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The hand giveth, the hand taketh away

China only has about 30 percent of the world's rare earth metal deposits, but thanks to clever planning it today controls 97 percent of the world's production of these scarce resources.  Deposits of this family of 17 elements -- vital to power electronics found in televisions, smart phones, electric vehicles, and a variety of other devices -- are found in California, Canada, Australia, and Russia, but it will take years to bring them online.

In short the world is at China's mercy for now when it comes to rare earth supply.  And China's biggest rare earth metal producer -- the Inner Mongolia Baotou Steel Rare-Earth (Group) has announced that it is severing shipments to the U.S., Japan, and Europe for one month in an attempt to artificially inflate prices.

Inner Mongolia Baotou Steel Rare-Earth also plans to buy rare earth metals in an attempt to further move prices upward.  The company already controls 60 percent of China's rare earth production, thanks to the Chinese government's decision to merge 35 other local companies into the Inner Mongolia business, or fade them out.

Rare earth metals
China controls 97 percent of the world's rare earth metal production.
[Source: Wikimedia Commons]

While the Sichuan province in the southwest and Shandong in the east produce significant amounts of rare earth as well, the Inner Mongolia Baotou Steel Rare-Earth Group's decision should be enough to move prices significantly.

Doing so will benefit China in a couple ways.  First, prices will almost certainly go up, reverse a downward slide.  Lynas Corp., an Australian rare earth producer reveals that since June the price of neodymium oxide has declined 34 percent to $157 per kilogram, while europium oxide is down 35 percent at $2,904 per kilogram.

Sun Fan, a rare earth analyst for Goldstate Securities in the southern city of Shenzhen comments in a Associated Press interview, "The impact on the market supply will be substantial.  The dual measures of suspension and purchase will offer support for the rare earth prices and make the prices gradually pick up in the future."

Aside from raising prices higher, the pause in production will allow China to try to kick start its efforts to produce locally produce magnets.  When it comes to the production of the magnets used in the electric motors of hybrid and electric vehicles, typically the biggest profit is not realized at a commodity level, but at a magnet producer level.  Thus in the past foreign nations like the U.S. and Japan have pocketed the biggest profits.  China hopes to change that.

China hopes to supplant its U.S. and Asian rivals as the main producer of electric motor magnets, by choking resource supply to its foreign competitors. [Source: ThinkGeek]

China's Ministry of Land and Resources in September bragged that rare earth metals were the nation's "21st century treasure trove of new materials."  It argued that exports should be tightened, choking foreign supply and favoring Chinese manufacturers.

Source: AP

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RE: Tree hugging retards.
By Talcite on 10/21/2011 1:35:15 AM , Rating: 5
This has nothing to do with tree hugging retards. Your history is poor.

The US had several active rare earth metal mines, but they were closed due to an inability to compete with lower prices elsewhere. "Through the 1960s until the 1980s, the Mountain Pass rare earth mine in California was the leading producer [of rare earth minerals in the world]"[1]

This was a case of poor economic policy. If the US can already justify the economic inefficiency generated by agricultural subsidies and deep sea drilling subsidies, policy makers should have had no problem keeping the mines open.

Also, if your willingness to shift blame on NIMBY/environmental types without solid evidence indicates that you are getting caught up in partisan ideologies and are poor at analysing situations objectively.


RE: Tree hugging retards.
By Solandri on 10/21/2011 2:12:30 AM , Rating: 2
Agreed it had nothing to do with environmentalists. However, it was good economic policy. Someone was willing to sell us their rare earths for much cheaper than it cost us to mine ours. Better to buy theirs and save ours for later. Mining and refining aren't exactly cutting edge technology, so there was literally nothing to lose by doing so.

A few mining companies who paid for land leases for those rare earth mines got burned, but the U.S. lost practically nothing. If there was a screwup, it was not stockpiling enough of those purchased rare earths to tide us over until we could get our own mining and production up to speed.

RE: Tree hugging retards.
By mindless1 on 10/21/2011 12:24:30 PM , Rating: 3
We can't really consider that a "screwup". We depend on MANY foreign supplies/etc, to stockpile them all to that scale of reserve would be a large economic burden.

While in hindsight we could idealize that we're "saving ours for later", that's not really the case at all. It was simply a matter of it not being cost effective to pay more to mine than it costs for the ore constituents... but you already stated as much.

It did have to do with environmental issues though, that makes it more costly to process in countries with stricter regulations.

RE: Tree hugging retards.
By ekv on 10/21/11, Rating: -1
RE: Tree hugging retards.
By bigdawg1988 on 10/21/2011 9:38:40 AM , Rating: 2
Dude, maybe you ought to read the articles before you cite them. It's the 3rd sentence in the article.
The facility is currently undergoing expansion and modernization, and expected to be back up to full production in 2011.

Oh, also:
The company paid more than $1.4 million in fines and settlements. After preparing a cleanup plan and completing an extensive environmental study, Unocal in 2004 won approval of a county permit that allowed the mine to operate for another 30 years. The mine also passed a key county inspection in 2007

Really? They only paid $1.4M in fines and settlements for allowing radioactive and hazardous waste to be released? They got off pretty good in my opinion. Probably would have cost a lot more than $1.4M to dispose of 600K gallons of waste properly. If you actually read the article you'll see they spent $500M to reopen the mine. Should be coming online soon. Should reduce the impact of what China is trying to do.

The strangest thing about this is that the Chinese company is actually telling everyone what they are doing instead of just trying to sneak and do it. Either they have some sort of weird sense of fairness, or they were educated in a super-villain school.

RE: Tree hugging retards.
By mindless1 on 10/21/2011 12:29:26 PM , Rating: 2
Not so strange, if they didn't give a reason why they did it people would presume as much anyway. Otherwise if they claimed there were supply problems it would either appear dishonest or sooner cause competition which they don't want.

It's only a month... a disruption for sure but hardly super-villainous unless they are in direct violation of supply contracts.

RE: Tree hugging retards.
By sorry dog on 10/21/2011 12:31:29 PM , Rating: 2
The strangest thing about this is that the Chinese company is actually telling everyone what they are doing instead of just trying to sneak and do it. Either they have some sort of weird sense of fairness, or they were educated in a super-villain school.

Nah...just trying to use the publicity to manipulate the market prices. They probably tipped somebody to sell a bunch of now probably worthless put options for some kickback. In the mean time they will probably still sell but to middlemen in the country who arbitrage it on over to us.
We still get our stuff but a few new actors to pay off in the deal...and the central planning big wigs probably get a get back too to approve it.

You gotta love free market communism...makes AIG & Goldman Sachs look 12 year olds trading baseball cards by comparison.

RE: Tree hugging retards.
By ekv on 10/22/2011 5:49:33 AM , Rating: 2
Take a step back and re-read my post. Try comprehending this: did I once say anything about Mountain Pass not being made ready? Answer: no.

So what was my post trying to convey? Ah, something about EnviroNuts. I am a conservative so I believe we are to be good stewards of the resources given to us. I do not believe in operating Zinc mines, for example, below industry standards, ad nauseum, and then when the media gets wind of a potential scandal, sell the mine thereby making it somebody else's problem. I say this so you may at least realize I have some intelligence -- which your denigrating little post denies me.

The real story behind Mountain Pass is that, yes a $1.4M penalty is tiny. What your crass microscopic brain is so close to understanding though is all the stuff behind the scenes. Connect the dots. Unocal was able to get the fine reduced by promising to jump through the hoops. Those hoops: extensive environmental study, county inspections, massive renovation. Who's buddy was Unocal forced to hire to perform the environmental study? How much time did the county inspector spend on just Mountain Pass? Do you think maybe it was his livelihood for about 10 years? Cush city man. Cushy. Renovation done by county approved contractors? No opportunity for kick-backs there ... oh wait! And lets not even think about counting all the billable hours put in by the lawyers on both sides.

Are you getting the picture yet? $500M. It's one thing to protect the environment but it is another to sit back and call this a win for the environment. It is sheer hypocrisy given the level of graft involved.

Mountain Pass would've been on-line a decade ago if not for all the damn gov't bureaucratic red-tape. China ought never have been in a position to pull their little stunt.
the Chinese company is actually telling everyone
Is this supposed to mean something?
Either they have some sort of weird sense of fairness, or they were educated in a super-villain school.
Fallacy of the False Dilemma. Not very objective of you.

RE: Tree hugging retards.
By Strandwolf on 10/24/2011 5:16:38 AM , Rating: 2
Got any evidence to bolster your libelous remarks?

RE: Tree hugging retards.
By ekv on 10/24/2011 5:16:50 PM , Rating: 2
Got any evidence to bolster your libelous remarks?
That's a good one. I think I'll use that on some unsuspecting boob in the future.

Just think ... the mere statement is libelous in itself. Kind of like asking "Have you stopped beating your wife yet?" If they answer "yes" they're screwed. If they answer "no" they're screwed. Is not that a funny-haha! And it puts the burden of proof on whomever you drop it on. Makes them do all the work while your lazy fat butt just sits back and rides. "So I'll just wait... all back-of-the-bus for now."

Don't have to answer any of the intricate questions. Avoids content whatsoever. Puts the conversation on your terms [which advantage, your friends tell you, you need].

Ever have boiled stone for soup?

RE: Tree hugging retards.
By DNAgent on 10/22/2011 11:25:46 AM , Rating: 1
Get your facts straight before you start running your mouth, man. For example, there is no such thing as "Title IX funding."

Title IX simply requires gender equality in schools that receive federal funding (typically regarding sports) or else that funding gets cut.

RE: Tree hugging retards.
By ekv on 10/23/2011 3:00:41 AM , Rating: 2
schools that receive federal funding
Fine. Stop the Federal funding then. It was suggested to cut oil and agricultural subsidies. Ok. My reply, I check that and I raise "all in". Now it's your call. You still think I'm running my mouth? Put up or shut up.

Environmentalism is a good thing. We are to be good stewards of our resources. But let's be objective here. Al Gore is making a killing off the so-called Green Movement. It's such a watered down standard any dope on TV just adds a "new improved" green label to their product. Is there even a point where you would think 'this seems to be hypocrisy' ?

When Environmentalism strangles our national competitiveness, it is a bad thing. Tell me how that statement is wrong. Especially in light of China's ability and willingness to put melamine in food products. Etc. When the prices on your electronics dohickey's go up, don't b*tch to me about it.

RE: Tree hugging retards.
By Strandwolf on 10/24/2011 5:21:42 AM , Rating: 2
Come on. The people responsible for the melamine scandal were private businessmen and they paid for their greedy ways. Their lives, and their relatives chipped in for the ammo.

RE: Tree hugging retards.
By ekv on 10/24/2011 5:07:20 PM , Rating: 2
If you'd like to address the issues I'll consider replying. Otherwise, are you deliberately trying to waste my valuable time?

RE: Tree hugging retards.
By priusone on 10/21/2011 12:39:57 PM , Rating: 2
Obviously I did a poor job at getting my point across. What I am referring to is the 'raping and pillaging' of our environment. At one point, we used our own natural resources to produce our goods. Sure, toxic mineral levels are still high a lot of former mining sights.

"This was a case of poor economic policy... policy makers should have had no problem keeping the mines open."

The problem is, responsible mining is expensive and time consuming, which is something that China doesn't have to worry about. Yes, it subsidies would have been nice, but mining as a whole is looked at negatively. Think nuclear power; "It's great, just not in my backyard."

"your willingness to shift blame on NIMBY/environmental types without solid evidence indicates that you are getting caught up in partisan ideologies and are poor at analyzing situations objectively."

I blame the environmentalists for making it easier to just close down mines and import material from China. I live in Oregon and I love going out and experiencing nature, but if it takes ripping apart a few dozen mountains to get to the rare earth minerals, I think Mother Earth should just take one for the team.

RE: Tree hugging retards.
By bupkus on 10/21/2011 12:52:56 PM , Rating: 2
The economic gain of letting mother nature "take it for the team" is the economic loss of destroying natural water supplies that support water biology that provides safe food harvests to feed the hungry.

RE: Tree hugging retards.
By ekv on 10/22/2011 6:01:03 AM , Rating: 2
I'm curious, what rare earth mines in the US are "destroying natural water supplies"? or, even in a broader context, what mines are near natural water supplies?

If perchance you were referring to Mountain Pass (CA), then I have to ask ... I take it you've never driven HWY 15?

RE: Tree hugging retards.
By TheEinstein on 10/24/2011 5:25:20 AM , Rating: 2
PriusOne I am running for office in Oregon, Portland to be exact....

We need not 'take one for the team' to still get at these materials, and other ores.

Oregon is one of the most beautiful States in the Union as I have driven in 47 of them proffessionally I can attest my opinion with clarity.

We can mine a location, then use reverse fill when the mine is 'used up' and then use renaturalization methods to restore the ecosystem.

Mining companies would see most of this as trivial if they can get the right costs... and I am supporting a system where companies bid on mining rights, and so long as they show intent to mine right away they can bid, and they must incorporate a guarantee (with fiscal and criminal penalties) of no contamination reaching humans (IE drinking water) and a full restoration of the area (within some allowances, after all if they remove large amounts of coal filling the mine would be impractible, but sealing it, and replanting the affected exterior areas would be neccessary)

I support NO subsidies on this what so ever.

The bid profits would goto our general fund and an appropriate monitoring power such as the BLM or such.

This, or other proposals I have, could easily provides tens of thousands of jobs. This example would include miners, mine staff, drivers (moving the ore to where it will be refined), refiners, the manufactore of required tools and equipment, and so forth.

We can balance real environmentalism (not this for profit crap, or for power over others crap) with smart economics.

I am Michael Harrington and I endorse this message.

RE: Tree hugging retards.
By priusone on 10/24/2011 1:10:27 PM , Rating: 2
Talk to Armadillo Mining in Grant's Pass. They have a sticker that says "Earth First! We'll Mine the Other Planets Later".

Look, the spotted Owl pretty much destroyed the town that I grew up in. Oh, wait, it wasn't that stupid owl, it was stupid people. Stupid people are happy with their pretty trees and pretty colors, but they do have destruction, which is what we do to the environment.

Take a stroll out some random BLM road down here in Douglas County. An ex-friend made the comment about how ugly logging makes the forest. We loaded up Google Maps and drove to a few of the clear-cuts that showed up on Satellite View. Sure, new trees had been planted about 7 years prior, and money from the sales of wood products had helped OUR economy, but alas, my ex-friend couldn't see past the 'poor environment'.

Yes. Mining is bad for the environment. Oregon has a naturally high occurring amount if Mercury in it's rocks, among other little nasty minerals. For as much as I would love to see mines opened up, Oregon jobs created, and the US being ever so SLIGHTLY less dependent on China, you can't make those tree hugging idiots see the light.

Then again, I've seen numerous log mills open up in the past few years, so who knows, hopefully I'm wrong.

RE: Tree hugging retards.
By TheEinstein on 10/24/2011 3:43:15 PM , Rating: 2
There has been a slight increase in logging though Conservatives like myself would like more.

The irony is that in the environmentalist effort to protect Old Growth by tying the spotted owl to it they have probably doomed the spotted owl to extinction.

A number of activists admitted years ago of placing dead spotted owls in old growth trees and in other owls nests to make their case. The sad truth is they live in about Christmas tree sized growth and the small amount of these now after two decades of growth and rhe fact a superior owl shares this habitat means the Spotted Owl is nose diving in numbers.

Logging responsibly could actually save that species.

I will look that mining company up. Thx for heads up!

"What would I do? I'd shut it down and give the money back to the shareholders." -- Michael Dell, after being asked what to do with Apple Computer in 1997

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