Rare earths and trade
A battle to keep using rare earths on our terms
by Tim Worstall in The Register points to a facet of trade policy that would seem to demand some government action…I fail to see why trans-national companies would feel a need to act at least currently to implement more modern technology (or search for an unproven alternative). I can’t speak to the efficacy of his suggestions.
Note that I’m not saying that all of this is easy, that we can just fall off a log and it’ll be all right. I’m only saying that China really doesn’t have a long-term lock on RE supplies. The seeds of how we get out of this half nelson are already there, ready to be nurtured. We can and will deal with competition and industrial dominance from a low-wage/high-pollution country or company by doing what all of you people around here do. We can use brains rather than brawn to design better, more mechanised, ways of ensuring our supply of what we need to keep industry on its feet.
The economic problem here mirrors energy issues. When there are two sources of something, energy or REs and one source has a near-monopoly on the cheap one, they will use their pricing power to ensure that the price is JUST BELOW the price of more expensive ones. If the capital costs for entry into the more expensive source are high enough they can actually use their power to push the price ABOVE that of the more expensive one if it is obvious that they have sufficient capacity to lower the price before the more expensive source pays off its capital cost.
The end result is that the more expensive source isn’t developed, so little to no Canadian coal shale, American RE mining and processing, or non-US helium sources. This tends to continue until the near monopoly ceases, either because their supply diminishes, or demand increases beyond their capacity to supply.
Good point Jim.
As to the trans national companies: well, yes, as long as GM keeps getting the Nd and La for their batteries, why should they care? But that’s ignoring the competition among the companies that would like to be supplying GM their Nd and La.
Lynas in Australia doesn’t want to have to send their ores to China to be processed: so there’s an incentive for them to research and build a new method of processing their ores. And so on thoughout the system.
Nicely stated Jim…
Tim, I know nothing about the trade, but would a company such as Lynas have the resources to invest in such a move away from China without government help, seeing as how the inductry in China also probably receives subsidies of various kinds in addition to the low wage and tolerance of pollution and envirnmental degradation?
Molycorp is doing just that.
Currently, Rare Earth Dependent Technologies are nearly 100% reliant on Chinese-sourced materials. While in recent years China has managed to supply the entire world’s demand for Rare Earths, a dramatic shift is beginning to take place. As global requirements for Rare Earths continue to grow considerably (fueled primarily by the development and deployment of green energy technologies like hybrid vehicles, energy efficient lighting and wind power), China’s own domestic use of its resources is also soaring—with internal consumption presently at about 60% of production and rising rapidly.
The best plan for ensuring the future security of America’s Rare Earth Dependent Technologies is developing a strong domestic Rare Earth industry based on the responsible use of our own strategic reserves.
Fortunately, the U.S. has one of the world’s largest and richest Rare Earth deposits at Molycorp Minerals’ facility in Mountain Pass, California.
Amazingly we learned this lesson in World War II when the rubber shortage lead to a decision to maintain domestic supplies where possible of essential materials. (Subsidize the mines, or put a tax on imports or products containing the imports- same difference). The free marketers forgot the lesson of rubber in WWII and decided the market would provide being the great god that must be honored. Now we see the result of that faith.
An interesting paradox – Free market disciples promote policies which turn out to benefit godless commies. Heh.
China to buy stake in GM says the WSJ today.