SAN JOSE, Calif. - China is reducing the amount of rare earths it will export by more than 10 percent for the first half of 2011, according to the Associated Press.
The move is a cause for concern-and for good reason: China accounts for 97 percent of the production of rare earths, according to the report. Rare earths are essential to devices as varied as cell phones, computer drives and hybrid cars. That article can be read here.
In September, the House of Representatives 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 report, China in July reduced rare earth export quotas for the rest of the 2010 by 72 percent, inflating prices more than sixfold for some rare earth materials vital to the energy, military, electronics and manufacturing sectors. A 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.
A long-awaited report from the U.S. Department of Energy (DoE) on rare earth scarcity concludes that in the short term the "clean energy economy" is at risk of supply-chain disruptions. As a result, the study recommends the development of domestic U.S. extraction, processing and manufacturing capabilities as well as cooperative efforts with Japan and Europe to mitigate scarcity worldwide.
One analyst raised several concerns about the subject. ''My biggest concern about RE (rare earths) is how we react. Our government has attempted to make villains out of the Chinese as a distraction for bad U.S. policy decisions. To a certain extent, western Europe has done the same. The whole currency issue is a red herring. In short, we are wasting energy and resources by not focusing on fixing our problems. If we follow this course in our reaction to China's proposed (threatened) cut back in RE exports, and turn this into a trade war, it would be a huge mistake. Of course, rolling over and ignoring it would be a mistake too,'' said Paul McWilliams, an analyst with Next Inning Technology Research, in a report.
''One of the reasons China has such a strong position in a number of REs is its lax environmental policy. It's not that indium, for example, is rare - it is a by-product of Zinc mining,'' he said. ''The issue is that there are NIMBY (not in my back yard) and environmental concerns in western countries that make mining it a very costly proposition. This is also why so much electronic assembly and manufacturing was pushed first to Mexico, and then on to Asia. Labor costs were one issue, of course, but environmental policy is also a big part of the story.''
China is in the drivers seat in rare earths. ''China is making a point that it is in a position of strength, and it's time for the west to back off the currency issue. China could double the value of the Yuan, and it still wouldn't bring assembly jobs back to the west,'' he said.
There are other factors. ''China is making a play to be the world leader in solar and LED lighting (among many other things). If the costs for materials goes up, and China maintains a lock on supply, it will extend its advantages,'' he said.
''The bottom line: If we allow this RE threat to initiate a trade war in the near future, we'll see western economic growth suffer greatly. China, however, will keep percolating from its booming internal demand,'' he added.
One U.S. company is attempting to secure a source of rare earths. In June, Molycorp Minerals LLC, the owner of the largest non-Chinese rare earth deposit in the world, and Neo Material Technologies Inc. entered into a letter of intent pursuant to which the two companies expect to cooperate in the rare earth “mine to magnets” supply chain.
Neo Material is a producer of neodymium-iron-boron magnetic powders, rare earths and zirconium-based engineering materials and applications, and other high-value niche metals and their compounds. Neo is headquartered in Toronto, Ontario. Molycorp, with headquarters in Greenwood Village, Colo., is a U.S. rare earth producer and technology company.
Earlier this month, Molycorp entered into a memorandum of understanding (MOU) with Sumitomo Corp. Pursuant to the transactions contemplated by the MOU, Sumitomo will purchase $100 million of Molycorp common stock and provide Molycorp $30 million in debt financing at a low interest rate.
Molycorp is expected to provide Sumitomo with approximately 2,500 metric tons per year of cerium- and lanthanum-based products and 250 metric tons of didymium oxide (a combination of neodymium and praseodymium) per year from its current production facility at Mountain Pass, California. Following completion of its new rare earth processing facility at Mountain Pass, Molycorp will provide to Sumitomo for an additional five years approximately 3,000 metric tons of cerium- and lanthanum-based products per year and 250 metric tons of didymium oxide per year.
Also this month, Molycorp and Japan-based Hitachi Metals, Ltd. entered into an agreement regarding the planned formation of joint ventures for the production of rare earth alloys and magnets in the U.S. The ventures would be focused on the manufacture of neodymium-iron-boron (NdFeB) alloys and magnets that are vital to many clean energy, automotive, computer, health care, communications and other technologies.
This news when reported some months ago did also raise the same point about the policies. If China had made policies that are reaping benefits then it should encourage other nations to follow the suit.
REE availability is going to be a challenge for the elctronic component and battery manufactureres in the near future. The manufacturers should develop strategies to avoid any problem in the suplly chain. The first way is to consider is REE recycling so that they can reuse the REE From the electronic waste generated.
This seems to be another case of China acting in its own self-interest as a developing superpower. If other countries have reliances on these resources for their own needs then they need to either develop their own internal sources or secure trade agreements with outside sources. Other than that, I don't really see a threat here. As for China's position as the world's manufacturer, others have held that position in the past and I suspect that a different set of others will hold it in the future. If / When China really starts seriously developing their intellectual capital through education then things will get really interesting.
its not a secret that china would like to keep dominance as main source of world electronics production. With rigid move to cut rare earth materials they powered their position more and ringed bells at counterparts as Japan & US. Unfortunetelly due to high costs of mining and eagered chinese sellers countries such as US, NL had created big problem for their future, current policy changes wont make things better in short term either. Chinese fellows know this well and with cutting further they strengthen their position.
Environment policy could be an issue of mining rare earth material. Labor cost could be another. Extraction method could also be one of the many contributors that makes China becomes the leader of rare earth export. Policy makers have to act fast to ensure the leading position of US in this area.
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