China’s Monopoly on Rare Earth Metals

Rare earth metals with strange sounding names like dysprosium, terbium, neodymium, europium, yttrium and lanthanum are a class of 17 chemical elements that play a critical role in modern technology including cancer treatment, cruise missiles, iPods, flat screen TVs, hybrid cars, wind turbines, solar panels and oil refineries to mention some applications.

China currently produces 97 percent of the world’s rare earths even though the country has only 37 percent of known global reserves of the metals. With its low wages, minimal environmental regulations, and keen understanding of the vital role natural resources play, China has obtained a near monopoly on rare earths. (1) The United States was once the world’s top producer of rare earths with California’s Mountain Pass Mine leading the way. However, this mine ceased operations in 2002, because of years of low prices for rare earths and the expiration of its environmental operating permits after a series of spills of mine tailings that contained traces of radioactive uranium and thorium. (2) Canada and Australia also have rare earths but stopped mining them in the 1990s as lower cost Chinese ores flooded the market. (3)

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World prices soared dramatically when China reduced its export quotas by 40 percent in 2010 and a further 35 percent in the first half of this year, seeking to build a stronger domestic industry. It has also introduced an export tax on some rare earth products. (4) Recently, China announced that its biggest producer of rare earths was suspending production for one month in hopes of boosting slumping prices of these exotic minerals. (3) In short, the world is at China’s mercy for now when it comes to rare earth supplies. A recent report from the United States Energy Department predicts that it could take 15 years to break America’s dependence on Chinese supplies and calls for the nation to increase research and expand diplomatic contacts to find alternative sources and to develop ways to recycle the minerals or replace them with other materials. (5) The report presents a fairly gloomy assessment of the United States’ ability to wean itself from Chinese imports saying that 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 disruptions as they are absolutely vital to the manufacture of small yet powerful electric motors, energy-efficient compact fluorescent bulbs and other clean energy technologies. (6) Yet, even though the rapid run up in prices and reports of impending shortages have produced considerable anxiety around the world, Ronald Bailey notes, that the US Geological Survey (USGS) issued a somewhat reassuring comprehensive report looking at the availability of rare earth minerals in the United States and around the world and concluded that China’s rare earth domination may continue for the short run, but the world is far from running out of these minerals. (2) Bailey adds that shortages also spur innovation. “Several companies appear to be well on the way toward developing cheaper permanent magnets that don’t deend on rare earth metals. For example, the California startup NovaTorque has developed electric motors using low cost ferrite magnets that the company claims outperform much more expensive neodymium magnets. Hitachi in Japan is also developing a ferrite magnet that would be a cheap substitute for the neodymium magnets currently used in hybrid cars. Rare earth magnets are presently used for reading and writing hard drives. But that may not always be so. Researchers are working on new computer memories based on graphene oxide, a combination of common carbon and oxygen.” (2) Also, Toyota believes it is near a breakthrough in developing electric motors for hybrid cars that eliminates the use of rare earth metals, and Continental AG of Germany, one of the world’s largest auto parts makers, said it already has developed a rare earth free motor that will be used in an undisclosed electric car due out in Europe this year. This motor uses a variation of an electric motor often fiund in power plants. (7) Peter Foster reports, “The military-strategic fears, while good for headlines, are also somewhat overblown according to industry insiders, a view endorsed in October 2010 by a year-long Pentagon study into how to secure future supplies of rare earth and other critical materials.” “The quantities are extremely small,” Eric Noyrez, the chief operating officer of Lynas said, estimating that the US military would need 10 to 20 tons of rare earth metals a year for its weapon systems. “ Fixing that would not take much time,” he said. (8) Lastly, the wave of the future for rare earths may be in the oceans. Copious reserves have turned up in sediments at the bottom of the Pacific Ocean. The minerals have been found in such high density that a single square kilometer of ocean floor would provide one-fifth of annual world consumption. Two regions near Hawaii and Tahiti might contain as much as 100 billion tons. (9) So, for the present and foreseeable future there will be shortages of rare earth materials. However, as Ronald Bailey predicts, “In the end, new supplies and innovations will ensure that the future of the world’s high tech economy will not depend upon the whims of the mercantilist mandarins who steer Chinese industrial and trade policy.” (2) References

1. Bonner R. Cohen, “China cuts back on rare earth exports, jeopardizing wind and solar power, Environment & Climate News, February 2011
2. Ronald Bailey, “Rare earth ruckus,” Reason Magazine, November 23, 2010
3. Joe McDonald, “China rare earth supplier suspends production,” old.news.yahoo.com, October 20, 2011
4. Geoffrey York and Branda Bouw, “Chasing China,” The Globe and Mail, July 16, 2011, Page B6
5. “Critical Materials Strategy,” US Department of Energy, December 2010
6. Keith Bradsher, “US called vulnerable to rare earth shortages,” The New York Times, December 15, 2010
7. Mike Ramsey, “Toyota tries to break reliance on China,” The Wall Street Journal, January 14, 2011, Page B1
8. Peter Foster, “Rare earths: Why China is cutting exports crucial to western technologies,” The Telegraph, March 19, 2011
9. “Rare earths aplenty,” New Scientist, 211, 4, July 9, 2011