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.’

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