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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 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?

"This is from the It's a science website." -- Rush Limbaugh

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