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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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Isnt the real problem cost?
By GreenEuropean on 12/31/2010 9:05:43 AM , Rating: 2
Its not like we lack rare earths around the world.

http://johnbatchelorshow.com/schedules/image/rare%...

Point is people are too cheapskate to pay 10-50$ more for their TV, smartphone, computer etc.

Its double morale. Rare earths are only cheap due to cheap educated labour and lower environmental standards.

Nothign worse to hear a bunch of hypocrits whine over a country. When the real issue is they are too cheapskate for the industry to be placed in their own country.




RE: Isnt the real problem cost?
By diggernash on 12/31/2010 10:01:31 AM , Rating: 2
So the solution is an environmental tax on us all to combat a problem that can not be quantitatively discussed? It seems that the argument continues to be, if it changes the earth it must be bad. There are ancient human skulls that were munched on by Sabertooth Tigers. I am just fine with them being extinct. I'm glad there are no cougars stalking my daughters in the back yard. I would bet that a majority of Americans feel the same way.

I am also more than OK with sacrificing a few hundred square miles for perpetuity to make my TV cheaper. I am also OK with those that choose not to be educated building said TV for a few bowls of soup a day. I am much more OK with that than the large number of never-employed in America having TV, Air-conditioning, power, and cars on the backs of us that do work.

How bout we load those that support the environmental movement on cruise ships and send them to China to protest? That way they can save the planet and bring the cost for China's production up close to ours. I'm sure that is what would happen...I'm sure it wouldn't lead to a monument on a square some where.

The United States is stumbling and most of us are watching, hoping to video tape her when she falls and post it up on you tube. It sickens me.


RE: Isnt the real problem cost?
By GreenEuropean on 12/31/2010 11:09:17 AM , Rating: 2
Im not saying we should tax anyone. Problem is people want cheap chinese goods. But if it was a european or american worker they would demand higher wages. hence higher prices for rare earths. Thats where the problem is. Not avaliability of rare earths around the globe.

Nice try else to derail it, but no luck.


RE: Isnt the real problem cost?
By diggernash on 12/31/2010 11:28:19 AM , Rating: 2
Paying higher wages because workers have the tax-funded option to stay at home is a tax.

Paying more because of government regulation (with tax-funded enforcement)is a tax.


RE: Isnt the real problem cost?
By Lerianis on 12/31/2010 1:00:57 PM , Rating: 1
Without that government regulation, you would have businesses ACTIVELY doing things that would harm or even kill people, diggernash, so your point is moot.

We know that from EXPERIENCE in the late 1880's - 1920's. It's time to stop with the bashing on regulation, is a a sad but absolutely fucking necessary thing when businesses act like psychopathic gits unless you regulate them!


RE: Isnt the real problem cost?
By diggernash on 12/31/2010 10:53:54 PM , Rating: 2
As those that died chose to participate in the activity that killed them, I'm not sure I understand your point. We are not talking about slavery here. It was a consensual employer/employee relationship. I like choosing what activities I participate in, some of which are very hazardous to my health. I don't want to be protected from the use of others money. I'm a big boy and I can decide to shorten my life.

My Irish ancestors could have chose to stay on their potato farms and starved. But I'm sure they were more than willing to immigrate to America and take factory jobs that may have killed them. Today they would have likely been attached to a government teet and not have improved themselves. I'd be just another pathetic welfare child. I'm pretty thankful they had the choice to take a job that could have killed them.


RE: Isnt the real problem cost?
By SPOOFE on 1/1/2011 3:12:48 AM , Rating: 2
quote:
Without that government regulation, you would have businesses ACTIVELY doing things that would harm or even kill people, diggernash, so your point is moot.

It WOULD be moot if it was a binary, black-and-white scenario. It's not. There's no reason government regulation is inherently helpful. To call for a repeal of bad regulations is not to call for absolutely no regulation. Enacting a tax for undefined reasons is a very poor idea.


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