[Marxism] Chinese curbs on rare earth metal exports

Marv Gandall marvgand at gmail.com
Mon Aug 2 07:04:46 MDT 2010


Below, standard boilerplate from the Tory economic columnist Ambrose Evans-Pritchard about the uppity mercantalist Chinese not playing by the rules and selfishly pursuing their own economic interests, but this time in an interesting and little known industry - rare earth minerals - regarded as being of great strategic importance. The alarm over the export curbs introduced by China still seems to have more of the hallmarks, however, of "national security considerations" being mostly used as a smokescreen for vested interests - in this case, the US Magnetic Materials Association - seeking congressional subsidies. Rare earth materials are apparently not that rare, but Western and Japanese firms have gradually switched their operations from the US to lower-cost Chinese mines over the past two decades, to the benefit of defence, communications, auto and other industries dependent on the metals. Now China has abruptly restricted exports because of its own insatiable domestic demand, and it has shaken these global corporate consumers, as well as provoking renewed interest among mining companies and investors sensing opportunities in the exploitation of new state-assisted sources of supply elsewhere. I omitted E-P's further complaints about China's oil-related territorial claims in the South China sea, but the article is accessible in full at:

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/7921209/Hot-political-summer-as-China-throttles-rare-metal-supply-and-claims-South-China-Sea.html.

MG

*	*	*

Hot political summer as China throttles rare metal supply and claims South China Sea
By Ambrose Evans-Pritchard
Telegraph (UK)
01 Aug 2010

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 commerce ministry has cut export quotas for these metals by 72pc for the second half of this year. It is perhaps the starkest move to date in the Great Power clash over scarce resourses.

The Pentagon and the US Energy Department are still scrambling to work out what this means for US security. An interim report from the Government Accounting Office (GAO) has laid bare just how delicate the situation has become.

“The US previously performed all stages of the rare earth material supply chain, but now most rare earth materials processing is performed in China, giving it a dominant position. In 2009, China produced about 97 percent of rare earth oxides. Rebuilding a U.S. rare earth supply chain may take up to 15 years," it said.

Fifteen years?

China's rare earth blockade is becoming more piquant by the day as the country swaps threats with the US over the South China Sea. 

[…]

The GAO report said the US had been self-sufficient in rare earth minerals for most of the post-War era. The key mine at Mountain Pass in California shut down in the 1990s when China flooded the market with exports and drove Western mines out of business. One by one, US-based processing plants owned by German and Japanese firms switched operations to China. There are none left.

Cutting-edge weapon technologies are classified, but the GAO said the M1A2 Abrams tank and the Aegis Spy-1 radar both rely on chinese samarium. The US Navy's DDG-51 Hybrid Electric Drive Ship needs neodymium, which enhances the power of magnets at high heat. The Hell Fire missile requires Chinese components, as do a host of functions in satellites, avionics, night vision equipment, and precision-guided munitions.

Some of the metals such as terbium, dysprosium, thulium, and lutetium, europium, cerium, and lanthanum are more important that others, but crudely speaking they are the salt of life for the high-tech revolution -- sprinkled in iPads, Blackberries, plasma TVs, water filters, or lasers.

Each Toyota Prius uses a fistful of rare earth elements, which is why Toyota has purchased the rear metals dealer Wako Bussan. Cerium is used in catalytic converters for diesel engines. Terbium is key for low-energy light-bulbs that cut power costs by 40pc. Neodymium is used in hard-disk drives, wind turbines, and the electric motors of hybrid cars. Fresh research in Tokyo shows that rare metals can cut friction on power lines, slashing leakage.

Countries that cannot obtain these minerals --at any price – will not play much part in the technology revolution.

Japan already has a "Strategy for Ensuring Stable Supplies of Rare Metals". Japanese companies have been stockpiling feverishly for the last five years -- which may be one reason why China decided to cut off supplies. The West has been caught off guard.

The US Magnetic Materials Association said America has drifted into a "silent crisis" and needs to crank up its own supply chain within three to five years."Immediate action must be taken to free the US from complete foreign dominance."

Rare 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. What 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.

Yet the current situation is clearly intolerable. Congress is demading action through amendments to the National Defence Authorization Act. It is fair bet that the Western powers will soon funnel large sums of money into this very small niche.

Adventurous investors may want to look at Molycorp Inc, which is reopening the Mountain Pass mine but struggled with a share issue last week. Together with Arafura and Lynas Corp in Australia, it hopes to produce some 50,000 tonnes of rare earth metals by mid-decade. That is not enough for world needs. Avalon Rare Metals in Canada is a start-up play for the ultra brave. Greenland Minerals and Energy may tempt some.

Beijing’s export curb is understandable on one level. China's own industy will need most of its output within three or four years. The crunch will come one way or another. But as our Beijing correspondent Peter Foster has reported, the export limits seem designed to compel foreign technology companies to locate plants in China. This looks like a breach of World Trade Orgnaization rules.

Once again we see how China plays the globalization game, taking full advantage of WTO access to western markets without opening its own to the same degree, and all the while holding down its currency for mercantilist gain.

My hope is that this rare earth move was as much cock-up as conspiracy. Surely the Politiburo does not really think that China can act in this arbitrary fashion without eliciting a response?

Please tell us it was an administrative error. Then reverse it.



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