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 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.

"A politician stumbles over himself... Then they pick it out. They edit it. He runs the clip, and then he makes a funny face, and the whole audience has a Pavlovian response." -- Joe Scarborough on John Stewart over Jim Cramer

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