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China’s Stranglehold on World’s Rare Earth Supply

Commodities / Metals & Mining Sep 03, 2010 - 12:23 AM GMT

By: Anthony_David

Commodities

All 17 of the rare earth elements are metals. Cerium, dysprosium, erbium, europium, gadolinium, holmium, lanthanum, lutetium, neodymium, praseodymium, promethium, samarium, scandium, terbium, thulium, ytterbium and yttrium – unfamiliar names, yet rare earths are used in most modern and almost all ‘green’ applications. A few everyday examples are cell phones, computer monitors, DVD players, flat panel televisions, e-readers, iPods, rechargeable batteries for hybrid and electric cars, catalysts in cars and oil refineries, advanced ceramics, super-conductors, fiber optics, lasers, CFL light bulbs, wind turbines, and military systems.


About 97% of the world’s rare earth supplies originate from China. In fact, there are very few companies outside China producing the metals. Inner Mongolia Baotou Steel Rare Earth Hi-Tech Co. is China’s single largest producer of the metals. In 2008, China produced 120,000 tonnes of rare earth metals followed by India with 2,700 tonnes. Brazil and Malaysia were the third and fourth largest producers respectively.

China, Japan and the United States are the largest consumers of rare earth metals. With the growing demand for ‘green’ products, the demand for rare earth metals is only expected to increase. Supplies however, are facing deep constraints. The annual growth in demand is expected to hover around 10% but according to analysts, China will be able to supply only 160,000–170,000 tonnes of rare earth metals against an expected demand of 200,000–210,000 tonnes by 2014.

Since 2005, the Chinese government has been imposing export quotas on many of the rare earth metals, resulting in reduced global supply. Higher prices are a natural result of such supply restrictions.

Analysts are of the opinion that by 2012, the rest of the world could face a major supply crisis because of China’s reduced or zero supply. The demand-supply is expected to touch 30,000–40,000 tonnes by 2012 in the absence of any new large supplier. China’s export quotas for the second half of 2010 have already been reduced by an alarming 40%. Reacting to China’s announcement, David Menzie, Chief of the International Minerals Section at the US Geological Survey, said, “Countries and companies that have or plan to develop industries that need rare earth minerals to make products are concerned about China’s growing consumption, which they fear will eliminate China’s exports of rare earths”.

China currently consumes 60% of the global rare earth metals and the nation’s growing economy is creating a worldwide threat to supply. China insists that it requires the high supplies to meet the demands of its clean energy and high-tech sectors. Analyst Min Li of Yuanta Securities cautions, “Foreign companies could be facing some material supply risks, unless they decide to move production to China.”

The global rare earth market is still relatively small but with both China and South Korea planning to soon increase their electric and hybrid car production by 1 million units each, Toyota Motor Corporation intent on doubling production of the Prius to 2 million units, and the massive increase in demand for wind turbines worldwide, the market is unlikely to remain small for too long.

While the development of new ‘green’ technologies that are rare earth-free could challenge China’s monopoly, it cannot be denied that China will continue to control the global market for some time to come. Several new overseas mine projects are in the pipeline but few are likely to be able to compete with China on prices. Besides, it would require at least a decade before new mines can make an impact on the global market.

By Anthony David

http://www.criticalstrategicmetals.com

The mission of the Critical Strategic Metals Web Site

is to serve as a monthly compass for those who take a fundamental view of investment regarding the Molybdenum, Manganese and Magnesium metals markets, are concerned with the emerging critical under-supply of these strategic metals to Western nations and wish to profitability chart their course. Each month we will research and provide, in as short and concise a manner as possible, the most applicable information available on resources that will have the biggest impact on our day to day lives. Click here to sign-up for our FREE monthly report

© 2010 Copyright  Anthony David- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


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