This morning yields news that has been hinted about before, but has now reached proportions where people are becoming upset and dismayed by the changes.
So many of the items we use in our lives these days have become more useful through the miniaturization by the use of very special elements found in very small quantities, known as rare earth elements. Because they are rare, they have always been expensive, but now that the majority of supply is coming from China, there have been some difficulties with the production of some things, and leading to price hikes that were previously unanticipated.
An update on the problems comes from PC World -
Imagine a cellphone the size of a shoe. Or a laptop weighing 10 kilograms.
That’s what we would be carrying around today, if not for the rare earth metals, a group of materials with unique properties that have enabled the miniaturization of electronic components including capacitors, lasers and powerful magnets.
In many cases, it is the powerful magnets that are the greatest part of the problem. Metals like samarium and neodymium [lanthanides, in the periodic table] are what is being used, and if one looks on a supply map of the world, the places where these are found in abundance are in the Orient, and mostly in China and those areas controlled by China.
From computer hard drives to hybrid cars, many of today’s high-tech devices rely on components made with rare earth metals to properly function. But demand for those metals is beginning to outstrip supply, forcing governments and manufacturers to find new sources of raw materials.
The rare earths are a group of 17 metals including neodymium, used in magnets, and erbium, used in lasers.
Countries such as the U.S. have long possessed their own sources for rare earth metals, but despite this they have turned for their supplies to China, where mining costs have been cheaper and environmental rules more lax. This has made China the world’s largest producer of rare earth metals, mining more than 90 percent of global demand, analysts say.
China’s tightening control over supplies became apparent last month when media outlets reported that it had stopped exports of rare earth metals to Japan following a diplomatic spat between the two countries.
"What China’s action has done is create uncertainty," said Dudley Kingsnorth, a rare earth metals expert at the Industrial Minerals Company of Australia. "Undoubtedly people will diversify their sources of supply to reduce their reliance on China. But that can’t happen overnight."
Japan, a major importer of rare earth metals, is actively exploring for new sources in Canada and Australia, as well as looking into recycling old electronic devices as a way to create new supplies of the materials.
As we see in the paragraph above, and the one below, finding new sources is important for the balance of trade around the world. If China is allowed to continue as the major supplier, and decides to cut supplies, or hike prices, the development of many things will slow to a trickle. This is yet another reason why electronic recycling has become such an important thing; the ability to reuse these materials will make for a much greater stability in price and availability over the short run, while new supplies are being researched.
The U.S. Congress is working on legislation, passed by the U.S. House of Representatives last week, to revitalize U.S. sources of rare earths. But China’s dominance over the rare earths market will likely continue for the next two to three years, as manufacturing firms are forced to depend on limited supplies and dip into their stockpiles, Kingsnorth said.
Demand for the rare earths has long been expected to accelerate. Some projections suggest that demand could nearly double by 2015, with hybrid car engines and wind turbines big drivers behind the need.
Looking narrowly at costs, a shortfall in rare earth metal supplies might mean just a minimal price hike, or no increase at all, for the electronic gadgets that use them, analysts say. This is because many of these products only contain tiny quantities of rare earth metals.
"Something like a laptop computer probably only has got about 50 to 80 cents’ worth of rare earth in it," Kingsnorth said. "Even if that tripled in price, it won’t stop people from buying it."
For many electronic products, rare earth metals are key to miniaturization and making the products run efficiently. One such component the metals are needed to produce are neodymium magnets, which are present in hard disks, loudspeakers and cellphones. Without high-performance neodymium magnets, manufacturers would be forced to use larger and heavier ones.
"You wouldn’t have a laptop without these powerful magnets," Kingsnorth added. "It would have to weigh four to five times heavier."
Shifts in the supply of rare earths could have broader economic consequences for manufacturers and their employees.
An extreme situation in which rare earth metals are no longer available is highly unlikely, said Gareth Hatch, a co-founder of consulting firm Technology Metals Research.
However, the world could be faced with a scenario where China not only mines most of the raw rare earth metals on the globe, but also becomes the leader in manufacturing components and products containing them.
Due to the increasing domestic demand for rare earths, China has already placed caps on its exports of the metals. In response, foreign companies may decide to relocate their manufacturing bases to the country in order to get better access to China’s rare earth supplies, Hatch said.
If this occurs, there will be no easy normalization of the trade deficit in our lifetimes, unless we can come up with something the Chinese need badly. At the moment, it does not look as though there is anything that fits the bill.
"In the pursuit of the ‘lowest cost provider’, the West has been the architect of its own quandary here, unwittingly or otherwise," he said.
There could also be consequences for the environment, or for the development of cleaner mining technologies, if rising prices allow new mining operations to open elsewhere.
The owner of the largest rare earth mine in the U.S., Molycorp, believes the U.S. can counter China’s control of the market by leveraging its own existing rare earth supplies.
The mine at Mountain Pass, California, was shut down in 2002 because of environmental concerns and competition from low cost mining operations in China. Molycorp is working to reopen the mine and expects to be producing 20,000 tons of rare earth material by 2012.
China "would rather export value-added rare earth products, rather than just the raw material rare earths," said Jim Sims, a Molycorp spokesman. "That’s probably a model America should try to emulate."
With demand starting to exceed supplies, manufacturers are already asking Molycorp if it can produce more rare earth metals, Sims said.
"The prices for some rare earths have gone up more than 700 percent in the last 45 days," he said. "It’s a very serious situation right now. Predictions of a tight market are no longer predictions. They are reality."
We always hear a day late and a few hundred thousand dollars short. New supplies must be found, and old supplies, like the ones in California must be continued with an eye on ecological impact. We also need to look at other areas where the elements are found, and re-examine the concept of rarity versus availability, for in many cases, the places where difficulty in mining occurs, it could be more than offset by the increased prices of obtaining the materials from China.
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