Rare Earth

If you thought China has US by the nads regarding “free” trade, their overvalued currency and their multi-trillion dollar cash reserves as opposed to our increasing debt, then consider minerals. China controls the world’s supply of these minerals that are used to make batteries that power enviro-friendly vehicle, cell phones and night vision goggles. These minerals are difficult to mine and with their tolerance of pollution and low wages the Chinese government can mine and more cheaply than other producers and control its availability to competitors in the world market. According to


“Rare-earth magnet demand was expected to increase by 10% to 16% per year through 2012, increasing to 45,000 t to 50,000 t by 2012. Future growth was expected for rare earths in rechargeable NiMH batteries, especially those used in hybrid vehicles, increasing to 10,000 t to 20,000 t REO by 2012. NiMH demand was also expected to increase (moderated by increasing demand for lithium-ion batteries) with increased use in portable equipment, such as camcorders, cellular telephones, compact disk players, digital cameras, digital video disk players, laptop computers, and MPEG audio-layer-3 players.”

Japan breaks China’s stranglehold on rare metals with sea-mud bonanza
Japanese scientists have found vast reserves of rare earth metals on the Pacific seabed that can be mined cheaply, a discovery that may break the Chinese monopoly on a crucial raw material needed in hi-tech industries and advanced weapons systems.

The team have found deposits just two to four metres from the seabed surface at higher concentrations than anybody ever thought existed. Photo: Photolibrary.com

ByAmbrose Evans-Pritchard, in Tokyo
5:56PM GMT 24 Mar 2013

“We have found deposits that are just two to four metres from the seabed surface at higher concentrations than anybody ever thought existed, and it won’t cost much at all to extract,” said professor Yasuhiro Kato from Tokyo University, the leader of the team.

While America, Australia, and other countries have begun to crank up production of the seventeen rare earth elements, they have yet to find viable amounts of the heavier metals such as dysprosium, , europium, and ytterbium that are most important.

China has a near total monopoly in the heavier end of the spectrum, though it is also the dominant supplier of the whole rare earth complex after driving rivals out of business in the 1990s. It still accounts for 97pc of global supply.

Beijing shocked the world when it suddenly began to restrict exports in 2009, prompting furious protests and legal complaints by both the US and the EU at the World Trade Organisation. China claimed that it was clamping down on smuggling and environmental abuse.

“Their real intention is to force foreign companies to locate plant in China. They’re saying `if you want our rare earth metals, you must build your factory here, and we can then steal your technology,” said professor Kato.

Yasuhiro Kato, an associate professor of earth science at the University of Tokyo, displays a mud sample extracted from the depths of about 4,000 metres (13,123 ft) below the Pacific ocean surface where rare earth elements were found. – Reuters

The team of scientists from Japan’s Agency for Marine-Earth Science and the University of Tokyo first discovered huge reserves in the mid-Pacific two years ago. These are now thought to be 1000 times all land-based deposits, some of it in French waters around Tahiti.

The latest discovery is in Japan’s Exclusive Economic Zone in deep-sea mud around the island of Minami-Torishima at 5,700 meters below sea level. Although it is very deep, the deposits are in highly-concentrated nodules that can be extracted using pressurised air with minimal disturbance off the seafloor and no need for the leaching.

Professor Kato said exploration will continue for another two years before scaling up towards production. Over 50pc of the metal in the deposit is the heavier end of the spectrum, twice the level of China’s key mines and without the radioactive by-product thorium that makes the metals so hard to mine.

Japan consumes half the world’s rare earth metals in its cars, electronics, and environmental industries, and has accused China of withholding supplies as a pressure tool. The country has been scrambling to find other sources under its “Strategy for Ensuring Stable Supplies of Rare Metals”, but a joint venture in Vietnam that once looked promising has so far yielded only lighter rare earths.

Professor Kato said a single ship drilling in the target zone at Minami-Torishima could supply Japan’s needs for a year, breaking strategic dependence at minimal cost. “We don’t need to mine it intensively. All we need is enough to force China to lower its prices.”

Rare earth metals are the salt of life for the hi-tech revolution, used in iPads, plasma TVs, lasers, and catalytic converters for car engines. Dysprosium is crucial because it is the strongest magnet in the world but also remains stable at very high temperatures. Neodymium is used in hybrid cars, and terbium cuts power use for low-energy lightbulbs by 40pc.

The metals are also used in precision-guided weapons, missiles such as the Hellfire, military avionics, satellites, and night-vision equipment. America’s M1A2 Abrams tank and the Aegis Spy-1 radar both rely on samarium.

Washington was caught badly off guard when China started restricting supplies. The US defence and energy departments have now made it an urgent priority to find other sources, but warn that it may take up to a decade to rebuild the supply-chain. The US Magnetic Materials Association said America had drifted into a “silent crisis”.

Most rare earth metals are not that rare but they are hard to find in viable concentrations, and the metallurgy is complex.

The new discovery is the second time this month that Japan has announced a major find on the sea floor. It announced a break-through in extracting gas from methane hydrates under the ocean last week, a technology that is likely to prove costly but could meet Japan’s gas needs for a century.


China’s advantage erodes in a key area: rare earth minerals

By Howard Schneider, Published: October 26

Two years after China limited its exports of “rare earth minerals,” unnerving developed countries that depended on them for industrial uses, production is expanding at sites outside China.

And as new sources of rare earth minerals have appeared, that has meant new jobs — including in the tiny town of China Grove, N.C., where Japan’s Hitachi Metals is planning to produce high-tech magnets from rare earth minerals.

The Hitachi plant and its 70 new manufacturing jobs are a small example of how market forces can sometimes undercut China’s trade clout.

In recent years, China has dominated the production of these magnets, in part because the country has had a virtual monopoly on the mining and refining of the rare earth elements used in their production.

There are 14 rare earth minerals commonly used in industrial applications. The elements are difficult to find in concentrations that can be commercially exploited. They provide, for example, the illumination in night-vision goggles. A fraction of a gram of elements such as dysprosium or Europium provide the colors that light up the screen of a smartphone. A hybrid car might contain 40 pounds or more of rare earth magnets — lighter and more powerful than traditional iron-based magnets — in the battery-based power chain or small motors that run power windows, seats and other accessories.

Hitachi Metals produces magnets that it hopes to sell to the makers of hybrid and electric cars.

“Just like any other supplier, we are trying not to be dependent on Chinese sources,” said Koshi Okamoto, executive director of New York-based Hitachi Metals America. “Reliable sources of supply are clearly one of the top priorities.”

North Carolina Secretary of Commerce J. Keith Crisco said that when the state was in talks with Hitachi about expanding, company officials said their other option was to make the magnets in China.

“We need to be good partners [with the Chinese]. Not pansies; good partners,” Crisco said. “They are a major economic force.”

Alarmed over Chinese restrictions on rare earth exports, the United States, the European Union and Japan filed a World Trade Organization complaint alleging that China was using its monopoly over the minerals as a political and economic weapon — for instance, to punish Japan over its claims to contested islands in the South China Sea and to entice companies to relocate factories inside China by offering a cheaper supply of rare earth materials.

Even as the United States was pursuing its WTO claim, Colorado-based Molycorp, along with firms in Australia and elsewhere, were reshaping the landscape. Molycorp reopened a rare earth mine in Mountain Pass, Calif., that had been shuttered a decade ago because the supply of the minerals coming from China was so cheap.

Molycorp President Mark A. Smith said the company, which has scaled up employment at the mine from 55 to 420 in recent years, aims to produce as much as 40,000 metric tons a year by 2013, accounting for about 30 percent of projected world supply.

As important, he said, the company recently acquired China-based Neo Materials and with it the technology needed to provide the more purely refined rare earth oxides used in computer, defense and telecommunications equipment.

At the peak of China’s influence on the market, he said, companies could get rare earth materials about 40 percent cheaper there than elsewhere. China used that advantage to recruit firms to the industrial regions near the source of the materials. Smith said the Chinese price and the world price have now nearly converged, and he predicted more announcements like Hitachi’s.

“As you see that diversity of supply, you’ll see R&D come back, and you’ll see manufacturing come back,” Smith said.


Rare and Foolish

Published: October 17, 2010

Last month a Chinese trawler operating in Japanese-controlled waters collided with two vessels of Japan’s Coast Guard. Japan detained the trawler’s captain; China responded by cutting off Japan’s access to crucial raw materials.

And there was nowhere else to turn: China accounts for 97 percent of the world’s supply of rare earths, minerals that play an essential role in many high-technology products, including military equipment. Sure enough, Japan soon let the captain go.

I don’t know about you, but I find this story deeply disturbing, both for what it says about China and what it says about us. On one side, the affair highlights the fecklessness of U.S. policy makers, who did nothing while an unreliable regime acquired a stranglehold on key materials. On the other side, the incident shows a Chinese government that is dangerously trigger-happy, willing to wage economic warfare on the slightest provocation.

Some background: The rare earths are elements whose unique properties play a crucial role in applications ranging from hybrid motors to fiber optics. Until the mid-1980s the United States dominated production, but then China moved in.

“There is oil in the Middle East; there is rare earth in China,” declared Deng Xiaoping, the architect of China’s economic transformation, in 1992. Indeed, China has about a third of the world’s rare earth deposits. This relative abundance, combined with low extraction and processing costs — reflecting both low wages and weak environmental standards — allowed China’s producers to undercut the U.S. Industry.

You really have to wonder why nobody raised an alarm while this was happening, if only on national security grounds. But policy makers simply stood by as the U.S. rare earth industry shut down. In at least one case, in 2003 — a time when, if you believed the Bush administration, considerations of national security governed every aspect of U.S. policy — the Chinese literally packed up all the equipment in a U.S. production facility and shipped it to China.

The result was a monopoly position exceeding the wildest dreams of Middle Eastern oil-fueled tyrants. And even before the trawler incident, China showed itself willing to exploit that monopoly to the fullest. The United Steelworkers recently filed a complaint against Chinese trade practices, stepping in where U.S. businesses fear to tread because they fear Chinese retaliation. The union put China’s imposition of export restrictions and taxes on rare earths — restrictions that give Chinese production in a number of industries an important competitive advantage — at the top of the list.

Then came the trawler event. Chinese restrictions on rare earth exports were already in violation of agreements China made before joining the World Trade Organization. But the embargo on rare earth exports to Japan was an even more blatant violation of international trade law.

Oh, and Chinese officials have not improved matters by insulting our intelligence, claiming that there was no official embargo. All of China’s rare earth exporters, they say — some of them foreign-owned — simultaneously decided to halt shipments because of their personal feelings toward Japan. Right.

So what are the lessons of the rare earth fracas?

First, and most obviously, the world needs to develop non-Chinese sources of these materials. There are extensive rare earth deposits in the United States and elsewhere. However, developing these deposits and the facilities to process the raw materials will take both time and financial support. So will a prominent alternative: “urban mining,” a k a recycling of rare earths and other materials from used electronic devices.

Second, China’s response to the trawler incident is, I’m sorry to say, further evidence that the world’s newest economic superpower isn’t prepared to assume the responsibilities that go with that status.

Major economic powers, realizing that they have an important stake in the international system, are normally very hesitant about resorting to economic warfare, even in the face of severe provocation — witness the way U.S. policy makers have agonized and temporized over what to do about China’s grossly protectionist exchange-rate policy. China, however, showed no hesitation at all about using its trade muscle to get its way in a political dispute, in clear — if denied — violation of international trade law.

Couple the rare earth story with China’s behavior on other fronts — the state subsidies that help firms gain key contracts, the pressure on foreign companies to move production to China and, above all, that exchange-rate policy — and what you have is a portrait of a rogue economic superpower, unwilling to play by the rules. And the question is what the rest of us are going to do about it.

China Said to Widen Its Embargo of Minerals
By Keith Bradsher
Published: October 19, 2010

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 Stats trad actions.

China mines 95 percent of the world’s rare earth elements, which have broad commercial and military applications, and are vital to the manufacture of products as diverse as cellphones, large wind turbines and guided missiles. Any curtailment of Chinese supplies of rare earths is likely to be greeted with alarm in Western capitals, particularly because Western companies are believed to keep much smaller stockpiles of rare earths than Japanese companies.

China experts said on Tuesday that Beijing’s assertive stance on rare earths might also signal the ascendance of economic nationalists, noting that the Central Committee of the Communist Party convened over the weekend.

Officials at the media relations office of China’s commerce ministry did not respond all day on Tuesday to e-mail or telephone calls seeking confirmation of the expanded embargo.

A few rare earth shipments to the West have been delayed by customs officials in recent weeks, said industry officials in China, Japan and the United States, but new restrictions on exports appear to have been imposed on Monday morning.

Industry executives said there had been no signal from Beijing of how long rare earth shipments intended for the West would be held by Chinese customs officials. Nor is it clear if occasional shipments are still being allowed out of the country, or if all shipments have now been suspended.

Word of the blocked shipments emerged from industry officials on Tuesday after an official China newspaper reported earlier in the day that Beijing planned next year to further reduce its annual export quota for rare earths.

The signals of a tougher Chinese trade stance come after American trade officials announced on Friday that they would investigate whether China was violating World Trade Organization rules by subsidizing its clean energy exports and limiting clean energy imports. The inquiry includes whether China’s steady reductions in rare earth export quotas since 2005, along with steep export taxes on rare earths, are illegal attempts to force multinational companies to produce more of their high-technology goods in China.
Despite a widely confirmed suspension of rare earth shipments from China to Japan, now nearly a month old, Beijing has continued to deny that any embargo exists.

Industry executives and analysts have interpreted that official denial as a way to wield an undeclared trade weapon without creating a policy trail that could make it easier for other countries to bring a case against China at the World Trade Organization.

So far, China seems to be taking a similar approach in expanding the embargo to the West.

Wang Baodong, a spokesman for the Chinese Embassy in Washington, said on Tuesday that the Chinese government was putting new restrictions on the mining, processing and export of rare earths to protect the environment. But he said that China was not violating any W.T.O. rules in doing so and that it was not imposing an embargo or trying to use rare earths as a bargaining chip.

“With stricter export mechanism gradually in place, outbound shipments to other countries might understandably begin to feel the effect,” Mr. Wang said in an e-mail. “But I don’t see any link between China’s reasonable rare earth export control policy and the irrational U.S. decision of protectionist nature to investigate China’s clean energy industries.”

Nefeterius Akeli McPherson, a spokeswoman for the Office of the United States Trade Representative in Washington, said that American trade officials were looking into the matter, after a report of the Chinese customs restrictions was published on Tuesday afternoon on the Web site of The New York Times.

“We’ve seen the news report and are seeking more information in keeping with our recent announcement of an investigation into whether China’s actions and policies are consistent with W.T.O. rules.”

Jeremie Waterman, the China director of the United States Chamber of Commerce, said that he was still checking government and industry sources to learn the extent of a suspension of Chinese rare earth shipments. “If it’s true, it’s disturbing news to say the least,” he said.

Mr. Waterman said that rare earths were so important to advanced manufacturing that restrictions on their trade might need to be put on the agenda of the Group of 20 meeting of heads of state, scheduled next month in Seoul, South Korea.

The Chinese government office that oversees rare earth policy, which operated with considerable independence for many years, was moved early last year into the Ministry of Industry and Information Technology. That ministry, formed only two years ago to draft plans for global leadership in many industries, has emerged as a bastion of economic nationalism.

Decline in Rare-Earth Exports Rattles Germany

Published: October 19, 2010

BERLIN — China’s curtailing of rare earth exports is causing so much concern in Germany that industry and government are joining forces by appealing to the European Commission and the World Trade Organization to intervene, industry officials said Tuesday.

China’s exports of rare earths declining by as much as 40 percent worldwide over the past ten months, according to the . That decline has set off alarm bells in Germany, one of the world’s largest export-driven economies and whose industry relies heavily on rare earths.


Premier: China won’t block rare earth exports

The Associated Press
Friday, October 8, 2010; 4:41 AM

SHANGHAI — China is not using its control over supplies of rare earth – exotic metals crucial in advanced manufacturing – as a diplomatic “bargaining chip,” state media quoted Premier Wen Jiabao as saying during a visit to Europe.

Recent reports that Beijing had temporarily suspended shipments to Japan of the metallic elements, used in computer disk drives, hybrid car components and other high-tech products, has drawn attention to China’s near monopoly on the materials.

Speaking to a China-European Union business summit in Brussels, Wen echoed other Chinese officials in denying Beijing had ordered traders to hold back rare earth shipments to Japan due to a recent flare-up in tensions, the newspaper China Daily reported Friday.

“China is not using rare earth as a bargaining chip,” said Wen, China’s top economic official.

The government’s official web site carried some of Wen’s remarks, including his call for sustainable development of China’s abundant reserves of the 17 minerals, which have exotic names like dysprosium and terbium.

“What we pursue is to satisfy not only the domestic demand but also the global demand of rare earth. We should not only stand from the present, but should also look forward to the future,” the government’s account of Wen’s remarks said.

“If rare earth minerals were used up, how would the world and China deal with the problem?” he said.

China produces 97 percent of the global supply of rare earths, and experts forecast that annual demand could exceed 200,000 tons by 2014, far exceeding current production level of 124,000 tons a year.

“It is necessary to exercise management and control over the rare earth industry, but there won’t be any embargo,” the China Daily quoted Wen as saying.

China has denied it was halting exports, but Japanese trading firms said shipments stopped around Sept. 21, held up at Chinese ports by increased paperwork and inspections. That came after Japan arrested a Chinese fishing boat captain whose trawler collided with two Japanese patrol boats off disputed islands in the East China Sea.

Concern about rare earth supply had been brewing long before September’s restrictions to Japan. To cope with growing demand at home, China has been reducing export quotas of rare earths over the past several years. In the second half of this year, the government has capped overseas shipments at 7,976 tons, down 49 percent from the first half, according to figures from China’s Ministry of Commerce.

Shaken by the potential threat of supply disruptions to its manufacturers, Japan is considering becoming a global center for rare earth recycling and is partnering with Mongolia to develop new rare earth mines.

Japan’s Cabinet on Friday approved new funding for securing rare earths as part of 5.05 trillion yen ($61 billion) in new economic stimulus.

Concerns over the issue are prompting a resumption of some projects in the U.S. and Australia that had been postponed for years due to competition from cheap Chinese suppliers.

Meanwhile, the official Xinhua News Agency said Friday that geologists have discovered a large, still untapped new deposit in central China’s Henan province.

Authorities were drawing up plans to prevent illegal mining of the reserves, it said.

Block on Minerals Called Threat to Japan’s Economy

By Hiroko Tabuchi
Published: September 28, 2010

TOKYO — A halt of Chinese shipments of crucial industrial minerals to Japan poses a threat to the Japanese economy, a top Tokyo government official said Tuesday, amid a dispute over territorial sovereignty that has damaged relations between the regional rivals. The Chinese commerce ministry has denied that it is blocking exports of the minerals, known as rare earths, which are used in products like hybrid cars and wind turbines.

An official at a trading house in Japan said early Wednesday, however, that there were signs that Chinese authorities were issuing new export licenses for rare earth shipments to Japan, which he said had been terminated since early last week.

An official at the headquarters of China’s customs agency and an official at the Beijing municipal customs office each declined to comment.

Executives and traders in both countries have said that Chinese customs agents have blocked rare earth exports since early last week, after a diplomatic dispute over Japan’s detention of a Chinese fishing trawler captain in waters claimed by both countries. Japan released the captain on Friday.

A Japanese trader in the minerals said Tuesday that customs agents were still not allowing shipments of rare earths to Japan. Traders here say that it would be extremely difficult to find other sources of the minerals if shipments continue to be held up. China mines 93 percent of the world’s rare earth minerals, which can sell for hundreds of dollars a pound.

“The de facto ban on rare earths export that China has imposed could have a very big impact on Japan’s economy,” the economic and fiscal policy minister, Banri Kaieda, told a news conference Tuesday. “We need to restore Japan-China ties, especially economic exchanges, as soon as possible.”

China’s commerce ministry has steadfastly denied that China has imposed a ban on exports, which would violate World Trade Organization rules. In the United States, the United Steelworkers union filed a legal petition last month asking the White House to begin W.T.O. proceedings against China for a series of alleged violations of W.T.O. rules in exports related to green energy, and that petition singled out China’s handling of rare earth exports in recent years as a particularly strong candidate for a W.T.O. Case.

The Office of the United States Trade Representative has said that it would make a decision on the petition by Oct. 24, the deadline under the obscure law cited by the union.

Rare earths are used to make many products: glass, batteries, compact fluorescent bulbsand computer display screens. Demand has risen in the last decade for their use in clean energy technology, like generators for large wind turbines and lightweight electric motors for cars.

They have been crucial as Japanese automakers vie to keep the lead in fuel-efficient vehicles, turning to the minerals for the powerful electric motors that help propel gasoline-electric hybrids like the Toyota Prius, or Nissan’s all-electric car, the Leaf.

Separately, Toyota Motor said it had set up a task force to handle rare earth procurements. The task force was established in response to “the current situation” in rare earth trade with China, said Paul Nolasco, a spokesman for the automaker in Tokyo. He declined to give other details.

An official at a trading company based in Tokyo, who spoke on condition of anonymity, said it was unclear if the continued restriction in shipments was the result of a backlog that might have built up over the weeklong halt or whether a longer-term ban was in place.

The Associated Press reported that Japan’s finance minister, Yoshihiko Noda, had acknowledged the concerns among Japanese businesses, and said that Tokyo had submitted a statement to Beijing asking it to clarify the situation.

China, predicting robust growth of its own auto industry, has placed increasingly stringent exportrestrictions on rare earths. Some experts predict that exporters in China could run out of quotas as soon as the end of October, although that had nothing to do with the suspension of exports last week. While China’s refusal to acknowledge a ban has puzzled some within the industry, others say an unofficial halt carries political and legal advantages. A halt to exports because of administrative needs would be harder for Japan to challenge at the World Trade Organization, which prohibits unilateral export restrictions in most cases.

On Sunday, Chen Deming, China’s commerce minister, said in an interview on Chinese television that the government had complied with World Trade Organization rules by not ordering a ban on rare earth exports to Japan.

But he seemed to hint that a halt on exports might have occurred anyway when he said, “I believe entrepreneurs, they will have their own feelings, and will do their own thing.”

There are 32 companies with rare earth export licenses in China, and 10 of them are foreign companies. Mr. Chen was not asked why foreign companies would have felt a need to stop shipments.

The dispute comes at a politically difficult time for China, with the approach of National Day on Oct. 1, the anniversary of the creation of the People’s Republic of China in 1949 after more than a half-century of Japanese incursions into the Asian mainland — a holiday comparable to the Fourth of July in the United States.

Chinese leaders have been especially keen to play to patriotic sentiment at this time of year and to avoid backing down to foreign pressure, especially from the Japanese.

China to Tighten Limits on Rare Earth Exports

Published: December 28, 2010

HONG KONG — China’s commerce ministry announced on Tuesday in Beijing a steep reduction in export quotas for rare earth metals in the first months of next year, a move that threatens to cause further difficulties for manufacturers already struggling with short supplies and soaring prices.

The reduction in quotas for the early months of 2011 — a 35 percent drop in tonnage from the first half of this year — is the latest in a series of measures by Beijing that has gradually curtailed much of the world’s supply of rare earths.

China mines more than 95 percent of the global supply of the metals, which are essential for smartphones, electric cars, many computer components and a range of military hardware. In addition, the country mines 99 percent of the least common rare earths, the so-called heavy rare earths that are used in trace amounts but are crucial to many clean energy applications and electronics.

In what seemed to be an effort to reassure traders and users of rare earths, the commerce ministry said in a follow-up statement late Tuesday on its Web site that it had not decided what the total export quotas would be for all of 2011. The ministry typically issues a second, supplementary batch of quotas each summer.

The ministry said on Tuesday night that companies should not make guesses about the total export quotas for next year based on the initial reductions issued earlier in the day.

“We will be considering the production of rare earths in China, domestic demand and sustainable development needs to determine” the full quotas for the entire year, the ministry Web site quoted its foreign trade department director as saying, without naming the director.

Earlier this month, China’s finance ministry raised export taxes to 25 percent from 15 percent for some of the most crucial rare earths. The ministry also extended taxes to exports of some rare earth alloys that previously were not taxed.

China gradually reduced its annual tonnage of export quotas from 2006 to 2009, then cut the tonnage of allowed exports by more than half in the second half of 2010.

Separately, the Chinese government imposed an unannounced embargo on shipments of raw rare earth minerals to Japan from mid-September to late November, a ban that started during a territorial disagreement over disputed islands.

In addition, rule changes for export quotas have had the effect of reducing the availability of supplies leaving China. Until now, the quotas mostly covered alloys and oxides with a rare earth content of at least 50 percent.

Starting next year, industry executives said, exports of some additional alloys will face restrictions as well, which will have the effect of tightening quotas by about 6 percent.

The commerce ministry provided no reasons for its reduction in initial export quotas for next year, and a ministry spokesman declined to elaborate. White House trade officials have begun an investigation into whether China’s export restrictions violate World Trade Organization rules; the W.T.O. prohibits export quotas and export tariffs except for environmental protection and national security.

China’s latest restrictions drew a quick response from the Office of the United States Trade Representative in Washington.

“We are very concerned about China’s export restraints on rare earth minerals,” a spokeswoman for the office, Nefeterius Akeli McPherson, said. “We have raised our concerns with China and we are continuing to work closely on the issue with stakeholders.”

Business leaders and officials in Europe have also raised the alarm, especially in Germany, where a large manufacturing sector relies heavily on imports of Chinese rare earths.

Until a few months ago, Chinese officials said that their rare earth policies were aimed at forcing foreign industries to move high-tech factories to China so as to have access to Chinese rare earths. But as trade frictions have increased, they have given greater emphasis to environmental concerns.

A Chinese official said on Tuesday that pollution worries about rare earth mining were sincere.

“The government is paying more attention to environmental protection, and is retiring older facilities and older technologies,” said the official, who insisted on anonymity because of the political implications of rare earth policies, and declined to discuss specifics of the quotas.

Dudley Kingsnorth, a longtime rare earth industry executive and consultant in Perth, Australia, said China’s long series of restrictions, together with uncertainty about Chinese policies, were making it increasingly likely that mines would be opened in the next three years in other countries.

“It’s only a matter of time before China is not the major supplier to the rest of the world,” he said, while adding that there might be supply problems before the other mines can open.

Japanese companies account for half the world’s consumption outside China and have some stockpiles, but have kept secret the size of these stockpiles.

Toshiyuki Shiga, the chief operating officer of Nissan Motor, said at a news conference on Dec. 20 at the Guangzhou auto show in China that his company had weathered the Chinese export halt this autumn with stockpiles held by Nissan’s suppliers. But he warned that any further Chinese export restrictions would create problems.

“If this continues, it becomes a big issue for all of the Japanese auto manufacturers, and not just auto manufacturers, but electronics manufacturers and others,” Mr. Shiga said.

The commerce ministry said on its Web site on Tuesday that it had awarded export quotas totaling 14,446 tons to 31 Chinese-owned and foreign-owned companies.

A year ago, the ministry had awarded 16,304 tons of export quotas to 22 Chinese-owned companies and 5,978 tons of quotas to 10 foreign-owned companies, for a total of 22,282 tons.

The Chinese commerce ministry denied earlier this month that it would reduce export quotas in 2011. Mr. Kingsnorth said that it was still theoretically possible for this to be true, if the government sharply increased its quota allocations for the second half of 2011 to offset the steep drop in quotas allocated at the start of the year.

The ministry typically makes a large allocation of quotas in December that can be used at any time in the following year, and then a supplemental allocation of quotas the following summer. In July of this year, the ministry made a supplemental allocation of 7,976 tons to Chinese-owned and foreign-owned companies.

World consumption outside China totals about 55,000 tons of rare earth minerals a year, and is rising about 7 percent a year, with increases at twice that pace for the particularly high-price minerals needed for clean energy. Annual production outside China is around 7,000 tons but poised to rise to at least 50,000 tons a year within three years. A quirk in how China calculates quotas means that two tons of quota must be used to export a ton of rare earths for some alloys.

The ministry also said that one company previously receiving quotas, not identified as foreign or domestic, had temporarily lost its rights to quotas because it was replacing equipment.

Rare earth metals mine is key to US control over hi-tech future
Approval secured to restart operations, which could be crucial in challenging China’s stranglehold on the market

Suzanne Goldberg in Mountain Pass
guardian.co.uk, Sunday 26 December 2010 16.54 GMT

It’s a deep pit in the Mojave desert. But it could hold the key to America challenging China’s technological domination of the 21st century.

At the bottom of the vast site, beneath 6 metres (20ft) of bright emerald-green water, runs a rich seam of ores that are hardly household names but are rapidly emerging as the building blocks of the hi-tech future.

The mine is the largest known deposit of rare earth elements outside China. Eight years ago, it was shut down in a tacit admission that the US was ceding the market to China. Now, the owners have secured final approval to restart operations, and hope to begin production soon.

“We will probably never be the largest [mine] in the world again. It will be hard to overcome China’s status in that regard, but we do think we will be a very significant supplier,” Mark Smith, chief executive of Molycorp Minerals which owns the mine, told reporters during a tour of the site.

So far as the Obama administration is concerned, the mine can’t open soon enough. A US department of energy report warned on 15 December that, in the absence of mines such as this one, America risks losing control over the production of a host of technologies, from smart phones to smart bombs, electric car batteries to wind turbines, because of a virtual Chinese monopoly on the rare earth metals essential to their production.

China controls 97% of global rare earth metals production. Such total domination of a strategic resource became impossible to ignore in October when China cut exports of rare earth elements by more than 70% over the previous year, disrupting manufacturing in Japan, Europe and the US. Prices of even the cheapest of the 17 rare earth elements rose 40%.

Now America, like Japan and Europe, is desperate to find alternatives. “Reopening domestic production is an important part of a globalised supply chain,” David Sandalow, the energy department’s assistant secretary for international affairs told a seminar in Washington.

For Smith, the official recognition of the strategic importance of the metals was a long time coming. “I’ve been going out to Washington DC every other week for about two years trying to tell the rare earths story,” he said.

They are listening in Washington now. At the 15 December seminar at the Centre for Strategic and International Studies, one PowerPoint presentation lingered on a slide that showed only the Chinese flag. The room filled with nervous laughter.

By 2015, global demand for rare earths is expected to reach 205,000 tonnes. “If we don’t get alternative supplies up and running we are going to have this supply gap that is going to cause a lot of issues,” Smith said.

Those issues forced their way onto the government’s agenda this autumn when China began squeezing raw material exports of rare earth minerals.

Some US media reports have speculated China is trying to use its control over the supply lines for political leverage. But a number of analysts say China is trying to get better control over an expensive, dirty and dangerous mining process, and to get more factories to set up shop inside the country.

Rare earths are extracted through opencast mining and generate radioactive waste.

“I don’t believe that China is trying to chop the west off at the knees but it has a growing internal market that is driving the demand,” said Gareth Hatch, an analyst at Technology Metal Research. “That reduces the amount they are willing to export.” That is where Molycorp – the frontrunner for now in a global race to develop alternative production of rare earth materials – hopes to step in.

Since going public last July, the company has raised more than $500m (£323m) to expand its production facilities at Mountain Pass, a collection of rusting buildings that date from the 1950s. This month, Sumitomo Corp of Japan invested $130m in return for guaranteed supplies of rare earths for the next seven years. The company has also applied for department of energy loans.

By mid-2012, Molycorp aims to produce 20,000 tonnes a year of nine of the 17 rare earths or about 25% of current western imports from China. Smith suggested the company could possibly ramp up production to 40,000 tonnes within the next 18 months. He says Molycorp has exposed just 55 acres of the 2,200 acre site.

But even production on that scale may not be enough to guarantee the supply of metals needed to move to a clean energy economy: lanthanum for batteries for hybrid cars, neodymium for the permanent magnets for wind turbines, especially offshore, europium for energy efficient lighting.

“You would need seven mines the size of Molycorp’s just to meet the demand for wind turbines and that would mean no neodymium for motors or any other applications,” said Jim Hedrick, who until last year was the rare earth expert at the US Geological Survey.

“Obviously there is a demand for 10 or 20 mines through the world to meet all the different demands for these products.”

Some companies, such as General Electric, are already moving to reduce their use of rare earths. “What we are going to absolutely have to do is diversify our sources and optimise the use of these materials in manufacturing,” said Steve Duclos, who heads GE’s global research division.

In Japan, meanwhile, Hitachi has started a recycling effort to recover rare earths from hard drives and other materials.

Aside from raw materials, it is also unclear whether the US still has the expertise for the complicated process of turning minerals into usable clean tech components.

Such challenges were unthinkable half-a-century ago when prospectors looking for uranium stumbled instead on a rich deposit of rare earths about an hour’s drive from Las Vegas.

By the 1960s, the mine was booming, largely through sales of europium, used to produce the bright red tones of colour televisions.

But prices fell as China came on the market, with its low production costs. A pipeline accident in the late 1990s, which leaked radioactive fluid into the desert and a nearby town, led to an expensive clean-up.

The mine closed in 2002. The central pit in the 55-acre site became a pool of bright green water. White bales of minerals – some mined eight years ago – were stockpiled until such time as prices would rise.

This time around, however, Molycorp claims it has a fighting chance against China, especially if it is able to meet its goal of complete mines-to-magnet processing at the Mountain Pass facility.

The company is also confident it can head off competition from a slew of new mines due to begin coming online from Australia, Wyoming, Quebec and South Africa. “The growth in demand for these minerals is just phenomenal,” Smith said. “A 6% average growth rate for us would be very, very good but when you start adding things like hybrid vehicles and wind turbines to the rare earth sectors now you are talking about double digit growth, and you still don’t know where that will end.”

At this point, though, Molycorp is not even at the beginning. “The road to the green world of the future starts from the black earth. But first you have to get the materials out of the ground,” said Hatch. “The whole clean-tech energy industry is hinging on it.”

The “rare earth elements” are a group of 17 naturally occurring metallic elements used in small amounts in everything from high-powered magnets to batteries and electronic circuits. The materials (including scandium, yttrium and a group of elements called the lanthanides) have chemical and physical properties that make them useful in improving the performance of computer hard drives and catalytic converters, mobile phones, hi-tech televisions, sunglasses and lasers.

With global demand for hi-tech goods increasing the market for rare earth elements has doubled in the past decade.

Despite their name, rare earth elements are not actually all that rare, but China has a near-monopoly on mining the elements. In a report on the elements published this year, the British Geological Survey put their natural abundance on the same level as copper or lead.

According to the BGS China has 37% of the world’s estimated reserves, about 36m tonnes, but controls more than 97% of production. The former Soviet bloc has around 19m tonnes and the US 13m, with other large deposits held by Australia, India, Brazil and Malaysia.

Other sources, untapped as yet, include Greenland. Estimates suggest the land mass could meet 25% of global demand for REEs. South Africa also has potential for rich REE deposits, as do Malawi, Madagascar and Kenya.


Rare Earth

About Jerry Frey

Born 1953. Vietnam Veteran. Graduated Ohio State 1980. Have 5 published books. In the Woods Before Dawn; Grandpa's Gone; Longstreet's Assault; Pioneer of Salvation; Three Quarter Cadillac
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