China's Tight Rare Earth Grip
Image Credit: Steven Milne

China's Tight Rare Earth Grip

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China is crimping the supply of vital rare earth metals, hitting green industries around the world by sending prices skyrocketing.

With 95 percent of the world’s production of rare earth metals – crucial to a range of day-to-day electronic devices like cell phones and laptops, as well as environmentally friendly technologies like wind turbines – any Chinese restrictions on supply have a big impact on global prices.

From 2009 to 2010, Chinese mines accounted for 259,000 tonnes out of a total global production of 263,000 tonnes of rare earth oxide. But last year, the international community got a taste of what happens if China decides to use the metals as a bargaining chip. Last September, Beijing suspended rare earth exports to Japan after an incident in the waters off the disputed Senkaku Islands, in which a Chinese fishing vessel captain was detained by the Japan Coast Guard.

The Chinese government said that it didn’t actually issue any specific directives to suspend exports, arguing (unconvincingly in many countries’ eyes) that any suspension was the result of the spontaneous and uncoordinated actions of various producers and exporters.

Now, the New York Times notes, China is temporarily shutting down most of the industryout of environmental concerns. ‘China claims that it is taking the steps to improve pollution controls in a notoriously toxic mining and processing industry,’ the paper notes. ‘But the moves also have potential international trade implications and have started yet another round of price increases for rare earths, which are vital for green energy products including giant wind turbines (and) hybrid gasoline-electric cars.’ The latest moves followed a 40 percent reduction in quotas last year.

As Brad Plumer notes in Wonkblog, the effects of Chinese restrictions are also being felt in the United States in the form of a spike in light bulb prices.

‘Most people don’t spend a tonne of time fretting over europium oxide,’ he notes. ‘But the rare earth compound is a key component of CFL bulbs, and it’s becoming increasingly difficult to procure, causing bulb prices to leap dramatically.’

But are the Chinese moves really just about improving the country’s environment? According to Ming Hwa Ting at Adelaide University, China’s protestations can’t all be taken at face value. Writing for us a couple of months back, she said:

‘If environmental considerations were really the main factor behind the imposition of export quotas, this wouldn’t be enough to explain the sudden suspension of exports to Japan last September, nor the current negotiations to supply Taiwan with more rare earth exports.

‘And what of China’s claims of trying to ensure the sustainability of its rare earths? This also isn’t very convincing with China’s rare earths reserves having increased from 43,000,000 tonnes to 55,000,000 tonnes between 1996 and 2010. True, the supply of rare earths, like other natural resources, is finite. But the discovery of new deposits, as well as improvements in technologies allowing the mining of previously inaccessible ores, has increased supply and reserves.’

Comments
7
gwen.wgy
October 27, 2011 at 08:05

@”yang zi @Oro Invictus I have a different understanding of yang zi’s statement – “China’s RE belongs to all mankind”. Technically all resources on earth belong to all mankind, but the allocation of reources relies on the market forces of demand and supply. The market system also gives a country the right to charge for the factors of production that it is endowed with, just like how OPEC countries are charging for the oil that they export and other like Japan and USA are earning revenue from the technologies that they have (through export of consumer products for example). Thus a restriction in supply does not prevent the rest of the world from accessing to the REs, but merely at a higher price. This may help to make RE resources more sustainable in the long run as current (over) consumption would be reduced.

As to whether this price is justified is really subjective. But since the extraction of RE has immense environmental impact (huge negative externality), then restricting its supply would be benefitial to the Chinese population, provided that the remaining extraction processes are properly monitored. Nonetheless, i do not reject the political motives of China’s move, but since no government can do away with politics (they are foundamentally political entities anyway), then wouldn’t it be a bit off-track for us to demand an “altruistic” decision from them?

Regarding the point that China’s restriction of RE supply would jeopardise the global Green Electronic industry, it may indeed retard its progress in the short run, but if the 2 oil shocks in the 1970s (and subsequent manipulation of oil prices by various oil exporting countries and world powers in numerous occassions) did not curb the growth of industrialistion and our global economy in retrospect, then i think we should have more faith in techonogy and the resillience of our global enterprises. If Japan could achieve greater energy efficiency out of the 1970 oil crises, outdoing the western countries that tried to use military powess to suppress the oil price, then a technology race may be a better option in this episode as well, especially when the military and political options are not so viable towards China (too much economic interests involved worldwide).

It’s a pleasure to share my views. :)

jim1980
October 11, 2011 at 01:41

@Oro Invictus, you clearly ignore the history and makes absolute no sense. In the past, Japan polluted to get rich. Then South Korea, Taiwan polluted to get rich. Now, as China has become wealthier, it too wants to stop pollution. Just because China doesn’t have good basic environment does not mean that it will not starting soon. Just a couple months back, A couple of city folks successfully stop building Chemical plant in their cities.

@Oro Invictus, rare earth deposit located in everywhere in the world. China only have it because it was poor country and it had lax environment law. I am sure your country also have rare earth deposit. Why don’t you suggest your government start creating rare earth mining if you don’t think that’s environment cost? Why depend on poor Chinese for your green technology?

damnyou
September 22, 2011 at 04:47

Take a serious look at this http://en.wikipedia.org/wiki/Rare_earth_element.
Though China is the leading producer of rare earth, it doest mean or the rare earth locates in China. Worry about future? go feed yourself!

Frank
September 19, 2011 at 14:50

Mining destroys China’s environment.

China is no longer short of money anymore. There is no need to mine and export the rare earth.

Oro Invictus
September 19, 2011 at 00:38

@Yang Zi

Ignoring the massive amount of environmental data and various trends that, extrapolating from just the recent per capita emissions and their various oscillations since the PRC enacted its first set of “reductions”, suggest these moves will only serve as a catalyst for the planet’s degradation, I an curious as to where you came up with the idea that it is the PRC who served to jump-start the modern push for renewable energy; my understanding was that it was due to a global movement by slowly burgeoning public awareness in tandem with government initiatives to increase sustainability (not because said governments believed it was the “right thing” or anything, it is simply it was more profitable to begin shifting to these new markets as well as improve their global standing). If anything, the PRC has harmed said movement, not simply due to their current and (planned) future environmental policies, but because they have created a green technology industry supremely concerned with profits, seeking not to innovate but to marginalize and outcompete; this is not to say that any other country’s green technology industries are any different, but the PRC’s has been particularly concerned with profit, which has had the global repercussion of further decreasing the focus upon actual research than upon the possibilities for profit.

Once again, I appreciate the desire to protect the already deteriorating environmental conditions of China from further decay, but this move will not help with this in the slightest. The consequences of this move will affect the global industry and, in doing so, also directly affect China; if the PRC really cared about the Chinese mainland, they would instead institute basic pollution control standards and third-party oversight of the rare-earth extraction sites. Virtually any scientist whose field is germane in the slightest to environmental protection will tell you the same, that being this move will not serve the interests of the planet’s ecological sustainability in the slightest.

Also, in response to the high-ground comment (on the chance you are not a paid mouth-piece or a blind nationalist), I would like to remind you once again that all governments inherently work in their own self-interest, a macrocosm of the (unfortunate) individual drive amongst men for self-perpetuation and plenty at the expense of others. When dealing with governments, those assorted systems of control whose very nature codifies and enforces the basest of human traits, no move is moral, no motive is altruistic.

That being said, there are many things that the PRC could do with the rest of the international community to help: Global population control initiatives, establishment of global forums in which information, data, and technology can be freely shared, institution of international oversight systems to incentivize green technologies and social programs, the list goes on and on. Notably absent? Restricting the trade of materials which are crucial in modern green technologies for purely political gain. You are right in one thing however, that being China’s renewable energy belongs to all mankind, as is the case with any other nation and its resources; unfortunately, this latest set of actions by the PRC government show that they clearly do not share this sentiment.

yang zi
September 18, 2011 at 06:07

you are short sighted, China’s move is the golden gift to the world and environment. You can’t expect to protect your environment by destroying China’s. Besides, China’s RE belongs to all man kind, you don’t want to exhaust them too easily and quickly. China revived the world RE industry! especially US and Australia. add South America too. I really hope US and Australia can develop some environment protection standard so China and learn.

China is standing on the solid moral high ground. you should thank China for that.

Oro Invictus
September 17, 2011 at 15:42

The environmental argument is complete bunk, no matter how you look at it; the reduction in green products being produced across the world due to this ridiculous policy of the CPC will, in the long run, cause far more pollution and drains upon natural resources than this “reduction and optimization” of its mining industry ever would. While I certainly agree it is important to negate the damage to the landscape done by such mining operations, the new policies put into effect and the consolidation of these mining firms are unhelpful at best and antithetical to said goals at worst (given such procedures diffuse and narrow administrative and observational capabilities of such facilities and/or operations). Anyone even remotely familiar with basic resource extraction operations, hell, even simple chemistry would realize that this is purely political.

I swear, this is worse than the facetious malefactors in the US who claim global warming is a hoax, socialized health care is bad, and stem cell research is amoral; at least the effects of their idiocy is mostly restricted to their respective areas. This bloody move b the PRC will damage the wellbeing of the entire planet, all the while being “defended” by the bleating of the various ingratiating and slavish mouthpieces of the party, spouting broken logic and misinterpreted copy-and-pastes from friggin’ Wikipedia.

Granted, this is not solely the CPC’s doing, as they are only being opportunistic self-styled hegemons and capitalists; no, much of the blame lies with the greed of the other industrialized nations, content to allow the PRC to gain a monopoly on rare earths by exploiting its workers and destroying it environment, all so they could satisfy their avarice with the cheap costs of production.

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