Wednesday, October 20, 2010

Rare Earths Again

The New York Times reports:
HONG KONG — China, which has been blocking shipments of crucial minerals to Japan for the last month, has now quietly halted shipments of those materials to the United States and Europe, three industry officials said on Tuesday.

The Chinese action, involving rare earth minerals that are crucial to manufacturing many advanced products, seems certain to further intensify already rising trade and currency tensions with the West. Until recently, China typically sought quick and quiet accommodations on trade issues. But the interruption in rare earth supplies is the latest sign from Beijing that Chinese leaders are willing to use their growing economic muscle.

“The embargo is expanding” beyond Japan, said one of the three rare earth industry officials, all of whom insisted on anonymity for fear of business retaliation by Chinese authorities.

They said Chinese customs officials imposed the broader restrictions on Monday morning, hours after a top Chinese official summoned international news media Sunday night to denounce United States trade actions.

It seems like this rare earth story keeps getting more and more important.  The Wiki has some good background on rare earths.  Particularly useful are this graph on the production of rare earths:

illustrating the world's increasing dependence on cheap Chinese rare earths.  Also this table of the major economic uses of rare earths:

The USGS has more background data here:
In 2008, rare earths were not mined in the United States; however, rare-earth concentrates previously produced at Mountain Pass, CA, were processed into lanthanum concentrate and didymium (75% neodymium, 25% praseodymium) products. Rare-earth concentrates, intermediate compounds, and individual oxides were available from stocks. The United States continued to be a major consumer, exporter, and importer of rare-earth products in 2008. The estimated value of refined rare earths imported by the United States was more than $127 million. Based on final 2007 reported data, the estimated 2007 distribution of rare earths by end use, in decreasing order, was as follows: glass polishing and ceramics, 34%; automotive catalytic converters, 30%; rare- earth phosphors for computer monitors, lighting, radar, televisions, and x-ray-intensifying film, 14%; chemicals and petroleum refining catalysts, 11%; ceramics, 3%; pharmaceuticals and pharmaceutical equipment, 3%; permanent magnets, 2%; metallurgical applications and alloys, 1%; laser and scintillator crystals, 1%; and other, 1%
Doesn't sound like the world will immediately grind to a halt, but obviously particular industries will be hurt.

Rare earths are not rare in some absolute sense, but rather are rarely concentrated to economically useful concentrations.
Rare earths are relatively abundant in the Earth’s crust, but discovered minable concentrations are less common than for most other ores. U.S. and world resources are contained primarily in bastnäsite and monazite. Bastnäsite deposits in China and the United States constitute the largest percentage of the world’s rare- earth economic resources, while monazite deposits in Australia, Brazil, China, India, Malaysia, South Africa, Sri Lanka, Thailand, and the United States constitute the second largest segment. Apatite, cheralite, eudialyte, loparite, phosphorites, rare-earth-bearing (ion adsorption) clays, secondary monazite, spent uranium solutions, and xenotime make up most of the remaining resources. Undiscovered resources are thought to be very large relative to expected demand.
Here are world's currently known reserves:

Chinese production in 2008 was 120,000 tonnes, and that was only 0.44% of their reserves, and only 0.13% of global reserves.  So there is not going to be an absolute shortage of this stuff any time soon - this is completely a story about the Chinese cornering the market and then using the resulting monopoly to throw their weight around in international negotiations.

1 comment:

bmerson said...

This is an interesting story primarily because it is China and they operate under a different set of rules.

China (and to some degree the FSU) have the benefit (in this instance) of strong central government that can move quickly to adjust to changing circumstances. China has the added "benefit" of cheap labor and the need to keep it employed.

For China, maintaining the rare earth monopoly is a jobs program, albeit one with nice economic and geopolitical benefits. Why wouldn't they throw money and labor at production of RE and flood the market, making it uneconomical for market-based producers to emerge?

The FSU could conceivably compete, but its labor costs are higher. Free market sources like the US and Australia are going to have real trouble without serious government subsidies.

What is the US really going to do if the Chinese flood the market with cheap RE? Almost any response ends up hurting Americans more than the Chinese. How does this end with the US having an economically viable industry?