China's export and tariff rule changes for rare earth materials are a wakeup call: The U.S. must fast-track its policy on exploration, development and commercialization.
The House of Representatives has approved H.R. 6160, the Rare Earths and Critical Materials Revitalization Act of 2010, authorizing development of a domestic rare earth materials program to address short-term scarcities and ensure long-term supply for the nation’s security, economic and industrial requirements. The nod comes none too soon.
According to a Bloomberg report, China in July reduced rare earth export quotas for the rest of the year by 72 percent, inflating prices more than sixfold for some rare earth materials vital to the energy, military, electronics and manufacturing sectors.
The U.S. Government Accountability Office, in a briefing to congressional committees, reported on "Rare Earth Materials in the Defense Supply Chain." The GAO warned that while rare earth ore deposits are geographically diverse, current capabilities to process rare earth metals into finished materials are limited mostly to Chinese sources. The United States can no longer claim a role in all stages of the supply chain for materials based on the rare earths. China's dominance not only has implications for global availability and pricing of rare earth-based materials but also could jeopardize U.S. defense readiness.
In a concern closer to the industry, ceding control of both magnetic polarities of the world's magnets to China—magnets being the key electronic components that use rare earth elements—could hold consequences for producers of electronics.
The GAO report states that the fate of materials based on such elements as neodymium, dysprosium and terbium is largely in the hands of Chinese suppliers. China has adopted domestic production quotas on rare earth materials while slashing export quotas. It has increased export taxes on all rare earth materials to a range of 15 to 25 percent.
Still think China's industrial ambitions are purely benevolent?
Rebuilding the U.S. supply chain for rare earth materials to a level that will ensure sustainability could take 15 years. Development is dependent on new technologies that some experts believe will not be available on a production scale for up to four years and will require high startup costs. There is also an intellectual property rights issue: Japanese and other foreign companies own key technology patents for manufacturing neodymium iron boron magnets, some of which do not expire until 2014.
One hopeful sign is a recent contract between Boeing and U.S. Rare Earths Inc. under which Boeing will use a version of its remote sensing technology to identify and confirm rare earth deposits at sites for which USRE owns the mineral rights. USRE will use the Boeing findings to expand its exploration and incorporate large-scale mapping of confirmed and suspected rare earth deposits.
USRE holds the rights to significant deposits of rare earth elements in the United States, according to the U.S. Geological Survey.
China's export and tariff rule changes for the rare earths are a wakeup call for nations that have let their own capabilities lapse. The U.S. government must fast-track its policy on rare earth mineral exploration, development and commercialization.
The solution to a materials supply problem is not more government. Just leave industry alone and free to do what they do best. Businessmen operating in a laissez faire economy will solve the problem much more efficient than an army of Czars in Washington possibly could. Just get rid of the Looters and let Hank Rearden do his thing.
Exports to China of soy beans, rice, and other agricultural products related to the food industry have steadily increased over recent years. While there are no export taxes in the US, there are export controls. The US could, like China, place quotas on exports of food industry products, thereby fighting fire with fire by driving up the cost of food for Chinese consumers. That is a pretty good bargaining chip, since demand for food is not likely to decline in China.
This is a lesson, among many others that currently exist, that no nation should cede its manufacturing power to another.
Too many times USA companies and the government have let industries and key technologies slip away due to not supporting proper national imperatives as well as financial short sightedness.
"It should only be fair that U.S. companies have
mining rights to the Afghanistan deposits."
To follow on this article, China is also investing heavily in Africa and in South America to access natural resources such as rare earth materials among other resources. A monopoly or near monopoly on these resources is not in the interest of anybody really. I do not think the Chinese officials are stupid to use these materials as economic weapons. I believe they are simply trying to secure their own supplies, like any other major power including the US.
Rare earth metals are needed for electic motors - inculding hybrid electic vehicles, commercial wind turbines and high speed train engines. With China trying to corner the market on rare earth elements
they are trying to become major players in manufacturing of the above technology markets.
A recent PBS news segment stated there was only one
U.S. rare earth metal mining operation but it needed help to get production up. A recent USGS report found deposits of minerals including rare earth in Afganistan may be worth $1 trillion.
It should only be fair that U.S. companies have
mining rights to the Afghanistan deposits.
Our infatuation with low-cost labor allowed China to call the shots in rare earth metals used by the electronics industry. Both Japan and the U.S., as the world's most advanced economies, cannot afford to be cut off. So yes, while Japan is trying to find alternate solutions to using rare earth elements in their motors, the U.S. cannot afford to wait for this kind of development to see fruition. It needs to start opening the mines it closed earlier to catch up.
I just read an article here that talks about the the development of a non-rare earth magnet electric motor (http://www.eetimes.com/electronics-news/4209004/Japan-researchers-develop-electric-motor-sans-rare-earth-metals). Perhaps the rest of the world should follow suit? It seems that we are being surprised by this development, but should we have been surprised? It makes both great business and political sense to control these high tech metals, why wouldn't we in the US (or any other country) not already be engaged in securing supplies? It makes me wonder....