China: Trade embargo on Rare Earth minerals/metals - What damage could this do to the West?

Recently I have relayed reports and allegations that have appeared stating that China appears to have decided to restrict access to their 'Rare Earth metals' resources. e.g. Backlash over China curb on metal exports [Telegraph online]
This all appears to have heated up in the wake of the global economic crisis, and subsequent growing tensions affecting previously 'functioning' trade and military relationships between China and the USA, Japan and Europe, which now appears well on it's way towards developing into a well defined, and significant trade war.

My reason for attempting to put the spotlight back onto this issue about the Rare Earth metals is that I am curious to look more closely at how important this action could be, in the light of some further reports I saw today, e.g.
Toyota forms task force amidst China export ban [Bloomberg News]

Rare earth minerals such as neodymium and dysprosium are used in electric-motor magnets in hybrid cars, including Toyota’s Prius and Honda Motor Co.’s Insight, and in mobile phones and rechargeable batteries. China, which controls more than 90 percent of the global market for the metals, imposed a “de facto” ban last week on exports to Japan of the materials, a group of 17 metals used in weapons, hybrid vehicles and laptop computers, Japanese Economy Minister Banri Kaieda said yesterday.

“The Chinese won’t hesitate to change the rules to improve their situation,” Peter Strachan, a Perth-based analyst for independent advisory firm StockAnalysis, said in a phone interview today. “China has restricted rare earths sales to everyone, not just Japan.”

Chen Rongkai, a spokesman for China’s Ministry of Commerce, reiterated yesterday that the nation hasn’t imposed an export ban.

I also found another article (from October 2009!) in The Times Greenland challenge to Chinese over rare earth metals which shows that concerns about China's possible use of their hold on "95%" of world supply was a concern back then, and specifically uses the term "weapon" in relation to that. The article also appears to uphold the other reports that I have read that infer that if Chinese export DID halt exports suddenly, at present in 2010, despite there being large scale plans and investment in place to diversify supplies, there could be a delay until say 2012 (e.g. the Australian mines/source) before the issue of supply is even relieved, let alone replaced.

So my question is this really: Given the scale, position and importance of the industries potentially affected (micro chips, mobile ICT products e.g. phones, tablets, laptops, drones, missiles; hybrid cars and motors, high-tech electrical generators/dynamos) to the economic plans and recovery of the West, what would/could a 1-5 year export ban/sanctions do?

reply to post by curioustype


their focus on Japan sounds like they are trying to pick a fight.

The drums of war are beating louder.

Hi curioustype. As an investor, I have been following the REE market for about three years. The good news is that aggregate demand for many of these rare earth metals has declined a bit since 2008, a result of the overall drop in western consumer spending. After foolishly selling-off our strategic stockpiles at the end of the cold war, the pentagon began sounding the alarm on the Chinese monopoly in REE's back in 2007...closely followed by in-depth research, and investor advisories from high profile trend spotters like James Dines and John Kaiser. The latest press has ignited a fury in the rare earth metals Jr. mining space, e.g., the stock value of Australia based Greenland Minerals Ltd, (the company you referred to in your OP) has surged over 2000% in the past 2 months. Most of those gains were realized in the first week of August

There exists ample REE deposits outside of China, but it will take a few years for these non-Chinese companies to define reserves and move to meaningful production. In the interim, the pentagon in it's new effort to reintroduce strategic stockpiling can expect to pay higher prices for these essential oxides...along with auto makers and high tech manufacturers.

It's been no secret that China planned on gradually restricting exports, producing most of it's REE reserves for internal consumption. It's large footprint in this market not only gives China tremendous price leverage, but by restricting foreign access to these vital elements, Beijing also has the advantage of growing it's own manufacturing base...while starving it's competitors.

We have a very good rare earth mine in Calif. Mountain Pass Mine.
The only problem is calif is run by tree huggers that are rabid anti mining.
The mine is now in the process of being reopened under new ownership.
en.wikipedia.org...


Just this year alone over 10,000 small miners(average 3 miners per dredge) were put out of work in Calif.
www.findmall.com...,1023569
www.msnbc.msn.com...

The Molycorp Mountain Pass project is currently producing approx 3000 tonnes of REE per year...primarily neodymium and cerium.

Annual Chinese production = 120000 tonnes (2009).

If Beijing should decide to flood the market with cheap REE's like they did in back the 90's, Molycorp and other emerging REE producers would be forced to rely on taxpayer funded gubmn't subsidies to survive...or be driven out of business.......again.

Admittedly a doubtful strategy given Beijing's internal consumption demand, but the fact that they hold this option only serves to underscore China's stranglehold on this sector.

IOW...Who's your daddy ?

With Chinas growing economics and military, they are feeling bolder then they ever have.

They are eager to display their power and prove themselves to the rest of the world........Japan is a perfect target........to them anyway......i think they severely underestimate Japan

Rare earths are rare, China's economy is strong enough that they can no longer have to sell rare earths.

Its not an evil conspiracy to destroy the world, middle eastern countries too will someday realize that it would be wiser to consume the oil themselves instead of selling it so that other countries can make a profit consuming it.

China should have restricted exports earlier, flooding the market was a pretty bad move because they have depleted most of their reserves and got a few dollars for their trouble.

Also before people start screaming Yellow Peril

China is simply running out, what little they have left they are saving for themselves

www.finalternatives.com...

A physical chemist by training, he is now a trader specializing in technology metals and rare metals. He says Chinese limits on rare exports are not a “Fu Manchu plot” against America but a plan to add value and create jobs by ensuring China exports finished goods, not raw materials. As for the U.S. military, he says it doesn’t require rare earths in quantities large enough to cause panic.

In fact, Lifton says there are only two rare earths that really matter—the heavy rare earths neodymium and dysprosium, both of which are used in the production of rare earth permanent magnets (which in turn are used in many of the products mentioned earlier) and both of which are indeed, rare. (Dysprosium comes from the Greek ‘dysprositos’ which means hard to get).

“The problem with dysprosium is that it has only ever been produced in China and [China’s] production is about 1,000 tons a year and that is rapidly becoming not enough. The Chinese are worried that they’re running out—remember, they’re the only producing source we have in the world and they think they’re running out.”

Just the week before last, congress passed the Rare Earths and Critical Materials Revitalization Act of 2010. Good to see the gubmn't finally taking this situation seriously. The passage of this bill means access to additional funding for rare earth exploration & mining companies...outside of the painful share dissolution route. This bill is great news for rare earth stockholders, especially Ucore stockholders...of which I happen to be one.

Ucore Comments on the Passage of Domestic Rare Earths Legislation by the U.S. House of Representatives

("Ucore" or the "Company") is pleased to comment on the bipartisan passage of H.R. 6160, the Rare Earths and Critical Materials Revitalization Act of 2010 ("the Act"), by the U.S. House of Representatives. The Act incorporates amendments to the National Materials and Minerals Policy, Research and Development Act of 1980 and other proposals to further the establishment of a domestic supply chain for rare earths in the United States....

"While these Acts together promise to give U.S.-based rare earth producers a remarkable edge in the race to replace specialty metals now dominated by China, very few domestic projects have the qualifications of Bokan as a strategic military and technological asset," said Jack Lifton, a leading REE expert and a party to the initial drafting of proposed RESTART legislation. "As the largest historically documented Heavy rare earth deposit in the U.S., Bokan is a counterpoint to Molycorp's primarily Light rare earth deposit at Mountain Pass in California. Together, these two deposits, located in relative proximity to each other and on U.S. soil, have the potential of liberating the U.S. from non domestic rare earth dependencies in the near term."

Full Text

Ucore's flagship property is the Boken [heavy rare earth] concession.

China just initiated the first phase of a 10 year program to ramp up light rare earth productive capacity. The mainland holds vast light rare earth deposits, but eventually, dwindling deposits of heavy rare earth elements in the face of China's future growth needs, will force even Beijing to look to "outside" suppliers.

China flooded the RE market back in the early/mid ninety's...because they could afford to...cheap production costs. In the process they eliminated 99% of their competition, earning them the monopoly they hold today. Essentially, the sole global supplier of RE for the past 15 years. Very profitable, and very shrewd indeed..

As mentioned earlier in this thread, John Kaiser has been following crucial developments in the rare earth market for a number of years. Here's the most comprehensive, up to date sector analysis I've read in a while.

John Kaiser: Rare Earths' 'Tail Wagging the Dog'

October 12, 2010

It's possible that no one knows the REEs market and its fundamentals better than Newsletter Writer John Kaiser, and he tells the rare earths story with refreshing honesty. "Anybody that in the interim needs rare earths for their products is being encouraged to setup manufacturing shops in China so that they don't have supply disruptions. Of course, that's not going over very well because that's extortion," John explains. In this exclusive interview with The Gold Report, John sheds some light on the supply-side dearth of REEs and discusses some REEs projects that are and are not ready to step into the breach.

Full Text

reply to post by OBE1


Thank you so much for your updates, I apologise for not responding sooner but this thread seems to have been a bit of a slow burner...and then my CPU decided to play up and distract me away from normal browsing for a few days...

You have passed on some very interesting information. I had been gleaning bits and pieces here and there from the MSM in the UK (BBC, Telegraph) but the overall quality of responses on here just show how worthwhile opening things up on ATS for debate can be. Your contributions are most welcome.

What also fascinates me, is not just the possible wrangles this may place on international relations - for all kinds of parties - but also whether there may be issues to do with how global leaders, corporations and scientists are promoting certain ideas about how to move the world (c. 7 billion) froward, ie.: Move away from fossil fuels, combustion engines, etc...go electric, use magnetic motors/dynamos, batteries....grow the electric digital network of circuitry, convergence...re-energise flagging engineering, manufacturing or export prospects...

But do we really have any less of a problem attempting to obtain, defend and share those resources (including things like REE) in the quantities needed? Can leaders keep selling all of their visions about the 'green'/post carbon/new economies, or might the public learn of a whole new suite of issues and concerns that such large scale shifts in consumption (not just a few thousand prius', plus BRICK nations stepping up demand) may create?

reply to post by Returners


Thanks very much for your contribution.

*As for the U.S. military, he says it doesn’t require rare earths in quantities large enough to cause panic.

At first this seemed pretty reassuring, but then I had a few thoughts:

I still don't really know how REEs are consumed by the military. [EDIT: *That statement appears to come with NO supporting data to analyse]. The military may not consume much directly, for now, but what about indirect acquisition (ICT, server farms, intelligence networks, laptops, mobile phones) and what about in a few years time when, even by the US miltary's own analysis, peak-oil MAY (now I don't want to get drawn into that one!) create scenarios where military and civilian structures (friend and foe) regard REE enhanced electronic power and transport infrastructure as substantially more important than it currently is?

reply to post by Returners

“The problem with dysprosium is that it has only ever been produced in China and [China’s] production is about 1,000 tons a year and that is rapidly becoming not enough. The Chinese are worried that they’re running out—remember, they’re the only producing source we have in the world and they think they’re running out.”

Thanks, is it me, or is that not very reassuring for someone encouraged to indulge in the odd vision of a super-high-tech, post-internal combustion-engine, next-generation super-networked civilisation, as promoted by many a politician, corporation, and scientist?

reply to post by ANNED

Perhaps this news [posted by OBE1] may provide some kind of opportunity for a turn-around for the mining activities you mentioned. It would be a brave government/governator that held back development of what appear to be such strategically and economically loaded prospects? The 'tree huggers' may have some serious debating to do soon...what might be the cost (including environmentally and on a global scale) not to develop the extraction of those REEs?

The passage of this bill means access to additional funding for rare earth exploration & mining companies...outside of the painful share dissolution route. This bill is great news for rare earth stockholders, especially Ucore stockholders...of which I happen to be one.

As the largest historically documented Heavy rare earth deposit in the U.S., Bokan is a counterpoint to Molycorp's primarily Light rare earth deposit at Mountain Pass in California. Together, these two deposits, located in relative proximity to each other and on U.S. soil, have the potential of liberating the U.S. from non domestic rare earth dependencies in the near term."

reply to post by Returners


I just find it fascinating the contrast between these two statements:

In your post we have: www.finalternatives.com... quote which says:

A physical chemist by training, he is now a trader specializing in technology metals and rare metals. He says Chinese limits on rare exports are not a “Fu Manchu plot” against America but a plan to add value and create jobs by ensuring China exports finished goods, not raw materials

In one of OBE1s posts we then have this:

John Kaiser: Rare Earths' 'Tail Wagging the Dog' October 12, 2010 It's possible that no one knows the REEs market and its fundamentals better than Newsletter Writer John Kaiser, and he tells the rare earths story with refreshing honesty. "Anybody that in the interim needs rare earths for their products is being encouraged to setup manufacturing shops in China so that they don't have supply disruptions. Of course, that's not going over very well because that's extortion," John explains. In this exclusive interview with The Gold Report, John sheds some light on the supply-side dearth of REEs and discusses some REEs projects that are and are not ready to step into the breach. Full Text

Well, I suppose we do have to factor in that I live under the umbrella of broadly western MSM, but based on what I have seen of the mud-slinging that has become the USA/China lead trade/currency war...I have to say I think that REEs still remain something of a hot-potato. Is it really coincidence that the USA (and Japan...) governments are waking up to these issues just as trade, currency and military tensions and 'exchanges' with China are escalating?

I hear that in the 'currency' war debate, China are now warning the USA not to use them as scapegoats for their own short-sighted or unsuccessful economic and financial policies, I have to say in that context the strategic positioning of the west in relation to China and these REEs seems stunningly poor?

Originally posted by curioustype
I apologise for not responding sooner but this thread seems to have been a bit of a slow burner...and then my CPU decided to play up and distract me away from normal browsing for a few days...

No problemo curioustype. I didn't notice your recent activity on this thread until last night. I'm confident that the REE situation will continue to garner attention as we move forward into 2011. I will continue update here as newsworthy developments unfold...hopefully the other contributors will also.

Thanks for providing the opportunity to address an important issue

reply to post by OBE1


Thanks, I think I may have to do some reading up on all this some time, it would be great to see some more technical/scientific contributors.

I'd like to see someone take a look at figuring out whether REE availability/rates of production could pose issues for holding back the anticipated (by many of TPTB/MSM anyway) 'boom' in electronics, electronic transport/power infrastructure and continued ICT saturation, as many of the new BRICK and other developing nations of our 7 billion odd population join the queue for obtaining western levels of consumerism/demand?

I wonder also whether there could be issues if there were a convergence of geopolitical conflicts, peak oil, growing consensus on global warming, or even if one nation, e.g. China somehow achieved it's objective of using lunar helium3 to boost low/non-polluting nuclear electricity generation...whilst REE production (elsewhere) was still catching up..or China bought a/the US mine...such almost inconceivable things have happened elsewhere...

There has been a new and what I think is significant reports relating to this thread today, that I have read on the BBCs World News website.

In the interests of aiming for a balanced and unbiased debate I think we need to include links to them in this thread:

The first is a report dated 20/10/2010

US inquiry into China rare earth shipments

US trade officials say they are looking into a New York Times report that China is blocking shipments of rare earths to the US and Europe. China mines 97% of the specialist metals crucial to green technology. The report, citing anonymous industry sources, said Chinese customs officials had broadened export restrictions. Meanwhile China's commerce ministry has denied a report by the official China Daily that it will cut quotas by 30% next year to stop overmining. "The report is completely false," the ministry said in a statement. "China will continue to supply rare earths to the world, and at the same time, to protect usable resources and sustainable development, China will also continue to impose restrictive measures on exploration, production and import and export of rare earths."

The second report is dated 19/05/2010

Why China holds 'rare' cards in the race to go green

From electric cars to wind turbines, environmentally-friendly technology around the world needs rare earth metals. But China - where over 90% of these minerals are mined - is saying it now wants to keep more for its own industry.

The leafy banks of the Birmingham and Worcester canal may be an unlikely place to discuss a looming industrial crisis but it was here that Professor Rex Harris of Birmingham University took me on his hydrogen-powered electric barge. The super efficient motor, like most electric vehicle motors, uses rare earth magnets.

Rex gave me two matchbox sized neodymium-boron magnets, offering me £50 to push them together. His money was safe, the magnetic field was too strong. Such power is vital to green technology, so much of which is based on the efficient generation, use and storage of electricity.

So we need to be sure of good supply of rare earth magnets. "We worry about peak oil," he says, "we should worry about peak magnets as well."

Dangers of dependence Rare earth metals are relatively abundant in the Earth's crust, but they are difficult to extract.

Most came form the United States in the 1960s but tightening environmental regulations and a price war closed the last Californian mine, handing China a virtual monopoly.

American strategic metal consultant, Jack Lifton has been warning the US government of the dangers of dependence.

"Last year the Chinese announced their regular five year plan, looking ahead to 2010 to 2015.
"They said they would continue to reduce the export of these materials to the West and that they were considering stopping the export of certain of them."

I strongly suggest reading the articles in full if this thread is of interest to you.

I haven't got time to respond further right now, but I find it interesting how in May we have an article from experts in the field attempting to warn us and governments of a looming strategic crisis, and by October we have the government releasing PR suggesting they are going to launch a rapid high priority investigation into essentially the same topic, as if it's a brand new issue...it strikes me that whether or not they determine IF China IS currently acting uncharitably in this area, the governments should be held to account for their lack of foresight and inability to see such issues arising whilst both gov/opposition parties all over the West have been essentially fanning the flames of the problem for years in their shaping of energy, transport, outsourced manufacturing* (*in China) and other policies...?

Mr [insert western national leader's/corporate 'environmentalist' name here], please cease telling us that shifting from oil and combustion engines to 'green' energies, motors, generators, magnets and batteries, will automatically result in a parallel shift away from a reliance on resources that come with all kinds of unattractive ethical, strategic, military or geo-political consequences or associations...as oil has done...it looks like there are a few little issues to sort out before that road is clear?

I also wonder whether it may not just be REEs that could become an issue, but copper and various other resources too...China have developed massive copper extraction assets, internationally, recently...