china flexes muscle with rare earth minerals

This is going to be an interesting development . . . http://www.nytimes.com/2010/10/20/business/global/20rare.html

With the doubly short sighted "Just in time" manufacturing model embraced by most MBA led businesses - the optimum level of inventory for rare earth mineral based products is ummmm . . . letsee . . . ZERO.

Wont take much time for this to ripple through technology companies in the US - perhaps a little longer in Europe and a little longer still in Japan.

The US manufacturing sector is filled with dorks with dumb ideas on how to run a company and our guvmint is no better with respect to technology / critical supply policy.

this might put some wind in the sails of mining companies that have languished in recent years due to the cheaper Chinese sourced minerals. If it means getting the same minerals from companies that mine it with less environmental impact - I am fine with that.

So, are they talking about unprocessed rare earth soil pretty much, or also finished products like magnets ready to use? thats the bit I'm not getting clear on. For all I know it could just be their way of having companies here finally have them finish all the product in china before shipping it.

Money was made on the deal to sell all our mining and manufacturing of rare Earth magnets to China. The thinking at the time was that they would keep it in the USA. Before the ink dried on the contract, all the facilities were moved TO China.

"Rare Earth" is not "RARE" at all. ALL the elements exist in other parts of the World, notably in Australia, South America, USA, most of the rest of the world.

BUT, you would have to put people to work, that is anathema, today, in the US of A.

I don't think there is an element in the world, where there is a profit to be made, that cannot be extracted profitably.Gold has been extracted from mines that produce less than an ounce per ton, silver ditto, mercury was precious, at one time, and profitable to hard rock miners.

Radioneuclides, ditto. It might be 6 months or longer to get up to speed, but, if we wished, if the COMPANIES wished, they could, although they might have non-compete clauses in the Bill of Sale preventing companies which sold their businesses to the Chinese disallowing them to do so.

There are many other companies who mine for rare, or should I say, less refined, minerals and elements.

I suppose there is no magnet maker left in the US of A who would make a market for the. Without a market, no one will dig for it.

Cheers,

George

Interesting article, I wonder if congress will actually do something about it.

Marci

Marcibb said:

Interesting article, I wonder if congress will actually do something about it.
Marci

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Im sure someone will come up with a stimulus pacage...

They won't have to, increasing prices will provide all the stimulus needed.

So what about material we need for our missles and other defence items? Wonder how far the US will let them push before pushing back a bit. We could always withold some wheat.

We live in interesting times...

China doesn't want to export raw materials, and part of the reason is that they want to retain the added value of finished or semi-finished materials. Long-term, they've said they want to ensure they export finished goods, not the raw oxides.

Assuming China is willing to even export finished rare-earth goods, I worry that quality issues will surface. Again. Will US manufacturers have to take a PRC finished product, and recycle it into something usable? If the pattern shown by drill pipe, tooling, food and other finished goods continues, I worry.

The American British colonies rebelled against the Navigation Acts, limiting our ability to manufacture in competition with English factories. Bolivia has expressed a preference to do the same as China with their vast Lithium deposits. They want to export batteries, not raw lithium salts. Brazil has yet to forgive Henry Wickham for exporting rubber tree seeds to the world.

I guess the point is that we are again faced with a resources fight...The perennial fight of mankind. My hope is that issues like this start to prompt a US policy of diversification...Because we will have either this fight forever, or we will adapt and figure out a way to not need the resources and/or develop our own, making the fight obsolete. The latter would effectively neuter the PRC's ability to strong-arm the world. They could flex, and nobody would need to care.

There is interesting research into making Alinco magnets as strong as Nd magnets and research into Zinc-air batteries yielding efficiencies greater than Li-ion, for instance. Perhaps we can extend this to other parts of the economy? Diversify fuel: biodiesel/electric cars and fossil fuels? Trains and trucks? Electric trains? Wind and nukes? Decaf and regular? (nah. Screw decaf.)

A policy of development towards self-reliance, economic diversification and balance would make me happy, since I'm young, and have to live on this planet for another 50 years.

But alas, the MBAs that Ken mentions can't conceive of supply chain diversification, much less industrial diversification. Diversification to them means having to 'waste money', and they cower before the needs of the mighty 10-K. That, and the wrath of shareholders who can't ever see more than a quarter in front of their nose, even if the 10-Q hides a grenade. Then there is congress, who, instead of a 10-K is slaved to a 2 year cycle which eclipses even the most sensible bipartisan policies.

On a positive note, my father was in rural Nevada last week, and said he saw a few previously closed mines starting to re-open. Mainly gold, but other stuff too.

People keep bitching about China exporting too much. Now they're cutting back on some of it... You just can't please some folks

Mark Rand said:

People keep bitching about China exporting too much. Now they're cutting back on some of it... You just can't please some folks

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I guess part of the problem is how much of what they have today technology wise that was brought to them from more developed countries, in many cases companies here were supposed to secure lower cost shipments from china in return. Production here gets stopped, dismantled, equipment shipped over there, then when they know you have screwed yourself, they say, NO MORE FOR YOU! Not only do they control the raw product, they get to control what you make with it. If you want to start producing raw products again your costs will be higher, which will generally put your final product even higher, so, they win.
Can't say some of it isn't well deserved, its just unfortunate the population here will pay for a select well placed few at the top who are still getting richer off this.

It will be interesting to see how the cycle will play itself out, if their internal consumption for stuff will eventually choke them, or what will happen.

The SR71 was built with titanium sourced from the Soviet Union.......and the quality was crappy, much of the titanium wasn't of adequate quality, if I recall correctly.

95% rejection rate of incoming Titanium

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From Titanium and its Application to the SR-71 Blackbird


History has a way of repeating itself, with those who fail to heed its lessons.

China has a generation to go, if history is correct, before its quality control is even passable. Which may be too late, due to the 'one child' policy resulting in upcoming generations of sexually frustrated,lonely, horny, angy chinese men. And history shows that to be a toxic, unstable situation which can easily destroy civil peace.

On another note, there is a molybdenum 'city' mothballed in Canada. A real city, with bowling alleys, malls, hospital and schools. Prices dropped, the mining was canceled (and the city waits...)

If China has made such a decision it will be a spear into the chest of green power, hybrid and pure electric cars, and the start of the greatest trade war in history.

I'm ok with that.

dp said:

If China has made such a decision it will be a spear into the chest of green power, hybrid and pure electric cars, and the start of the greatest trade war in history.

I'm ok with that.

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Taking a step back and looking at the balance of things - given the last year's harvest of wheat and cotton . . . I have said this before and I'll say it again - at some point in the future the only real natural resource that will count for anything is productive farm land. So far we haven't figured out how to outsource our ability to grow wheat and corn - and if we have another year like last year - we may well see some real trade going on.

You may not really need magnets and rechargeable batteries - but you do need food.

motion guru said:

Taking a step back and looking at the balance of things - given the last year's harvest of wheat and cotton . . . I have said this before and I'll say it again - at some point in the future the only real natural resource that will count for anything is productive farm land. So far we haven't figured out how to outsource our ability to grow wheat and corn - and if we have another year like last year - we may well see some real trade going on.

You may not really need magnets and rechargeable batteries - but you do need food.

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I do agree to with your statement. Still, China did refuse to allow import of chicken from the US a few months ago. I do think that this year, grain crops might be in demand. I think Russia had a very bad year, possibly the Ukraine as well. I don't know how the Midwest in the US has faired. It didn't rain here for at least a month. Actually almost two months. I think a lot of the famine in Africa was caused with only a 10% drop in harvest.
Also, I think a lot of the industrialization or modernization of China has come at the expense of their agriculture or farmland. Not a good scenerio. I think a few years back, there was a critical shortage of rice, through out Asia. I think a few countries blocked exporting of what rice they had, to feed their own. I now wonder how aggresive China might get, if supply of basic grains, becomes critical.
Tom

I suspect this will prove that Capitalism works just like its supposed to-

Because if China refuses to sell the raw material, and the finished goods are more expensive and of questionable quality, then Capitalism will step in, and mine, refine, and manufacture right here in the USA.

We have sizable, high percentage ore in California, and mining it is legal.
The company that owns the mines has been trying to get government money for some years now, claiming its not economical to mine it otherwise.

Molycorp Minerals - The Rare Earths Company

Congress is working on a law to give them money right now.
U.S. Congress Spurs Rare Earth Race - China Real Time Report - WSJ

Its the american way- we have to have lobbyests take congressmen out to lunch, and congress give money, tax breaks, and special laws, to a corporation, and THEN we can mine it.

The Chinese, it seems, are willing and able to spend government money on things they decide are strategic, either in a military or economic sense. We only do it when somebody makes a campaign contribution.

Regardless- we have plenty of these ores, and we are in no danger of going without.
There are also mining operations ramping up in Wyoming and other deposits in Idaho and Mississippi.
New Players Emerging in Rare Earth Elements Race

So, yes, it may cost more- but realistically, this is true with many imports from China. As many here have pointed out, the Chinese have been selling things at artificially low prices, due to low wages, lax environmental standards, government subsidized prices, and a policy of artificially depressing the yuan.
Many of these things are slowly changing, as chinese workers demand higher wages, chinese citizens demand better environmental laws, and the world economy changes.

We have had a free ride, in certain respects, for 20 years or so, of very low prices, for chinese imports. It wont last. Prices for things like rare earth magnets will go up. But we can mine the stuff, and make the magnets, here, and, probably, employ americans and make a profit too.

The book, 'When China Rules the World' is pretty interesting to read and gives some perspective on recent events related to china.

Seekins said:

Im sure someone will come up with a stimulus pacage...

Click to expand...

Marci

motion guru said:

This is going to be an interesting development . . . http://www.nytimes.com/2010/10/20/business/global/20rare.html

With the doubly short sighted "Just in time" manufacturing model embraced by most MBA led businesses - the optimum level of inventory for rare earth mineral based products is ummmm . . . letsee . . . ZERO.

Wont take much time for this to ripple through technology companies in the US - perhaps a little longer in Europe and a little longer still in Japan.

The US manufacturing sector is filled with dorks with dumb ideas on how to run a company and our guvmint is no better with respect to technology / critical supply policy.

Click to expand...

You know, I've never thought of it that way really ,but your absolutely right, I used to think JITM was a great feat of organization but it really is a gamble.

Thanks for the eye opener.

As someone who works with the mining industry on a relatively regular basis but is not an expert by any means, it appears to me that the current regulatory climate in the US is arguably the largest obstacle to getting domestic production where it really ought to be. Everyone wants to create jobs, mining provides very well paying jobs that tend to be located in rural areas where wages are otherwise low. Current mining practices are a far cry from an environmental and productivity standpoint from the turn of the century practices that are often pointed out as examples of mining.

I have recently done work at two locations in the western US where rare earth elements are being looked at but the permitting process will probably prevent any mining from taking place. There are plenty of us here in the US that do and will work hard at extracting the minerals required by our modern society if we are allowed to. A mine I worked at in Alaska last winter was shutdown for three years (at a rumored cost of $100,000,000) by a law suit that the mine eventually won before the Supreme Court. Three years of no jobs and vast sums going to the lawyers on both sides all because the Sierra Club wanted the tailings, which are basically sand, that the Army Corp of Engineers had classified as fill material reclassified as toxic pollutants.

Just one example of what I see happening weekly. I do not advocate the past practices that did cause environmental damage. But I have seen what responsible mining looks like and it is something we can live with. We have the resources we need, we just need to develop a cooperative approach to the regulation of mining that will allow us to move forward in a responsible fashion.

Just my 2 cents.

Craig

It says right here that the California mine was re-opened in August of 2009.
California Mine Reopened to Search for Rare Earth Minerals - Softpedia

which leads me to believe that permits are not the problem.

Molycorp, which owns the mine, has said repeatedly that they cant beat the chinese prices, and thats why they werent mining here.
Not because of laws, or regulations, or environmentalists- although, of course, those things may make it more expensive to mine in the USA.

But its currently legal to dig there.

They were just waiting for the price to go up.

Or, for congress to give em a subsidy.

Both of which, it seems, are happening now.

Glencore is also reopening their rare earth mine in Missouri.

Glencore International, Wings Enterprises to Restart Rare Earth, Iron Mine - Bloomberg

Again, the problem was not overzealous environmental regulations- it was the cheap chinese prices.

Its always easy to blame the Guvmint, when, in reality, the problem is usually the same- not enough greenback dollars.