Wednesday, January 13, 2010

Will China squeeze the West on rare earth metals in the coming decade?

Here's a really cool use of FirstRain that we've been running - although a scary one at a macro economic level.

Back in August the NY Times ran an article on rare earth metals which prompted us to set up an ongoing FirstRain saved search on the issue. Here's the essence of what it said:

“In each of the last three years, China has reduced the amount of rare earths that can be exported. This year’s export quotas are on track to be the smallest yet. But what is really starting to alarm Western governments and multinationals alike is the possibility that exports will be further restricted.”

The angst is intensifying as many believe China could eventually halt their exports of these elements. This has prompted investors to speculate on the winners and losers which also then gets delivered to us in the daily email report.

To stay on top of this we set up folder with the topic Rare Earth Elements AND China (you can see this in the search bar):

And also set up a daily email report from the saved search to keep us up to date on the issue:

This is where it gets scary. The results of this ongoing report show the growing concern that China will need everything it is producing and it may be only a matter of time until the West is cut off from critical rare earth metals.

For example from IEEE Spectrum this month:

“A single country, China, mines more than 95% percent of the world’s supply of rare earth metals, found in permanent magnets, phosphors, lasers, capacitors, and superconductors. As recently as 2004, China used less than half of the rare earth metals it produced, but according to an estimate by the Industrial Minerals Co. of Australia, in Mount Claremont, China’s domestic demand will overtake its production in less than 10 years. Now Beijing is considering banning exports of some rare earth elements and limiting shipments of others to 35 000 metric tons a year, which would immediately threaten not just electronics manufacturing across the globe but also hybrid vehicles. A Toyota Prius, for example, requires about a kilogram of neodymium for its electric motor and as much as 15 kg of lanthanum for its battery pack.”

or from Resource Investor:

China has a lock on the raw materials required for green energy technology like Indium and Gallium used in thin-film solar modules and Tantalum, which is used in the microchips for cell phones. In addition, China has an abundance of industrial metals like lithium and cobalt, which are used in batteries. If China decides to halt their exporting of these materials, they could essentially monopolize the manufacturing of many sought after components, which will have a large and lasting impact on many industries.

We're headed for a few countries having the "World by its balls" (the quote is courtesy of Business Insider) and here you can read a fascinating presentation. The U.S. has the reserves but it's a small matter of politics (i.e. a very large issue) to get mining going so we don't have our collective balls in a vise.


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Anonymous said...

While its mineral composition is somewhat different, Mountain Pass maintains its own "stock" of rare-earth rock.

Over the past decade, Mountain pass mines have been conveniently laid up due to China's willingness to mine and sell its minerals altogether too cheaply.

It is hard not to see this this layup as strategic, orchestrated partly by company and government.

Neil S said...

Lithium from problem.

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