Rare Earth Ore, US Government

China currently mines and produces 95% of all rare earth materials needed in the production of lithium car batteries, solar panels, wind turbines, flat-screen TV, compact fluorescent light bulbs and defense components such as missile guidance systems.

Its near monopoly makes it possible to dictate terms of sale that include insisting that manufacturers move their operations to Chinese soil.  Additionally, the Chinese government keeps prices high by rationing exports and places trade embargoes on nations that don’t go along with its policy/political interests.

In 2010, Beijing reduced rare earth shipments by 9% over the previous year and plans to reduce exports by an additional 35%.

China produces 99% of the world market’s dysprosium and 95% of neodymium, 3 pounds of which are found in every Prius motor.  It’s not that other nations don’t have these minerals.  The US has sizeable amounts of the two, but China’s low wages and lax environmental restrictions afford it a significant advantage in the production process.

Frustrated by years of unsuccessful negotiations, earlier this year the Obama administration, along with Japan and the European Union, pressed the World Trade Organization (WTO) to force China to stop raising prices by restricting exports of the commodities.

WTO rules permit export quotas on natural resources for environmental purposes, but trade lawyers note that though Beijing has cut other countries’ access to the minerals, it has not installed production limits at home that would protect their environment.

In 2010, China enacted an embargo on rare earth shipments to Japan to get leverage in a territorial dispute.  As a result, Japan now maintains a stockpile of seven rares.

The Toyota and Sojitz Corporations entered into tie-ins with Vietnamese rare earth claim-holders, and Toyota is operating a small rare earths mine in India.

South Korea announced plans in 2011 to stockpile 76,000 tons (10% of all global production) of rares over the next five years.

Sweden declared Tasman Metals, Ltd.’s Norra Harr heavy rare earth project to be in its “national interest” under the Swedish Environment Act.

And Germany recently entered an agreement to buy rare earths from Mongolia.

Coming up:  Two companies innovate to sidestep China’s monopoly.

from Forbes, April 15, 2012


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