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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.

Neodymium
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: I'm sorry I forgot....
By TheEinstein on 10/23/2011 5:50:04 AM , Rating: 5
You are all missing many many points here.

Wish I had my bookmarks, had to factory reset this phone, so I have to try this myself.

We cannot create cheap goods here because if we mine environmentalists sue and we have regulations requiring a lot more overhead than any other nation on Earth simply because "We are the greatest nation on Earth and we must be better than everyone else" and more expensive with less total output per capita than most nations.

We cannot create cheap goods here because we stop trucks from idling, and require outrageous environmental standards upon them as well as the toughest standards in transportation outside Europe 'because the world will die otherwise' (p.s. see http://www.surfacestations.org for evidence global warming is false. I plan a $10,000 commercial series highlighting this stuff as part of my political campaign).

We cannot create cheap goods because Unions keep demanding raises. If wages were locked for life there would be no inflation... but I digress... in any event we keep giving them extremely high salaries for sometimes simple work "because fair wages are high wages".

We cannot make cheap goods because of Government Agencies passing new and painful regulations on a 4-6 year cycle. Such as the new cross border pollution act. There is a variety of reasons these agencies use from 'weidling should conserve energy anyways' to 'itthe will save a dozen lives a year' to 'thethe Earth will die otherwise'. China don't care about those things, just saying.

We cannot make cheap goods because Congress keeps playing favorites by taxing all to hell then choosing who gets subsidies and kickbacks. We do this because 'the rich should pay their fair share' when in reality it is 'those other rich need to pay for my friends share'.

We cannot create cheap goods because we refuse to fight economic wars against those who are doing so against us like China, because "We clearly have an addiction to their goods and we are the source of the problem" or some other nonsense.

I hope this list educates.

I am Michael Harrington and I endorse this message


P.S. do not read into this that I support changing this or that, this is commentary, not policy.


RE: I'm sorry I forgot....
By Strandwolf on 10/24/2011 4:51:49 AM , Rating: 1
Not into hyperbole much...that's good! Where are you running for office? I probably want to support your opponent.


RE: I'm sorry I forgot....
By TheEinstein on 10/24/2011 5:35:56 AM , Rating: 1
I have strict policies regarding what I see as trolling or definitely noncontributing posts, either of which you may be guilty of.

1) I do not provide you material comfort unless you rectify the situation.
Meaning I will not provide follow up posts except to explain my guidelines against such nonsense posts.

2) I do not provide you information requested if you frequently do such posts against me or others.

-

You could have posted why you disagreed with my post, or why it was such hyperbole to you, but you did not see fit.

You could have quoted one section in particular and provided a counter argument.

You could have posted your own opinions.

You could have asked reasonable questions.


RE: I'm sorry I forgot....
By mars2k on 10/26/2011 10:18:41 AM , Rating: 2
Harrington maybe they didn’t do it your way because you’re kind of a dingbat.

Nobody cares what your “policies” are.

None, as in “not a single one”, how’s that for specific, are anything but a mish-mash of nonsense that you hear on Fox every minute of the day.

I’ll quote specifically from your post….. “TheEinstein” Really?..... You? Come up with an original thought and get back to me on that.


RE: I'm sorry I forgot....
By InvertMe on 10/24/11, Rating: 0
RE: I'm sorry I forgot....
By Kurz on 10/24/2011 9:47:39 AM , Rating: 3
Heh, I guess the 35% Corporate tax rate has nothing to do with it (One of the highest in the world). Or the Massive Payroll Taxes, Or Forcing Businesses to Provide Healthcare for their employees.

Nah That all cant be the reason why we don't make stuff here.


RE: I'm sorry I forgot....
By curelom on 10/24/2011 11:35:42 AM , Rating: 3
and don't forget all the regulations that have been heaped upon businesses in the past 10 years.


RE: I'm sorry I forgot....
By senecarr on 10/27/2011 4:21:19 PM , Rating: 2
You do realize that while we have a high MARGINAL corporate tax rate of 35%, compared to the rest of the world, we have one of the lowest actual corporate tax rates? Corporations use so many loopholes to reduce their actual taxes paid that of all developed nations, only Iceland has a lower effective tax rate based on paid corporate taxes as a percentage of GDP?


RE: I'm sorry I forgot....
By intelcpu on 10/24/2011 12:19:16 PM , Rating: 2
Yes you are arguing well but the point in aspects of wealth especially in manner of global unequal labor incomes is a totally different.
Lets go to an auto dealer in Palo Alto to buy a fuel efficient car. Now to support the US economy you may be favoring a US manufacturer but it really does not matter which brand you are buying, since the supply chain for manufacturing a auto is global. Parts are made all over the world and mostly not in the US-Europe. The good news is that it doesn’t matter which company or which brand will get your money if the value is added in the USA than the local economy will benefit from it. We are talking about value added chains.
http://www.uctv.tv/search-details.aspx?showID=9521

Recently china is opting for developing its human resources capabilities. If they are able to change the value adding chain in favor of themselves then we are going have a problem especially for the US- Europe labor with a mid-income.


RE: I'm sorry I forgot....
By Divide Overflow on 10/27/2011 7:26:04 PM , Rating: 2
+10


RE: I'm sorry I forgot....
By dew111 on 10/28/2011 5:22:26 PM , Rating: 2
"If wages were locked for life there would be no inflation"

False. In a perfect system this might be true, but in our system, companies and individuals strive for more wealth. This leads to price increases of certain goods which then affects prices of other goods and so on. Your ideals, or anyone else's for that matter, are not going to change this. Unions keep rich management from screwing over the working people--the people who make up the group of consumers who are generally buying the most products. Less wealth for the masses ultimately leads to an economic collapse and/or revolution. Rich people would do well to observe the historical lesson illustrated by France's Bastille Days.


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