acquire a world monopoly on this family of seventeen metals. Assumptions that Beijing would never risk its reputation as a global team player by abruptly strangling supply have proved naive.

China’s export controls on such minerals began some three years ago, in 2007, writes China Radio International‘s (CRI) German service. From 2009 to 2010, the export contingency went down by 40 per cent. The radio station quotes Wang Yong, a Beijing University professor, as saying that such controls were legal:

China’s export contingency for rare earths is in accordance with the WTO rules. The 1994 WTO agreement was amended with clauses concerning environmental protection. Therefore, sustainable development and a comprehensive use of global resources is emphasized. Also, the WTO advocates free trade. But clauses for state security and stable balances of payment were also defined. Therefore, export of the technologies and products in question can be put under control. America’s high-technology export controls are an example.

Chinese export controls on reare earths could be helpful for importers, CRI quotes Wang Yong. As prices were rising, companies which so far considered exploitation unprofitable would invest more in developments of their own, and with their own interests in mind, the countries in question would speed up the process.

The Frankfurter Allgemeine Zeitung (FAZ) quotes – unnamed – companies which depend on such minerals as complaining that Chinese authorities wanted to force them to relocate their production to China, as access to the minerals was easier there. The American Chamber of Commerce, the FAZ writes, issued a call on the G20 heads of state and government which refers to an “acute threat of free access to rare earths – the use of such elements for industrial policy goals or other goals was banned – the WTO prescribed free access and the absence of quotas. The FAZ adds the point – see previous paragraphs – that restrictions aiming at environmental protection was indeed in accordance with WTO rules.

The Chinese government plans to afford Baotou Steel Rare-Earth with a monopoly for light rare earths, while China Minmetals and Chinalco would focus on medium-heavy and heavy rare-earth minerals in Jiangxi province, according to the FAZ.

Meantime, Evans-Pritchard (see second paragraph) reminds his readers that

[r]are metals are not in fact very rare. Large amounts exist in the US, Canada, Australia, South Africa, Russia, Sweden, Vietnam, and above all Greenland with a third of the world’s known reserves.

However,

[w]hat is rare is to find them in viable concentrations. The metalurgy is complex. The frequent presence of radioactive Thorium complicates matters. Extraction is capital intensive.

All the same, Pritchard Evans, or so suggests the final paragraph of his article, would rather continue to depend on China’s mineral reserves. That’s not terribly original. If as much as recent coverage suggests is at stake, broader global supplies should be made available. If these minerals are so vital for so many industries, the capital-intensity of extraction should be no convincing argument. And given that the global reserves aren’t unlimited – in many places, genuine environmental concerns are likely to weigh heavily -, technological innovation should also contribute to reducing the global dependence on – more or less – “rare earths”.

Meantime, existing, but defunct mines could help to broaden supplies.

Through the early 1970s, the Mountain Pass  mine, about an hour’s drive from Las Vegas, was the world’s largest  supplier of rare earth elements (REE), writes the Washington Independent.  What could hamper a re-animation is that much of the know-how is no longer available.

Yaron Vorona, executive director of the Institute for the Analysis of Global Security’s Technology and Rare Earth Metals Center, cited an April 2010 Government Accountability Office report that says it could take 15 years to develop a U.S. rare earth industry,

writes the Washington Independent.

South African, Canadian, and Australian companies are all racing to develop their own mines, Blake Hounshell wrote on the Foreign Policy blog on September 23. But the economic rewards were questionable, he quoted the New York TimesKeith Bradsher:

“One potential threat,” Hurst warns, “is that, while China’s reduction in export quotas is currently causing prices to go up, if China were to turn that around and bring prices back down, this could potentially put these and other companies out of business even before they become fully operational.”

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Related
Rare Earth Element, Wikipedia

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