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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 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!

"And boy have we patented it!" -- Steve Jobs, Macworld 2007

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