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Chinese price manipulation has taken its toll on the U.S. economy

Rare earth metals are an increasingly integral part of everything from automobiles to television sets.  But the precious metals are tightly controlled by China, with an excess of 95 percent of current suplly coming from Chinese-owned mines and refineries.  The degree of control has allowed China to manipulate prices, cutting back on demand to sell less material for the same amount of profit, any businessperson's dream.

I. New Private-Public Partnership Sets Aim on Chinese Mineral Hegemony

The problem is that it takes several years or more to bring rare earth metal mines and refineries online; and the capital costs of such facilities are very high.  It took China decades of clever planning to set itself in its current peachy position of rare earth hegemony.  Now the U.S. is racing to try to recover, before Chinese price manipulation deals too much of a blow to the U.S. economy.

The U.S. Department of Energy has committed a relatively large investment of $120M USD to establish an Energy Innovation Hub under the supervision of Ames Labs to research ways to expand domestic rare earth production and otherwise cut reliance on Chinese rare earth supplies.

Rare earth metals
The U.S. is investing deeply to try to cut its reliance on Chinese rare earth metal supplies.
[Image Source: Nelson Ching/Bloomberg]

The new lab, dubbed the Critical Materials Institute (CMI), will be a joint effort between a number of large domestic firms in the private sector, universities, and top government research labs.  

In addition to Ames Lab, other national labs involved include Idaho National Laboratory (INL), Lawrence Livermore National Laboratory (LLNL), and Oak Ridge National Laboratory (ORNL).  On the university side, major contributors will include Brown Univ., the Colorado School of Mines (CSM), Purdue Univ., Rutgers Univ., Univ. of California-Davis (UC Davis), Iowa State Univ. (IA State), and the Florida Industrial and Phosphate Research Institute.

Corporate partners include General Electric Comp. (GE), OLI Systems Inc., Spintek Filtration, Advanced Recovery, Inc., Cytec Industries, Inc. (CYT), Molycorp Inc. (MCP), and Simbol, Inc. (Simbol Minerals).

II. Attacking the Problem From All Angles

Among the research projects will be:
  • Improve rare earth recycling/reuse
  • Improve extraction processes
  • Develop rapid deployment mining techniques
  • Develop rare earth material substitutes
  • Study and optimize supply chains to minimize waste
Top targets for domestic rare earth production include neodymium -- used in neodymium iron boron (NeFeB) hard drive magnets and cell phone components -- and samarium -- used in samarium cobalt (SmCo) drive magnets.  Currently the U.S. has no domestic neodymium producers and only one domestic samarium producer.

Neodymium
The U.S. has no domestic producers of neodymium magnets. [Source: ThinkGeek]

The Government Accountability Office (GAO) in a 2011 research report [PDF] suggests that the U.S. rare earth supply chain, phased out in the 1980s at a time when the 17-element family looked non-critical, will take approximately 15 years to rebuild.  The new lab aims to assist in that slow and arduous recovery.

The U.S. also will continue to purse action against China before the World Trade Organization (WTO) where it has filed complaints about the Chinese price manipulation.

Sources: DOE, Ames Lab



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@#$%ing idoits...
By maxxcool on 1/10/2013 3:55:16 PM , Rating: 5
//somewhere in the 80's// "Huurr duurrr.... China won't hold us over a barrel and rape us over rare earth metals!! Lets just scrap our own entire industry and never re-invest in it.... it's not like its OIL and OPEC 7 like years ago or something"

!@#$ing morons




RE: @#$%ing idoits...
By arazok on 1/10/2013 4:28:00 PM , Rating: 4
Really, there’s something here that doesn’t make sense.

If China wants to take over rare metals, first it must subsidize the hell out of such operations and dump cheap product on the market. That’s expensive, and they essentially shoot one sector of the economy to help another. They lose in that equation, and the world wins cheap material.

But long term, they drive the competition out of business. Establish a monopoly. Spike prices and reap huge rewards. That earlier shot in the foot pays off. They win, and the world suffers.

But what’s supposed to happen next, and will happen, is that people invest in mines as its profitable again. It might take a few years to get going, but it will. This will negate the monopoly, and China is back to a losing situation, as they need to subsidize again to establish control. The cycle continues.

I don’t see why the US gov needs to partake in this game. It seems foolish. If they really want to end it, wouldn’t it be easier to just tell China that If they dump subsidized crap on the market, you’ll just smack them with import restrictions and taxes? Why start your own subsidy program? Just cut them out of the market.


RE: @#$%ing idoits...
By bug77 on 1/10/13, Rating: -1
RE: @#$%ing idoits...
By StanO360 on 1/10/2013 5:01:16 PM , Rating: 2
They're not even addressing that part! That's like batteries, the EPA has been crushing US battery manufacturers for decades and then suddenly everyone is complaining why no US battery companies make new products!

Good luck getting permits for new mines and operations under the current regime. Sure they'll talk a good talk . . . until the Environmental Impact Report arrives.


RE: @#$%ing idoits...
By Treckin on 1/10/2013 5:26:42 PM , Rating: 4
More like battery producers were crushing batteries into local water supplies.

Look at the ridiculous instances of lead poisoning in Mexico as a result of the battery recycling programs there, and you'll have an idea why we kicked that load of toxic mess overseas.

If domestic industry had innovated and figured out cost-effective green and best-practices before causing birth defects and mental retardation in US townships all over the country, then we wouldn't have been forced to abolish it altogether. Sad, but not the fault of regulation.

Its actually the fault of financialization - as more and more corporations adopted a publicly traded, earnings-per-share based accounting methodology, the focus on reinvesting into the company to generate tangible growth transformed into an incentive to inflate earnings numbers to reap a quarterly profit from the market.

This trend is especially strong among executives, as their compensation is usually in stock options. As long as the market likes your earnings numbers, you can make money every month, despite the lack of ACTUAL growth (new jobs added, markets entered, factories opened, innovation created).

In fact the opposite is now true for most firms; the more people you can fire, manufacturing you can avoid/outsource/offshore, the more small towns you can close with a single factory closure, the better Wall Streen investment firms like your stock.

Its all effed up man.


RE: @#$%ing idoits...
By Spuke on 1/10/2013 7:21:43 PM , Rating: 2
quote:
Its all effed up man.
Yep, sometimes it takes a hammer over the head before "we" actually "get it". And I'm not just talking about corporations dumping toxins into water.


RE: @#$%ing idoits...
By Schadenfroh on 1/11/2013 6:28:11 AM , Rating: 2
The irony is that in order to make "green" electronics, we must wreak havoc with the environment via the nasty business of rare earth extraction.


RE: @#$%ing idoits...
By bug77 on 1/11/13, Rating: 0
RE: @#$%ing idoits...
By Mint on 1/13/2013 12:06:38 PM , Rating: 2
Except that it's not true.

The biggest rare earth consumer used to be NiMH batteries, using cerium, lanthanum, and neodymium. Lithium ion batteries don't need rare earths. Same thing with motors/generators. With modern electronics, induction motors lose most of the drawbacks of their complicated operation, and they don't need any rare earths since they have no permanent magnet.

China's control over rare earth supply is an overblown problem. There aren't a whole lot of truly critical uses without substitutions available.


RE: @#$%ing idoits...
By gn77b on 1/17/2013 6:03:40 AM , Rating: 2
Except that it's not true.

The automotive industry relies on motors that use rare-earth permanent magnets. And no, I don't mean hybrid cars only, but also motors used in electric steering systems. And it's not neodymium alone, but dysprosium too. Even if it's a secondary ingredient, "rumor" has it that growing prices are enough to push companies (or at least departments) out of business.
Also, I think that China's natural supplies are extinguishing but I can't vouch for it. The Wikipedia article on dysprosium mentions that the automotive industry is the principal consumer.

All the economic theories in the world amount to nothing if hard facts are ignored.

The above is based on direct experience, except where otherwise noted.


RE: @#$%ing idoits...
By adrift02 on 1/10/2013 6:01:07 PM , Rating: 2
Huh? Did I miss something here?

I thought China was taking advantage of the fact that they supply a large majority of the world's rare earth metals and demand is relatively inelastic. They're restricting supply, not dumping.


RE: @#$%ing idoits...
By arazok on 1/11/2013 12:00:53 PM , Rating: 2
Before they restricted supply, they dumped. It was after they drove other mines to close that they restricted the supply.


RE: @#$%ing idoits...
By toyotabedzrock on 1/10/2013 8:01:03 PM , Rating: 2
They dump the radioactive waste on their own people.

That's the main problem other than patents transferred to Chinese companies.


RE: @#$%ing idoits...
By Uncle on 1/11/2013 1:43:55 PM , Rating: 2
"They dump the radioactive waste on their own people." Whats the difference between that and Air, Water and Ground Pollution in the US. No different then the towns built over top of toxic waste dumps in the US.


RE: @#$%ing idoits...
By Just Tom on 1/18/2013 8:38:17 AM , Rating: 2
If you don't think there is a significant difference between ground, water, and air pollution levels between China and the United States you need to do more research.


RE: @#$%ing idoits...
By Yojimbo on 1/11/2013 9:01:55 AM , Rating: 3
Cut them out of the market? They are the market.


RE: @#$%ing idoits...
By Samus on 1/11/2013 6:37:22 PM , Rating: 2
Sounds like what amazon is going... And right now I don't have a problem with that.


RE: @#$%ing idoits...
By dsx724 on 1/10/2013 8:12:19 PM , Rating: 2
China warned about export restrictions back in 2006. What the hell did the world market do about it? Absolutely nothing. It's more a market failure because China gave plenty of notice. I hate how every article says China are manipulating the market when they clearly gave as much advanced notice as possible.


RE: @#$%ing idoits...
By knutjb on 1/10/2013 10:45:27 PM , Rating: 2
Weak arguement. This was after China had decimated all other companies in this industry by dumping its products on the market.

On the bright side Molycorp has a mine it is working on reopening. On the down side its in California.

W@#$$@$ are we, our Government, opening up anything in China.


RE: @#$%ing idoits...
By gn77b on 1/17/2013 6:10:04 AM , Rating: 2
A big thumbs up. I love how every comment thread on an article where the word "China" is mentioned eventually turns into a "they raped us" lament.
Especially when it's obvious that few have the bigger picture.


RE: @#$%ing idoits...
By Jeffk464 on 1/11/2013 12:34:05 PM , Rating: 2
nope, if we close down China's advantage here they will just figure another way to out fox us. The fact is China has been able to play the US like a fiddle.

Besides nothing is built in the US anymore so why do we need the rare earth metals?


RE: @#$%ing idoits...
By 1prophet on 1/11/2013 9:31:07 PM , Rating: 2
Our short term immediate profit only matters mentality is what China takes advantage of, no one can do to us what we have done and continue to do so to ourselves.


RE: @#$%ing idoits...
By Uncle on 1/11/2013 1:38:21 PM , Rating: 5
"Chinese price manipulation has taken its toll on the U.S. economy" I can think of a few areas in the US market place by US companies that takes its toll there and elsewhere in the world. Like the Oil Industry, Monsanto and Cargil in the Food Industry. Look at the stir created by Monsanto in India whereby the farmers can't afford to buy seed after growing Monsanto's first crop because they were not educated enough to see Monsanto's swindle. Same scenario as Oil. Theirs the world price of oil and a world price for seed, Monsanto's seed. These same players and others are carving up Africa's prime agricultural land. Natives knew who owned the land that was passed down from generation to generation, no written down proof, so the Military or Rebels or Terrorist being paid by outsiders, Agri Business,or any other Interests, are kicking the people off their land. The fighting that's going on is really not between the people but between the big Corporate Industrial groups. All these people will need jobs to survive, so you have cheap slave labor at your finger tips. What a circle jerk. First the Africans are brought to N America as slaves. 150 yrs later the N American Corporations go back to Africa and turn the natives into slaves again. Funny how history repeats itself.


Never going to work
By Salisme on 1/10/2013 4:53:10 PM , Rating: 2
Environmentalists are going jump all over this. They are going to claim it's going to impact some rare grasshopper's habitat or produce 0.0067% more CO2. Then when they are done protesting and the project failed to gain public support, they all drive away with their battery operated cars supplied from China and demand free medical care.




RE: Never going to work
By InsGadget on 1/10/2013 11:24:22 PM , Rating: 2
Cool.


RE: Never going to work
By bupkus on 1/11/2013 1:15:54 AM , Rating: 2
Yah, we really should be hating on those environmentalists. :p


RE: Never going to work
By kattanna on 1/11/2013 11:09:11 AM , Rating: 2
yes, actually we should. they have done far more damage to the environment then any other group.


By PresidentThomasJefferson on 1/10/2013 4:46:17 PM , Rating: 2
China is able to do this with their gov banks granting $1-$2 million in 'free' or 'almost-free' loans to their domestic industries as a jobs/stimulus program

-they also give billions in 'free' loans to foreign companies to relocate to China with no payments needed for 12+ years as long as they stay in China, & pay for 'free' factory construction (construction jobs to build it funded by Chinese gov or gov-owned banks)

They can do all this while cutting taxes because increased production increases hiring & supply to meet increased spending via 'deficit spending', which offsets inflation

..China has been following most of MMT (Modern Monetary Theory) since the founders of MMT Warren Mosler & Randy Wray flew to China to brief China's gov ministers on MMT about 15 years ago...

for more see www.MoslerEconomics.com or www.MonetaryRealism.com




By StanO360 on 1/10/2013 4:58:54 PM , Rating: 2
The may not "follow" it, but they can't escape it. You simply cannot create things out of thin air, you must create value and sell for value or you will eventually pay.

All of those "loans" and "projects"(empty cities), and all the countless "investments" that are a complete bust (most of them probably) represent billions of wasted effort. You can gin up growth for a while, but if it's not backed up by real products and services sold for for real prices for a real profit, it will not last.


By Mint on 1/13/2013 12:14:58 PM , Rating: 2
quote:
if it's not backed up by real products and services sold for for real prices for a real profit
What world are you living in where China is not selling real products for real prices?

They're investing in a hell of a lot more useful stuff than the drivers of asset bubbles are doing in the US.


By Mobious918 on 1/10/2013 11:58:37 PM , Rating: 5
We already know how to mine rare earths in the US, we should have been doing it all along, but we stopped for the stupidest of reasons. There's enough monazite sands in the US alone to cover all our rare earth needs for the better part of the next century. Leave it to the congress to cover everything in red tape in order to pull a profit from shipping the industry to China.

One reason we stopped our rare earth industry is because of all the Thorium by-product from processing monazite. Dump some money into Thorium reactor production, figure out how to separate the Thorium out of the monazite and we win everything forever: all the rare earth metals the US needs for years, and an in-exhaustable source of Thorium power for the next 1000 years.

Oh wait....we're in America. Sorry, I forgot common sense in government isn't allowed here. My mistake.




revisionist history
By DockScience on 1/12/2013 12:56:15 PM , Rating: 2
The California Mountain Pass rare earth mine was closed by repeated lawsuits and fines from the EPA and California Environmental agencies.

It was simply easier and cheaper to buy from China than to fight the regulatory hurdles.




RE: revisionist history
By jasonn2426 on 1/12/2013 6:54:13 PM , Rating: 2
You are forgetting that it is labor intensive as well technology intensive meaning it has higher barriers to competition ie higher profits.As well china cut costs on the environment Which will cost more in the long run.


Time
By Scootie on 1/10/2013 4:11:21 PM , Rating: 3
About damn time but I'm afraid it's kinda tooo late.




By dgingerich on 1/11/2013 11:28:41 AM , Rating: 3
It's smarter for us to not use up our resources on such thing while other countries supply it, with our oil, rare earths, or anything else.

Here's why: ok, with any depletable resource, if you have the wealth, buy up the resources that other sources offer, wait for them to deplete their supply, then as they supply from around the world runs down, ramp up local sources and sell at much higher rates due to the shortage. In the long run, we're much better off.

Sure, we can buy from China now, and it is smart for them to restrict their supply artificially, but we're smarter to save our supply and get it from whoever else might have it. I've heard there are a couple countries down in South America that have decent supplies.

On top of all that, the government shouldn't be spending money on this sort of thing. It's such a waste.




"Rare Earth"
By vladio on 1/10/13, Rating: 0
RE: "Rare Earth"
By Treckin on 1/10/2013 10:30:31 PM , Rating: 2
"Rudimenal" basics like spelling, grammar, punctuation, and syntax?

/cantunderstandyouwhatareyousaying


By WinstonSmith on 1/11/2013 10:01:43 AM , Rating: 2
Thorium, Heavy Rare Earths, China & the Loss of Hi-Tech Manufacturing

http://www.youtube.com/watch?v=AkC8kItzdZI&hd=1




Oops..
By ppardee on 1/14/2013 5:24:18 PM , Rating: 2
Headline should be US Government borrows $120 million from China to...

In the end, employing people is better than giving people money for nothing and cheese for free. All government cheese is Republican by the way. It creates obstructions and prevents crap from going out. See what I did there?

But trying to one-up China while borrowing money from them to do it is insane. The best way to one-up them is revoke the free-trade agreements Clinton set up, lay on the tariffs, pay off our debt and never borrow from them again. But we know none of that will happen, which is why we'll all be speaking Mandarin (Or Manglish?) in 200 years.




Problem solved
By bug77 on 1/10/13, Rating: 0
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