China holding the world to ransom? (*rare earth)

[Sablicious]

It was announced today-ish that China are increasing tarrifs on their rare earth exports. This means everything from flat screen TVs to laser-guided missles will become more expensive to produce as the access to these minerals declines. And this will only get worse for the rest of the world as it's predicted China will consume all the rare they exhume within a few years. Meaning, finders keepers!

Do the math: As of now, China produce 95% of the world's rare earth and creating new mines is costly and very time-consuming. The Chinese govt have declared they will be limiting exports of said minerals to 35,000t as of January 2011 with a gradual reduction henceforth. The world uses approximately 4 times this amount currently with a 3-year projected consumption of 200,000t.

So, are our soon-to-be Sino overlords spoiling for war 'their enemies' won't have the wherewithal to fight beyond a week or two or are they merely holding the world to randsom?

Quotes of interest:
“[Rare earth] will do for China what oil did for Saudi Arabia.” -Deng Xiaoping
"and the number of the forces of the horsemen is two myriads of myriads, and I heard the number of them." -Revelation 9:16

Related stuff:
October article
2009 production breakdown

[Simplicio]

Seems kinda dumb. China isn't the only place with rare earth reserves, they're just the main source because they can mine it cheaply, for pretty much the same reasons they produce everything else cheaply. Presumably if they raise tariffs and ban exports (IIRC, they stopped exporting to Japan over a spat over martime borders a few months ago), other countries will just dig their own mines and China will gain some competitors.

I think there are already plans for mines in Canada and the US, simply due to the increase in global demand.

[Leaper]

I'm just curious what relevance the Revelation quote has.

[E-Sabbath]

There are horsies in the mines.

[DrFidelius]

As Sun Tzu said:

One who does not know the plans of the feudal lords cannot forge preparatory alliances. One who does not know the topography of mountains and forests, ravines and defiles, wetlands and marshes cannot manoeuvre the army. One who does not employ local guides will not secure advantages of terrain. One who does not know one of these four or five cannot command the army of hegemon or a true king.

[gonzomax]

They are just being capitalists. I thought we should praise them for being like us.

[Ravenman]

Originally Posted by Leaper

I'm just curious what relevance the Revelation quote has.

Yeah, two myriads of myriads is only 200,000,000. There are something like 16 myriads of myriads of Chinese. Maybe they have a shortage of horses?

[XT]

Originally Posted by gonzomax

They are just being capitalists. I thought we should praise them for being like us.

They are being stupid. I suppose we would praise them if we were stupid too...

-XT

[Wallenstein]

Huh... earth isn't rare, I've got a truckload of it just sitting on the ground under my garden. There's a field near my house that is pretty much just earth and that's loads bigger than my garden, they just keep horses on it, or grow turnips, stuff like that. If the Americans or Japanese want it that bad they're welcome to pop round with a shovel and take some... I'll swap it for a few beers to be honest, we were planning on putting down decking anyway.

[Wesley Clark]

I remember when the global recession hit. Nations were desperate for cash and China had tons of it, so they bought up tons of mines and cornered the market.

I have no idea what the long term consequences are. My impression is the results will be more mining outside of China and economic alliances by nations against China.

Another part of why China is doing this is so companies are forced to do R&D and manufacturing within China (which would also likely require them to share R&D secrets with the Chinese government). There will be an abundant supply of rare earth minerals within China, but very few outside so a company will have no choice as to where to do manufacturing. It is a pretty smart move on their part.

I don't think this is a military thing on China's part. I think they are just being intelligent and finding ways to give themselves economic leverage against other nations. They want to ensure that R&D and manufacturing of consumer electronics and alternative energy products (both of which require rare earth minerals to produce, and both of which will be huge parts of the 21st century economy) is done within Chinese borders.

But I hope they fail, and I hope mining development outside China grows at a clip.

[gonzomax]

Originally Posted by Wesley Clark

I remember when the global recession hit. Nations were desperate for cash and China had tons of it, so they bought up tons of mines and cornered the market.

I have no idea what the long term consequences are. My impression is the results will be more mining outside of China and economic alliances by nations against China.

Another part of why China is doing this is so companies are forced to do R&D and manufacturing within China (which would also likely require them to share R&D secrets with the Chinese government). There will be an abundant supply of rare earth minerals within China, but very few outside so a company will have no choice as to where to do manufacturing. It is a pretty smart move on their part.

I don't think this is a military thing on China's part. I think they are just being intelligent and finding ways to give themselves economic leverage against other nations. They want to ensure that R&D and manufacturing of consumer electronics and alternative energy products (both of which require rare earth minerals to produce, and both of which will be huge parts of the 21st century economy) is done within Chinese borders.

But I hope they fail, and I hope mining development outside China grows at a clip.

Yep, being capitalists. That is to be praised. Rare earth is a component of magnets and batteries. There is no reason they should give the ability to other countries to excel in those fields. We in America are quite fond of using economic leverage . China is learning fast.

[chrisk]

To take a counter-position, I don't think that governments raising tarriffs and limiting exports is ever 'being good capitalists.' If it was just the Chinese companies involved (government-owned or not) raising their prices, then that's all well and good, but for the government to be getting involved in such a protectionist way is something entirely different. They're being anti-free-trade, which is stupid for them in the long run I think.

[Deeg]

For those who might not know, "rare earth" elements are not rare.

[Stranger On A Train]

Originally Posted by Wesley Clark

I remember when the global recession hit. Nations were desperate for cash and China had tons of it, so they bought up tons of mines and cornered the market.

Sounds like a good candidate for a Bond villain.

Originally Posted by Deeg

For those who might not know, "rare earth" elements are not rare.

While it is true that the 'rare earth' minerals can be found well distributed in the Earth's crust, extracting those elements is difficult and often produced polluting byproducts that are difficult to reduce or contain and lead to movies starring Julia Roberts as a spunky single mother cum environmental crusader. China, which is relatively unconcerned with pollution, has little cost associated with this processing, while developed nations of Europe and the United States have significant restrictions that make this kind of refinement prohibitive.

Stranger

[gonzomax]

South Africa , Brazil, California, Canada, and others stooped production when China undercut the market. Mountain Pass ,Calif. expects to back up next year. Other countries are following suit. So China's capitalistic actions may backfire.

[Lantern]

It's kind of ironic. One of the main pillars of Chinese economic policy is to undervalue their currency which acts as a subsidy for exports. Now they apparently want to tax exports for this one industry. Doesn't make a whole lot of sense. The Chinese have been behaving extremely foolishly in recent months on rare earths, the fishing boat standoff and their Nobel Peace Prize hissy fit. If they wanted to deliberately scare the rest of the region into moving closer to the US and scare multinationals into diversifying their supply chains away from China they could hardly do a better job.

[Simplicio]

Originally Posted by Lantern

It's kind of ironic. One of the main pillars of Chinese economic policy is to undervalue their currency which acts as a subsidy for exports. Now they apparently want to tax exports for this one industry. Doesn't make a whole lot of sense.

The rare earths are raw materials for a lot of electronics and the like, so the idea seems to be that the tariff will give Chinese exporters of the finished goods that rare earths are a component of a leg up over foreign competitors. So while I agree it isn't a great strategy in the long term, I don't think its in obvious contradiction to Chinese policy of encouraging export surpluses.

[shiftless]

Originally Posted by gonzomax

They are just being capitalists. I thought we should praise them for being like us.

300 million capitalists isn't so bad. A billion may be a problem.

I think they should be praised for encouraging us to develop our own resources, especially for one that is so vital. Maybe they could raise the price of labor so some jobs will scoot back over to the USA?

[Capt. Ridley's Shooting Party]

Originally Posted by gonzomax

South Africa , Brazil, California, Canada, and others stooped production when China undercut the market. Mountain Pass ,Calif. expects to back up next year. Other countries are following suit. So China's capitalistic actions may backfire.

I read somewhere that the Californian mine doesn't contain any of certain sorts of rare earth elements that are critical for modern electronics. In other words, for certain minerals, the Chinese really are almost cornering the market. I'm not sure how true this is.

[XT]

There aren't any rare earth elements that exist solely in China afaik...they have merely developed their resources more than other nations at the moment. They will be shooting themselves in the, um, foot, long and medium term if they go through with this...all for a short term gain. So much for the supposed wisdom and long term thinking of the Chinese.

Eventually their antics (as well as their antics with their currency) is going to come back and bite them squarely on the ass...which is why predictions of China taking over are even less grounded in reality than the folks who used to worry so much about the Japanese menace...IMHO anyway. Guess we'll see.

-XT

[gonzomax]

As long as money is being made by capitalists, they will not allow China to fail.

[Magiver]

Originally Posted by gonzomax

South Africa , Brazil, California, Canada, and others stooped production when China undercut the market. Mountain Pass ,Calif. expects to back up next year. Other countries are following suit. So China's capitalistic actions may backfire.

As has already been pointed out, it's not capitalism that invoked the tariffs. It was a political system that did it.

[Chimera]

Part of the long term Economics of Raw Materials, that we've seen in spades with Oil, is "While it is cheap, buy it from the other guy". This preserves your own supplies for the long run while consuming the other guy's supply. Then when things tighten up or run out, ideally you still have a larger percentage of your supply than he does of his.

So right now, China is the cheap supplier. They may hold more of the resource pie, but we're buying it from them and not using our own supplies. Were they to cut off the supply or jack up the price, we naturally would turn and exploit our own reserves. Of course, there will be some short-term panic and shortages, but nothing more than ripples in the long term.

[DSeid]

A very pertinent article.

For as long as the next 15 years, the supplies of at least five minerals that come almost exclusively from China will remain as vulnerable to disruption as they are absolutely vital to the manufacture of small yet powerful electric motors, energy-efficient compact fluorescent bulbs and other clean energy technologies, the report said.

The five minerals are medium and heavy rare earth elements of which China mines an estimated 96 percent to 99.8 percent of the world’s supply: dysprosium, terbium, neodymium, europium and yttrium.

China also increasingly dominates the manufacture of clean energy technologies that require such minerals ...

... Demand for rare earths and China’s virtual chokehold on supplies have prompted some overseas companies to enter, or re-enter, the field.

Molycorp, an American company that in August made an initial public offering of its shares on the New York Stock Exchange, plans to open in 2012 a large rare earth mine at Mountain Pass, Calif., that closed in 2002 after prices were undercut by Chinese competitors. Molycorp announced on Monday that it had received the last of the construction permits needed to proceed.

The Lynas Corporation of Australia plans to open at the end of next year a large rare earths mine at Mount Weld, Australia.

But both the Molycorp and Lynas mines will produce mostly light rare earths and relatively little of the medium and heavy rare earths needed for magnets and other significant clean energy applications.

Dozens of small mining companies hope to open new mines in the United States and elsewhere that could tap reserves of medium and heavy rare earths. But these small companies face formidable legal, financial, marketing and management obstacles, the Energy Department report said.

Interestingly enough many true EVs do not need the rare earths as they typically use induction motors; HEVs OTOH are heavy consumers of the stuff. (A point lost in many articles published on the subject.)

Yes, new sources will be developed, and not only from mines. Recycling might be a good option as well. Still, developing resources, even developing recycling programs, takes a few years. In that time China will further develop their already extant lead in these sectors. OTOH, having that lead may motivate them to embrace binding consenses on Climate Change, as the technology to achieve the goals will increasingly be bought from them.

[tingbudong]

That China controlled 90%+ of rare-earth metal production was a fact hardly lost on decision-makers, policy-wonks and China watchers. It has been a well-known fact for some time, actually. But they always appeared to be playing ball with the rest of the world so it didn't really sit on the top of the to-do pile.

I think what caught folks off-guard was their decision to drop this ace over a bloody fishing boat captain and a insignificant dispute with Japan over a commonly argued oceanic border. The canary cried and now everyone is rushing to ramp up alternative production sites and it wouldn't surprise me if companies start to come up with some alternative substances if China really starts to get greedy with their metals.

Waste of a strategic advantage IMHO. They could have kept that card out of play, holding it for something more significant than a childish spat.

[DSeid]

Not totally off-guard - the SDMB talked about the possibility a year ago .

And as referenced in that thread, even Newsweek was talking about the threat. The rush was on before the fishing boat incident.

You're not alone if you can't name any of these rare-earth minerals. Words like yttrium, holmium, lanthanum, and thulium don't exactly roll off the tongue. All you have to know is that China has a near stranglehold on such ores, currently producing 95 percent of the world's supply and claiming about 60 percent of known reserves within its borders, mostly in the region of Inner Mongolia. The region's vice governor, Zhao Shuanglian, declared in early September that China planned to streamline the domestic rare-earth industry, impose export controls, and establish a national reserve mechanism. "We're not taking a short-term view of just trying to prop up rare-earth prices," he maintained. ... Problem is, it takes up to a decade to develop a rare-earth mine on a commercial scale. Yet these 15 metallic elements happen to be essential in many emerging green technologies. ... just as these elements are becoming more essential, China is undertaking a new bout of resource nationalism. For some time, intellectuals representing what they call "patriotic" Chinese (that is, those who are hawkish about defending their country's national interests and skeptical of Western intentions) have demanded that their government play hardball in international trade–including rare-earth exports—and the decibel level has risen significantly since Western excesses triggered the global financial crisis almost exactly a year ago.
The government has fallen in line. China has already moved dramatically to curb export quotas for rare earths: last month a draft report by China's Ministry of Industry and Information Technology called for a total ban on shipments of terbium (a key ingredient in low-energy lightbulbs), dysprosium (used in the nuclear industry and lasers), yttrium (present in LEDs and TVs), thulium (which enhances medical imaging), and lutetium (used in alloys and polymerization). Other minerals, such as neodymium (crucial for hard-disk drives and wind turbines), europium (used in lasers), cerium (which reduces carbon monoxide in engine exhaust), and lanthanum (key for many hybrid and electric-car batteries), would face a combined export quota of 35,000 tons annually—woefully insufficient to fill global needs. World demand this year is an estimated 124,000 tons, and is expected to double by 2015.
Beijing officials say their goal is not to squirrel away the ores for themselves but rather to persuade manufacturers to build plants in China if they want to use Chinese-produced rare earths in manufacturing. But jitters have already swept through the Japanese government, which has drafted a "Strategy for Ensuring Stable Supplies of Rare Metals" that calls for stockpiling and securing supplies abroad. ... Other countries—namely Australia, the United States, Canada, and South Africa—are redoubling efforts to exploit their own reserves of rare earths. ... But these alternative producers cannot reach optimum capacity right away, so a crunch is inevitable. Among China's trading partners, there's some talk of invoking WTO commitments to try to prod the regime into more generous exports. But it'll be hard to force Beijing into magnanimity when it claims domestic supplies are needed just to meet internal demand. Worried about their own shortfalls, Chinese firms have scrambled to hook up with Australian rare-earth producers. One Chinese company doubled its stake (to 25 percent) in Arafura Resources Ltd., and another is awaiting Canberra's approval of its bid for majority share of Lynas Corp. Ltd.
In other words, rare earths are the sword of Damocles hanging over Beijing's trading partners. If and when they anger China, the People's Republic can cut them off on these essential elements. And nationalistic citizens will surely call on their government to play that card if China finds itself in a trade war like the one it is now spiraling toward with the United States. The effect would be felt across the developed world desperate for the technologies these metals enable. Tension would beset China's ties with the U.S. and Japan. And the long-term economic repercussions would affect the renewable-energy initiatives and defense industries of tomorrow

(bolding mine)

[Sablicious]

Originally Posted by tingbudong

it wouldn't surprise me if companies start to come up with some alternative substances if China really starts to get greedy with their metals.

It may not surprise you, but it'll likely be news to those who can actually pronounce the elements in question as they're supposedly "un-substitutable". Hence the growing concern over their hoarding it would seem.

Problem is, it takes up to a decade to develop a rare-earth mine on a commercial scale.

This^ in a country where health, safety, environmental offshoots and peoples' rights have little-to-no-bearing on what the Polit Bureau wants and you have a multiplying factor of [insert speculation and fear mongering] to the ten years quoted. Gotchya peeps' attention now...?
---

What people always seem to elide regarding China is their system is not our system - and I don't mean the Pinko thing. Tradition in the Chinese political system and governance is still very apparent and the way they look at things in not something an outsider can take an accurate stab at oftentimes. Heck, 'round eyes' still try lure Asianettes with dick pics- lol!

So hence the sudden interest in Aussie prime minister-cum-foreign minister Rudd and his Mandarin skills - the US are fumbling around in the dark when it comes to their fast up and coming Sino rivals. This is how desparate they are, massaging a guy who advocates "force" against the country that's single-handedly kept his country in the black while all others have fallen by the GFC wayside. (...albeit at the expense of the country's precious resources in exchange for poorly [child-]manufactured cheap knock-offs, admittedly). It's like he's the interpreter for an extraterrestrial race! Moreover, just because one speaks the tongue it doesn't automatically qualify one for intimate knowledge of a country's intra-governmental affairs, especially in the case of China.

They haven't forgotten what the drug-dealing 'barbarians' did to their sacred Forbidden City after the Boxer Uprising, much less what their much-loathed Japanese neighbours did at Nanking. Methinks we'd be wise not to either.

[Lumpy]

Originally Posted by Ravenman

Yeah, two myriads of myriads is only 200,000,000. There are something like 16 myriads of myriads of Chinese. Maybe they have a shortage of horses?

At the time Revelations was written, there probably weren't 200,000,000 people in the entire world. Back in the 1960s Mao claimed that China could field 200,000,000 militia*, which made Biblical end-times people jump up and take note.

*in the sense of "give every able-bodied adult a stick or a rock and point them at the enemy".