RARE EARTH AND CHINA'S DOMINANCE - TO END SOON?
By Ruma Dubey
Just as the Middle East has oil, China has rare earth metals or rare earth elements (REEs). China's share of global supply has come down to 86% from 93% between 2011 and 2012 but the fact remains that it continues to dominate this sector completely, totally.
China itself makes up for 60% of the world demand of REEs. Three years ago, China capitalized on its monopolistic position in the rare earth industry and cut back exports, slashing it by 72% for second half of 2010 and another 30% in 2011. And the effect of this cut is already felt world over, more so for USA and Japan which depends heavily on China for its REEs. This sent the prices of the 17 elements, known collectively as rare earth, to dizzy sky heights but that was the true wake up call for the world. Just as the dominance of the Middle East when it comes to oil is a cause for concern, China’s dominance in rare earth too is worrying.
USA has started mining on the border of Montana and Idaho, and by 2015, US will gain a new domestic, non-Chinese source of minerals essential to making electronic devices and weaponry components. But for now, the dominance of China continues.
Rare earth elements are not exactly 'rare'. They are infact available in plentiful in the Earth's crust but over a period of time have become extremely valuable. Then why call them Rare at all? Mining the right concentrate of the element from the ore extracted is very rare and that is what makes it valuable. More importantly, extracting the element is extremely expensive and environmentally hazardous. And that is the reason why the world depended on China to supply REEs.
Any technological advancement we make today needs usage of REEs. Smartphones, computer memory, DVD's, rechargeable batteries, cell phones, carcatalytic converters, magnets, fluorescent lighting, hydrid cars, nuclear batteries, high power magnets, precision weapons used in combat, all and many more such technological advancements we make today needs REEs. It's a strategic resource for the US as it is used in making its hi-tech defence equipments.
Russia is a world leader when it comes to supply of gas and if Putin gets angry and wants to punish some country, he can simply turn off the gas tap. Similarly, China is slowly but surely turning the tap off the supply of REEs to the world, especially to USA and Japan, the largest importer of REEs in the world. A couple of years ago, there was a sort of stand-off between China and Japan? The Japanese Coast Guard had detained a Chinese fishing boat which had entered its waters and China wielded the role of a typical Big Bully and declared an export ban of REEs to Japan. Though this was denied "officially" this is indeed how China used its prowess in REEs to make a point. And such countries, which bully others purely on account of their monopolistic state, needs to taught a lesson.
US has realized its vulnerability of this complete dependence on China. Like Japan, it too has realised how China could arm twist it. After China and some parts of Russia, USA has the world's third largest reserve of REEs but it has only one mine for extraction and that too was closed down. Till date it imports its entire requirement from China. But that will change once USA mines start in 2015. China has gone on to say that by 2015, it will completely stop exports. So while China will continue to spike up rates of REEs by gradually withdrawing world supply, the world scrambles to find a solution.
Why is China slashing exports when it is so lucrative? It says it has its own growing demand to meet and is also concerned about the environment. Now, that is hard to believe. The real reason could be that knowing the value of what it has, China has ensured that countries start buying the finished goods from China instead of REEs. Why sell the raw material when it can sell the finished goods? France does not export grapes when it world over recognized for its wines.
Where does India figure out in this entire gambit of REEs? India is also worried about the growing dominance of China and it too has decided to restart mining which was shut down since 2004. It aims to start production soon in Orissa. But what is not good is India currently has access to 1.1 million tons of rare earths — the world’s fifth-largest reserve base — but it produces not more than 2,700 tons per annum. It plans to extract these REEs and export it! And then we will probably buy back the much expensive finished product!
We have only one company in this sector - Indian Rare Earths Limited (IREL) a PSU under the administrative control of the Department of Atomic Energy. Toyota Tsusho Corp., the trading company part-owned byToyota Motor Corp. is building a REE plant in Orissa that will help it secure supplies.
At least for the next 2 to 3 years, China will continue calling the shots and make full use of its monopolistic state in REEs. It is estimated that China's share of world production could slide to 63% by 2016. For now, the world will continue to contend with China….nothing rare about that!