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China controls 97 percent of the world's rare earth metals. It is cutting its exports to increase profits and stockpile resources.  (Source: Sun Bin)

Sony says that the cuts may eventually force it to raise the price of its electronics. Other Korean and Japanese electronics giants have made similar statements.  (Source: Mynjayz)

EVs like the Chevy Volt, and hybrid vehicles might also see price increases and shortages as China cuts off rare earth exports.  (Source: Car Buyers Notebook)

The shortages will also hurt the wind and solar power industries, which depend heavily on the rare earth metals.  (Source: Wind Power)
Meanwhile nation pockets big profits and builds up its own growing economic juggernaut

They sound like something from a mad scientist's laboratory -- Scandium, Yttrium, Lanthanium, Cerium, Praseodymium, Neodymium, Promethium, Samarium, Europium, Gadolinium, Terbium, Dysprosium, Holmium, Erbium, Thulium, Ytterbium, Lutetium.  Yet these "rare earth" elements -- which, as there name suggest, occur infrequently in the Earth's crust -- have become critical materials used by the electronics and automotive industry.

However, the market for rare earth metals is hardly an open one.  China, by expert's estimates, controls 97 percent of the world's rare earth refining capabilities.  And it's moved this year to cut exports.

I. Over a Barrel -- The World Stands Helpless as China Raises Prices

This month China announced that it would be slashing rare earth exports by 35 percent in the first half of 2011 from a year prior, and that it was considering cuts for the second half of 2011.  The country claims it’s making the move to maintain "ample" reserves.  Most experts, however, believe that the move is a bid to increase its profits and give its own domestic industries an edge.

The move has been met with outrage in Europe and the U.S.  The European Union has threatened that it may push the World Trade Organization, a powerful international arbiter to pass sanctions against China, if it doesn't restore supply.  A European Commission spokesman is quoted in Reuters as commenting that the EU "notes the latest quota figures and expects China to respect its recent assurance of a guarantee of rare earth supplies to Europe."

Japanese tech firms are also angered by the move.  Sony, which uses rare earth elements in its TVs and other electronics, says the move could damage it in the long run.  Writes a company spokesperson, "We cannot welcome rare earth export controls or any restrictions that hinder the system of free trade.  At this point in time there is no direct impact on our company. But further restrictions could lead to a shortage of supply or rise in costs for related parts and materials."

Some Japanese companies are vowing to cut their dependence on the rare elements.  But that may not be as easy as it sounds.  The elements have become widely used thanks to their plethora of desirable properties -- properties that aren't always seen in other elements and compounds.

As prices of rare earth metals soar, electrified vehicle (hybrid, EV, etc.) makers in the U.S. and Japanese are bracing themselves for price increases.  Hybrids and electric vehicles use more than twice the rare earth metal on average as a non-electric vehicle.  However, even non-electric vehicles may see costs rise, given the significant amount of rare earth metals used in their onboard electronics.

II.  The Future -- Some International Production, but Not Enough

The problem likely won't resolve itself anytime soon.  While Lynas Corp. (Australia) and Molycorp (U.S.) both hope to bring rare earth mines online next year, China will still control the majority of this rare resource in the foreseeable future.

For rare earth metal companies in the U.S. and elsewhere outside China, the opportunity is tremendous.  States, Molycorp CEO Mark Smith, "Any reductions China makes in its 2011 exports versus 2010 levels will only exacerbate the global supply shortfall of rare earths we can expect in 2011."

However, with demand expected to rise from 55,000-60,000 tons in 2011 to 250,000 tons in 2015, China will be in a prime position to score massive profits.  Increases in the price of electronics, alternative energy devices, and cars in the U.S., Japan, and Europe, barring significant unforeseen resource discoveries or technological breakthroughs, will likely reflect these profits.

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RE: Sound strategy
By Aloonatic on 12/30/2010 6:03:16 PM , Rating: 4
My tip for a sound financial future.

Invest in private security firms. Preferably those with experience operating in countries like South Africa or Brazil, as I fear that that is where western nations like the US and UK are heading. Huge gaps between rich and poor, where a lot of wealth is held by the aged, while the young and future-less, energetic youth are left to fight and struggle.

Someone's gotta keep those who have in the west safe from the ever increasing number of have-nots, with an ever increasing gap between the two too. You might as well make some money out of it, if you can :o)

RE: Sound strategy
By priusone on 12/30/2010 6:31:52 PM , Rating: 1
My resume is ready to be sent out when the time comes. I have the weapons and the rounds, all I need is a sit-rep and a green light. And no ROE this time.

RE: Sound strategy
By SPOOFE on 12/31/2010 1:02:12 AM , Rating: 2
Huge gaps between rich and poor, where a lot of wealth is held by the aged, while the young and future-less, energetic youth are left to fight and struggle.

How dramatic. Unfortunately for your (admittedly creative) scenario, but fortunately for reality, the fact is that 80% of the millionaires in this country are first-generation rich; meaning that, essentially, anyone that wants to get rich, can get rich.

The division between rich and poor is merely academic; people don't get violently jealous en masse just because someone has something they don't.

RE: Sound strategy
By Aloonatic on 12/31/2010 5:04:59 AM , Rating: 2
I'm perhaps more referring to the UK to be honest, were the gap between the rich and poor has been growing for a long time, and the percentage of wealth owned by the over 50s continues to increase too, as does the level of youth unemployment. However, the trend is probably there in the US too. If it's like the UK, then your nation's youth's futures have been sold out to the far east as well. Perhaps you guys have a better protected economy than over here though.

I'd be interested to know what age the "first-generation" rich/millionaires are in the USA. I'm assuming that that is where you are from too.

I'm not saying that you're going to wake up and open your curtains to see a Mad Max style scene outside your window tomorrow, by the way. Never mentioned anything about about mass violence either, just that many western nations are seeing an economic divergence, like that seen in other nations, where violent crimes, robberies, kidnappings etc are much more common. Surely you're not going to tell me that they are just "academic" and that gaps in wealth along with diminishing opportunities to gain wealth legally, don't have an effect of crime, and that that will meant that people are going to need more protection, or at least want to feel more secure.

RE: Sound strategy
By Kurz on 12/31/2010 10:23:54 AM , Rating: 2
Hmm... you actually stated the UK government used their power to sell the people out? And now you also state the US Government is doing the same?

You've come a long way Aloonatic.

RE: Sound strategy
By Aloonatic on 12/31/2010 2:47:18 PM , Rating: 3
I never explicitly mentioned the UK government, nor US? The US has had more more to protect it's industries though, in the laughable "free market" that allegedly exists, but that's more an issue to do with the size of the relative nations. Please point out where I have said that the UK government has sold its people out? If I did, that's not what I meant.

I'm only referring to trends and how people have behaved, which may be what you are referring to. However, generally speaking, I think that people get the governments that they deserve/ask for in the long run, so its not really any governments fault.

The simple facts are, kids in schools today will enter into a far harsher and more competitive world than their parents/grandparents ever did, and will have precious little too inherit too.

The riots in London over the last couple of months over student tuition fees are just one of the opening salvoes in what may well turn out to be a pretty nasty "generational war" (as I'm sure the tabloids would term it) in the UK, and I doubt that these issues only exist here too.

Governments just go along with whatever gets them the most votes, and that invariably follows the money. We sometimes forget that even in countries like the UK ans US, democracy and capitalism are not all that old, in the context of how nations are governed, and it seems that there might be a chink (no pun intended, given what this article is about) in the systems armour, when a large generation [baby boomers]comes along, which most of the money and power in a democracy will inevitably follow due to the way we are governed.

It's not governments that have sold their children out, it's their parents and grandparents, who have figured that appeasing them with shiny trinkets and loud flashing, noisy things made that last or a few years will make up for there being precious little else for them to inherit in the long run.

I hope I'm wrong, but it seems that that is the pattern that is appearing on this side of the pond. Of course, a great big global war/pandemic should reset the counter and get economies moving again. Create demand for this and that. Maybe that is how the future will go, who knows? :o)

RE: Sound strategy
By SPOOFE on 12/31/2010 6:50:47 PM , Rating: 3
I'm perhaps more referring to the UK to be honest, were the gap between the rich and poor has been growing for a long time, and the percentage of wealth owned by the over 50s continues to increase too, as does the level of youth unemployment.

You're just re-iterating what you already said. I'm asking why a huge difference between rich and poor is inherently "bad". We've never had so many people on this planet, ever, at any time in our history; that creates a pretty huge bell curve, with a taller peak in the middle and larger declines at the fringes, simply due to the sheer numbers.

As for "youth unemployment", you're noting an artifact of increased life expectancy; when expectancy was 40 or 50 years, it was more important to begin being productive at a younger age. That importance has lessened, so now we have more young'uns spending more time with school - or, heck, simply being young and irrespondible - for a longer period of time... solely because they can.

I'd be interested to know what age the "first-generation" rich/millionaires are in the USA.

Fairly irrelevent. The only real concern over wealth disparities lies with the perception of whether or not a poor person can become rich. If there's no expected payoff, there's no effort to achieve that payoff.

Surely you're not going to tell me that they are just "academic" and that gaps in wealth along with diminishing opportunities to gain wealth legally, don't have an effect of crime

Gaps in wealth do not inherently have an effect on crime. Diminished opportunities certainly do, but you haven't established diminished opportunities, merely inferred them based on shoddy evidence. There is no set amount of wealth; there is no law of physics that insists there can only be so much money. Someone having more than you does not make you covet their possessions or standing.

I think the primary reason people rail so much about the "wealth gap" is ignorance; they buy the propaganda - similar to that which you are spreading - that "the wealthy" are all bastards looking to keep the Little Guy down, and use that as a justification for not doing anything productive with their lives (sheer, simple laziness), and as such their lives suck. It's called a self-fulfilling prophecy. Meanwhile, the facts show that people that don't buy into your sort of hogwash are out there making money for themselves and becoming "the wealthy" that are such right bastards to begin with.

You've been conned by political rhetoric. Poor guy.

RE: Sound strategy
By gamerk2 on 1/2/2011 2:19:06 AM , Rating: 1
No, you're the one whos wrong.

Economic growth is driven by consumer spending. Period. None of that supply side crap thats been shoved down our throats the past three decades. No matter how much money that businesses make, they can not afford to hire people unless that hiring leads to an increase in sales. As such, if the consumer can not spend, the economy flatlines. [This recession is actually more proof on how supply-side thinking doesn't work].

The wealth disparity leads to two inevitable conclusions:
1: As the wealth becomes more centrailzed, consumers will have an ever smaller piece of the economic pie. Consumer spending stats to tail off, leading to little, if any, economic growth.

2: As more people become poor, more people become reliant on government run programs to survive. As such, the cost of those programs increase, leading to larger government debt. Eventually, either the country defaults, are programs are cut, which in turn hurts the consumer yet again.

Right now, wealth wise, 90% of the countries total wealth is in the hands of 2% of the population. Coincidentally, the current recession won't end, despite the fact job losses are near normal levels, because companies won't hire new employees. And why is that the case? Because consumers aren't spending money.

Meanwhile, other countries continue to pass us by. China, India, Brazil, South Korea; every single one who has economic growth driven by the middle class. In the US, the middle class, only a few decades old, is going the way of the dinosaur. And our economic power will go with it.

Of course, I'm sure thats somehow Obama's fault too; everything else seems to be these days :P

RE: Sound strategy
By SPOOFE on 1/2/2011 8:12:09 PM , Rating: 3
What an excellent response to something I never wrote.

As for your repetitious jingoism:

90% of the countries total wealth is in the hands of 2% of the population.

That's a bit of trivia that tells us exactly one thing: That 2% of the population is especially adept at gaming the system. I don't see why that's something that "needs changing". If you'd like to explain it - instead of mindlessly repeating sound bites you've heard without ever devoting an iota of thought to 'em - I'd love to hear it. But I'm unimpressed with your lengthy, bloated response that don't address a single point I raised.

RE: Sound strategy
By kosmokenny on 1/3/2011 5:10:44 AM , Rating: 2
It needs to be changed peacefully because the 98% of the population that is getting gamed is quite capable of changing it violently. Is that short and simple enough for you?

RE: Sound strategy
By Kurz on 1/4/2011 12:24:53 PM , Rating: 2
except they don't want to change it violently since the rich are providing a service that majority of populace wants.

However, if you have beef with rich people controling your lives they don't do so by forcing you to buy their product. The only entity that has power to do so is the government. So please take up your qualms with the government meddling in the economic market.

RE: Sound strategy
By Aloonatic on 1/3/2011 6:57:16 PM , Rating: 2
You seem to think that I am writing with some agenda. I am not, unlike most of you guys.

I've never said that rich people are this or that. I'm just commenting on what is going on. Sure people are selfish (if that's what you mean by b'stards), but what's new? They always have been, always will be, that's partly why we need governments and social conventions. They seem to have failed somewhat, or maybe it's inevitable?

Basically, all I said was that as the gap between rich and poor grows, the more crime you see. You are probably American but have money, so live in a little bubble, believing that America is like it is shown on Friends or something? However, you really should see what your country is like sometime, as you seem oblivious judging by your comments. (Not saying that any country is perfect either) You have a bigger gap between rich and poor in your nation than many in the west, and which country has the largest prison population percentage? The UK is catching up, and that happens to also be coinciding with a growth in the gap between...

Also, are you denying that in countries where there is an even bigger gap, that crime is higher? Countries like Brazil and South Africa, which I just chose at random.

You might want to dismiss what I point out or question as irrelevant, it just shows that you are missing the point. The age of the 1st gen millionaires? To spell it out, the number that come along in the next generation will almost certainly be a lower percentage of the population than before, and a lot of the current 1st get are probably older people. Of course, as someone cleverly pointed out, that has a lot to do with interest, but less and less young people are in the position to be able to take advantage of that system now too.

Sure, longer life expectancy is playing a part, but selling off manufacturing, taking the payment now, while replacing it with phoney/false economies where we generate little but customer satisfaction ratings, selling and servicing what is made over seas and bought on credit within a convoluted financial system based on hot air, is not going to cut the mustard in the long run.

Your notion of there being no problem with there being rich hand poor rubbing along together, I agree with, but only in a society where there is genuine opportunity for people to move from one to the other. That is part of what I am saying though, the older generations have sold-off/pawned many of those opportunities and mortgaged their own offspring's futures.

Oh, too many issues, and it's too late for me to bother :o)

RE: Sound strategy
By cfaalm on 12/31/2010 12:33:53 PM , Rating: 3
Or get a degree and learn to speak Chinese.

RE: Sound strategy
By Laereom on 12/31/2010 3:42:10 PM , Rating: 2
Hurr, old people have more money.

Hurr, I don't understand how compound interest works.

RE: Sound strategy
By Aloonatic on 1/3/2011 6:02:39 PM , Rating: 2
Apparently, the percentage of the UK's wealth owned by the over 50s is increasing. If compound interest is the only reason, is compound interest a new thing, only invented recently? Hurrrr (look at me with my clever use of hurrrr) hurrrr hurrrr.

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