Commerce Resources Corp (CCE)

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Rare earths become rare

Published: 10 Sep 2009 12:02:02 PST

Illustration: Peter C. Espina

By Sun Wei

China's rising strength in rare-earth minerals supply, and its willingness to use that as "a 21st-century economic weapon," have attracted much attention in the past few weeks.

The world's dominant-rare earth minerals producer, China produces more than 93 percent of the global supply of rare-earth metals, a group of 17 "lanthanide" elements essential in high-tech devices and green products.

China's Ministry of Industry and Information Technology is drafting a "Rare-earth Industry Development Plan 2009-2015," pressuring the rare-earth industry to consolidate to become more efficient and less polluting.

Against such background, strategic thinkers in Western countries are starting to worry that China could impose a total ban on exports of terbium, dysprosium, yttrium, thulium, and lutetium, and may restrict foreign sales of other rare-earth metals.

US technology news magazine Wired quoted an old piece of wisdom from the Strategic Air Command as saying, "When you have them by the balls, their hearts and minds will follow."

"China's regulation of its rare-earth metals industry does not aim at subduing any country, but protecting China's national resources, " Zhou Shijian, senior researcher at the China-US Relations Research Center of Tsinghua University, told the Global Times. "The cheap export era should have ended. It is high time, and China has been waited for a long time."

Powers' metals strategic

Fifty years ago, the world economy was established on steel, aluminum and iron. Today, rare-earth metals are reshaping the world economy.

Rare-earth metals are the key to 21st century technology. "Without them, we wouldn't have smartphones, hybrid cars or precision weapons," according to Wired.

China's decision could cause a crisis for high-tech development, according to Britain's Daily Telegraph newspaper.

The newspaper report says global energy competition has entered a new stage, because nations are already experiencing difficulties in acquiring rare raw materials.

Strategic metals are also closely related to sensational techniques.

In July, Chinese border police seized a quantity of the strategic metal vanadium bound for North Korea, foiling an attempt to smuggle a material used to make missile parts.

Vanadium is a metal that strengthens steel and protects against rust. It is alloyed with steel to make missile casings, as well as high-speed tools, superconducting magnets and jet engines.

China restricts the export of vanadium and other minor metals as part of a domestic policy meant to preserve strategic metals, encourage investment in processing industries and control international price fluctuations.

West preserved for years

While China is just starting to acknowledge the strategic value of rare-earth metals, developed nations have long been storing up their own strategic reserves.

As the world's second-largest rare-earth metals holder, the US accounts for nearly 12 percent of worldwide stocks. Early in 1981, the US categorized the metals that are of great importance to the economy and warfare and categorized them as strategic metals.

The administration of former US president Ronald Reagan spent $100 million buying strategic resources, including 62 kinds of minerals, metals and other raw materials.

Since 1999, the US began halting production for strategic and environmental concerns. By importing, the US protects its mineral reserves, according to CCTV.com.

Japan imports nearly all its rare-earth elements from China, with two thirds of its annual imports in reserve for strategic purposes. Since 1983, Japan put seven rare-earth metals into reserve, including nickel, chromium, tungsten, molybdenum, cobalt, manganese and vanadium.

Australia and Canada are also tightening the mining of rare-earth metals, and importing from China for their reserves.


Consumers avoid 'hot water'

Demand for rare-earth metals is forecast to increase by between 10 and 20 percent each year, on the back of growing demand for metals such as neodymium, used to make hybrid electric vehicles and generators for wind turbines.

Japan sees the rare-earth elements as a probable battleground for future trade wars.

The Japan Agency for Marine-Earth Science and Technology has begun developing three robots to search for rare metals, the Asahi newspaper reported.

The government-affiliated organization plans to spend about 3 billion yen on the project. The deep-sea exploration robots, expected to be operational by 2011, will look for rare metals, such as zinc, germanium, manganese, cobalt and nickel, which are used in electronic devices, alloys and other products.

Mines in the US that were forced out of business by price wars may be brought back into use. US-based Molycorp Minerals is preparing to resume mining of rare-earth ore deposits at a California facility, Wired reported.

The Pentagon is likely to take a closer look at this issue. The House and Senate versions of the National Defense Authorization Act – currently awaiting resolution – both contain measures that would require the Department of Defense to study the military applications of rare-earth metals.

A handful of Canadian mining companies are exploring for new supplies in South Africa, Brazil and the US while pushing ahead with existing projects.

Time to realize the value

As fear and criticism of China accumulate, developed nations have hardly mentioned the benefits they have won from China's cheap prices.

"China has not realized the precious value from a strategic perspective," Shen Dingli, a Chinese expert at Fudan University, told the Global Times. "Strategic metals match strategic industries. We own the dominant reserves of rare-earth in the world, but we didn't protect them well."

China produces about 93 percent of global supplies of rare-earth metals, with a single mine in Baotou, in China's Inner Mongolia, producing half of the world's supply.

Former Chinese leader Deng Xiaoping once observed that the Middle East had oil, while China had rare-earth elements. Owning 71 percent of world reserves of rare-earth minerals, China is the only country that can offer 17 different kinds of rare-earth elements. China has incomparable potential in this sector, even compared with the Organization of the Petroleum Exporting Countries (OPEC), which holds 69 percent of the world's oil reserves.

But China has no OPEC-style organization to contribute to pricing rights. Instead, most of the time, rare-earth minerals are over-exploited under an open policy.

Some of the minerals crucial to green technologies are extracted in China using methods that inflict serious damage on the local environment. China dominates global rare-earth production partly because of its willingness until now to tolerate highly polluting, low-cost mining, the New York Times reported.

According to the Financial Times, China produced 96 percent of the world's rare-earth metals in 2005, of which 60 percent was exported. As the exports decreased tenfold this year compared with in 1998, the price has dropped by 36 percent.

"China has been selling these precious rare-earth metals at a dirt-cheap price for 20 years, " Dai Xu, an expert on military issues, told the Global Times.

"Regulations should be brought into force to limit the exploitation of the mines," Shen said, adding that exploiting the mines can damage the environment and, at the same time, endanger China's strategic economic security.

"Strategic metals are pivotal to the future of great powers," Dai said, adding that the control of resources of future techniques indicates the control of the future.

"It is time for China to upgrade the protection of rare earths to a national strategic level," Dai said.

Agencies contributed to this story

http://news.alibaba.com/article/detail/business-in-china/100169407-1-rare-earths-become-rare.html