China Cuts Off World's Rare Earth Metal Supply
October 21, 2011 12:40 AM
comment(s) - last by
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.
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
, "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.
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10/21/2011 5:25:45 PM
how does it feel to be a communist? seriously I want to know. You just said "the economic reigns in china are looser than they are in the us" then proceeded to say that we need more regulation to fix the problems in the US. Hypocrite says what? Go drink some lye then play in traffic.
10/22/2011 5:38:01 PM
I get the feeling he's referring to safety and quality regulations. Wasn't too long ago that they found lead leaked into products, and now there's that whole riffraff from CCTV about the massive amounts of pollution and waste being dumped by companies like Meiko and foxconn.
China's lean regulation is technically more free than what we have here in the states. Background damage to the environment is not something that can be easily fixed by market competition, though. Public perception is much more influenced by price than business practices.
10/24/2011 10:16:41 AM
how does it feel to be a communist?
that and the rest of your comment made me laugh! Anyway, since reading comprehension doesn't seem to be your strength, I'll clarify: the economic reigns in China are (at least arguably) looser than they are in the US. That doesn't mean it's a place I'd want to run a business, but it does mean if you ARE running a business there's a good chance you can get away with whatever you want (especially if you know the right people). Also, I was talking about corruption and lack of regulation in China, NOT the US... So, you can stop with the angry mouth breathing.
"Young lady, in this house we obey the laws of thermodynamics!" -- Homer Simpson
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