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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 10/24/2011 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.


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