Print 107 comment(s) - last by Kurz.. on Jan 4 at 12:24 PM

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.

Comments     Threshold

This article is over a month old, voting and posting comments is disabled

RE: Sound strategy
By Mathos on 1/1/2011 3:57:46 AM , Rating: 3
I always find it interesting how someone has to throw blame at Union workers. Environmental policies definitely are causing problems. But, some of them are needed to push improvement. Minimum wage was raised to compensate for the increased cost of living. Sad to say, but a great many ppl who are educated, are stuck working near minimum wage jobs due to lack of market and high levels of competition for jobs. Prices on all goods had climbed steadily up till the price of oil went out of control. At which point someone decided hey lets use a food crop to produce ethanol to mix with gas.. This then caused the price of basics such as most foods to raise, due to the fact that so many things have Corn based ingredients in them, high fructose corn syrup, Corn starch, flour, etc.

Does anyone make more money???

Yes, Retailers were seeing huge profits and sales up until the economy collapsed, I know this because I work for a world wide retailer. Oil companies have been seeing record profits since Bush went into office, and oil prices started to skyrocket. Tell me this, if price per barrel of oil is nowhere near what it was in 2006 when it peaked, why are we paying more per gallon of gas now than we were then???

I know the real answer, but I wanna see your take on it.

RE: Sound strategy
By EricMartello on 1/1/2011 1:33:27 PM , Rating: 2
Unions are largely outdated now that there are plenty of federal and state laws that protect workers from the types of abuses that originally warranted the creation of labor unions. Nowadays unions just have a parasitic effect on the economy and little more. Disbanding them would only be a good thing for the companies that are currently stuck employing the notoriously lazy and underperforming union workers.

As for minimum wage, it was never really intended to be a wage that you could support a family of 4 upon. It's there to provide a "floor" but it's not a guarantee of anything, and its increase is mainly following inflation so in reality it has not increased. Many "educated" people are still unambitious morons who operate under the false notion that academic credentials entitle them to higher pay - when in reality, their capabilities as an employee are what determines their true market value.

The oil price increase we are seeing now is due to the cartels cutting back on production to artificially inflate the price of oil. Nearly two years of gas prices in the US that were not ridiculous must have been felt in those sheiks' pockets and the US demand for oil is still relatively soft. The increase in oil consumption was largely due to the retarded SUV fad that every jackass figured having an impractically large SUV was a smart choice.

"We can't expect users to use common sense. That would eliminate the need for all sorts of legislation, committees, oversight and lawyers." -- Christopher Jennings

Most Popular Articles5 Cases for iPhone 7 and 7 iPhone Plus
September 18, 2016, 10:08 AM
No More Turtlenecks - Try Snakables
September 19, 2016, 7:44 AM
ADHD Diagnosis and Treatment in Children: Problem or Paranoia?
September 19, 2016, 5:30 AM
Walmart may get "Robot Shopping Carts?"
September 17, 2016, 6:01 AM
Automaker Porsche may expand range of Panamera Coupe design.
September 18, 2016, 11:00 AM

Copyright 2016 DailyTech LLC. - RSS Feed | Advertise | About Us | Ethics | FAQ | Terms, Conditions & Privacy Information | Kristopher Kubicki