back to article China reveals new strategy of stockpiling rare earths

Tech supply chain jitters are set to resurface after it emerged that China has begun the strategic stockpiling of rare earth minerals. State-run business title the China Securities Journal broke the news, but didn’t elaborate on exactly when the programme had begun. lutetium rare earths element China produces 90 per cent of the …

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What actually are the WTO rules/agreements?

I'd have thought that the WTO rules would specify equal treatment, in that China could not sell rare earths to (say) Germany on better terms that it did to America. Do the WTO rules say that if you have a mineral resource in your country, then you have to mine it and sell it to any foreign country that wants it?

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If

If everyone starts stockpiling we will have a situation like the last petrol shortages here in the UK and there will be some who will make a lot of money out of it.

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Pint

Re: If

They call it business, it was invented a very long time ago.

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Watch and learn

> China – which produces 90 per cent of the world’s supply ... now has just 30 per cent of the world’s reserves

It seems to me they've been reading up on the history of OPEC and realised that there is a long (if not honourable) history of leveraging the supply and demand equation for their environmental reasons national profit.

Luckily for the chinese, it appears they are immune to the fate that befalls other countries who get in the way of " ... US workers and manufacturers [desire for] access to raw materials". I just wouldn't like to be in the shoes of whoever is sitting on top of the other 70% or the world's reserves.

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Anonymous Coward

Re: Watch and learn

Opec did not just leverage supply and demand - it actively used supply and demand control towards its goal of reducing the role of various alternatives until the alternatives aligned to its own policy mandates.

I would be surprised if China does not do the same - dump "stockpiled supply" on the market to guarantee their monopoly and the demise of alternative/in-country suppliers elsewhere.

I would also be surprised if they do not suddenly do a 180 degree turn _AND_ use the WTO when USA, Russia, Brazil and other alternative sources of rare earths try to use government subsidies, _IMPORT_ quotas and other mechanisms to ensure the existence of internal sources and supply diversity. By the way - IMHO we should have done that long ago.

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Re: Watch and learn

We are getting worried - especially since we have the USA's rightful oil and water as well

However the national defence plan - issuing everyone with a hockey stick and telling them that the opening of the season is delayed until the invaders are thrown out - looks like it could work

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kb
FAIL

Re: Watch and learn

The problem is the strategy is gonna bite them in the behind, because unlike oil (which the USA had all but pumped dry by the time OPEC became big) there are plenty of rare earth supplies in the USA and other countries, it just hasn't been economically feasible to dig them up...until now.

There is a mine in Utah already being slated to reopen, the Japanese found a large cache on the ocean floor that if the price rises will be economically viable, and I believe Russia as well has rare earth mines as well as Africa.

So if China wants to play hardball i have a feeling they are gonna find out the hard way that unlike oil there are a LOT more choices out there.

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Stop

Re: Watch and learn

There's going to be a lot of money in finding alternatives, either from mining in other countries, creating the minerals from scratch, or by finding alternatives to those minerals.

When they do - China are going to be stuffed. I hope they've got something else they can export...

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So what if they are stockpiling?

I thought the reason why China has a monopoly on rare earths is that they are the only people mining them, the others having given up because it requires lots of chemical processing to get the required metals (NIMBY-averse) and (effectively) China do it cheaper.

China now want to not rape their country quite so much, so are trying to close down the more dodgy ones. Before they do this, they need a stockpile of rare metals, since their economy depends a lot on producing the tech products that these metals are required for.

If by stockpiling and not mining this drives the price of rare earth metals up, then that will make mines elsewhere in the world profitable again, and remove the Chinese monopoly on rare earth metals.

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Re: So what if they are stockpiling?

100% Agree!

If the supplies have diminished this much, then they have every right to stock pile or even limit the mining, they also have the right to ensure they get the best return for it.

On the flipside of the coin, WTF is the world so reliant on China? Have there been no lessons learnt from the likes of the gas feud between Russia and Ukraine. We should be encouraging and investing in other countries who also have these minerals to ensure there is a fair market.

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Re: So what if they are stockpiling?

Trouble is, the fair market leans heavily in China's favor. Some of the highest costs of mining are labor and legal compliance. China has an advantage in both of these: it has a labor glut and its environmental controls are lax, both of which lower costs. How would you compete against such an advantage?

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Re: So what if they are stockpiling?

Imagine this, you have two countries, China and Australia. Both can mine up rare minerals in great quantities. Australia finds it can't compete with China because China is whacking out the minerals are lower prices so their mines are not really as profitable as they would like, so Australia shuts the mines down and China becomes the only supplier.

A few years later and China wants to make more money from the rare minerals so they start to strangle supply to force up the prices. The owners of the Australian mines look at the prices and think "strewth, I'm going to get some of that, no worries" and open the mines again. China then flood the market making the Australian venture not worthwhile so it has to close... again. Then China can start strangling supply....

The only way to remove the stranglehold on rare minerals that China has would be to open up the Australian mines to run at a loss, break even or very small profits, or to open the Australian mines and pay the Australians more than the market value to keep the mines open, how many companies do you know who will pay more to obtain exactly the same item when that in turn pushes up the costs to consumers (or lowers their own profit margins)?

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Anonymous Coward

Re: So what if they are stockpiling?

"How would you compete against such an advantage?"

You go ask India, then you go to Africa.

There's always someone willing to do the work both cheaper and with less safety concern.

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Devil

Re: So what if they are stockpiling?

Quote: "The only way to remove the stranglehold on rare minerals that China has would be to open up the Australian mines to run at a loss..."

No. The existence of EXPORT quotas entitles everyone to IMPORT quotas as a retaliatory measure.

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Re: So what if they are stockpiling?

Wages? Wages?

In 7 years, Chinese labour costs will be similar to Romania, in 14 years, close to Italy. That's what happens when you have massive trade surplus and consistent 7-10% inflation every single year, whilst the rest of the world is in deflation.

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Re: So what if they are stockpiling?

Australia invests in a lot of advanced technology so it can run it's mines efficently with very few people.

Pilbara mine digs out about 30Mt/year and is run remotely from 1500km away.

The problem with rare earths is that they are a byproduct of other types of mining, it's not worth opening a mine just for them so it's really luck how much of them you have in your copper/zinc/tin ore - then whether the price is worth extracting it from the waste.

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Re: So what if they are stockpiling?

"There's always someone willing to do the work both cheaper and with less safety concern."

You know there's a bottom to that race. It's called conscript labor. No wage and no regard for the laborer. How do you beat FREE?

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Give 'em rope

Sooner or later the Chinese will run out of stuff to dig up and then the rest of the world can stick it to them.

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WTF?

Labor Markets

Actually China already participates in that labor market, except they call them political prisioners, not conscript labor. And pay zip penalties for playing there.

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Re: So what if they are stockpiling?

The American Prison system?

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Re: So what if they are stockpiling?

I believe some of the most notorious examples of conscript labor (ex. Angola Prison and the southern Chain Gangs), which tended to involve minority populations, caused public outcry and resulted in prison reform that prevents American prisons from taking the bottom road.

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Anonymous Coward

Environmental reasons?

Horseshit.

Just look at the number of dams built over natural environments, rivers polluted, coal mines on fire and air quality in their industrial cities.

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Anonymous Coward

yes

Everything you say is true but this is what has led the Chinese to understand why we over here have environmental policies and why we enforce them. Our water, air quality etc has improved immensely from how it used to be and it is good to see that China have now also turned the corner in realising poisoning everything and making it uninhabitable is not exactly a good long term strategy even if it is cheaper to do it that way.

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Tee hee

"Prices of rare earth minerals over the past year have dropped significantly, prompting some to speculate that this is a strategic move to drive them up again."

Well, yes. And the recent news that the family of the incoming Chinese head honcho have a significant stake in one of the largest Chinese rare earth producers might have something to do with it.

As to supplies outside China: there are now no fewer than 429 ex-China rare earth projects on the go.....

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Happy

No sweat ... the Japanese are digging a bloody big hole in ...

the north of VietNam where a new, rich source of some rare metals has been discovered.

The ore will be refined in Japan. See: < http://www.livinginvietnam.com/forum/component/kunena/7-vietnam-news-highlights/11138-japan-vietnam-push-on-with-rare-earth-mining-plan?Itemid=0 >.

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Happy

Re: No sweat ... the Japanese are digging a bloody big hole in ...

And Afghanistan (with whom the US just inked a treaty) just happens to be sitting on around a $1 trillion, or so, just right next door to China, not far from Vietnam. That'll buy a lot of tribal elders, and probably for a whole lot cheaper than Chinese party members.

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Recycling?

Is there some way of recycling my old HDD magnets? If there is, I have never heard of any interest in it. I'm sure some people would love to sell these things back to manufacturers.

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Other sources

Like oil, rare earths exist in many places.

The US produced a lot and then the cost of extraction increased so China became the dominant supplier. As ever price will determine when various mines start working again.

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Alert

Game over, man...Game over !

The Godless Chinese have us by the short hairs. If we want those marvelous leccy cars, we will have to bow before their mighty...ah...Might. We will have to stand all day in flooded fields planting and harvesting rice. We will have to eat the leeches from our own legs, as we will not be able to afford food. China will rule every continent, with overlords stationed in every country. They will take our nukes. Dogs and cats living in sin ... mass hysteria.

You may panic now.

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Mushroom

Ahem

“These materials are key inputs in a multitude of US manufacturing sectors and American-made products, including hybrid car batteries, wind turbines, energy-efficient lighting, steel, advanced electronics, automobiles, petroleum and chemicals,” said US trade representative Ron Kirk."

And weapons.

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Rare Earths are NOT rare

They are everywhere!!!

As others have pointed out the Chinese only have a monopoly because they cut the price to gain one, cornering the market isn't exactly a new strategy if Western governments were short sighted enough to let them do it then more fool they!

There are tons of spoil from other mines that contain lanthanide ores anywhere where copper tin and other metals have been mined we simply need to refine it, when the price goes up that will happen.

China has 30% of the world's "known" reserves, but a tiny percentage of the reserves that would be known if we looked!

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