Japan, with its important dependence on the rare earth metals in its manufacture of high tech electronics, flat screen televisions, mobile phones and hybrid cars, among many others, is reportedly increasingly concerned with China’s intent to limit its exports of the metals, given the latter country’s total dominance of current world supply. The concern is such that reports in London suggest that Japan will take its case to the World Trade Organisation, although what the international body can do to alleviate the situation, apart from bring pressure on China to alleviate its proposals, is unclear.
As we pointed out on Mineweb in a recent article China moves on rare earths a threat to global supplies, China produces an estimated 95 percent to 98 percent of global supply of the rare earths metals for which demand is increasing at a rapid rate because of its modern high tech applications. It is also a strategic sector because of usage in modern military equipment and rare earths are also known as the ‘green’ metals because of many environmental applications.
It’s not that rare earths don’t occur outside China. They do and there used to be a number of significant producing rare earths operation in the US, Australia and South Africa, but these were virtually all undercut and made uneconomic by cheap Chinese supplies, and now the world may be going to pay the price.
To some, the Chinese control of the market is seen as sinister in the extreme, although it is probably doubtful that at the beginning of the major Chinese impact on the market that the future significance of rare earths was recognised – and now it may just be that it has realised how important rare earths are that China is just trying to preserve supplies for its own industries. But other countries are worried nonetheless and with China cutting its supply quotas year-on-year, and a new proposal to ban exports of one of the most critical of the rare earths, dysprosium, by 2015, is creating considerable concern.
According to the US rare earths company, Molycorp, which is bringing the old Mountain Pass mine back on stream, it is Chinese government recognition of the strategic nature of its rare earths deposits which is making it take steps to insure the longevity and security of its resources for its own domestic consumption. While Chinese production of rare earths is increasing annually, government issued export quotas are decreasing annually, thus protecting the flow of materials for rising internal consumption while at the same time reducing the amount of material exported to supply the needs of the rest of the world. Chinese export quotas have been decreased each year for the last 8 years. Most recently, China has announced that export quotas for the first half of 2009 are being reduced by approximately 34 percent over the same period last year.
What is also concerning industry is that China seems also to be trying to dominate possible new supplies from outside the country with state-owned Chinese companies attempting to take dominant positions in potential new producers. In a recent report in London’s Times newspaper Australia’s Lynas Corporation, with the Mt Weld mine in Australia and which is close to opening a major new rare earths treatment facility in Malaysia, is cited as having been targeted for investment by China’s state-owned China Nonferrous Metal Mining Group. Lynas was forced to suspend its development plans last year through a breakdown in financing because of the global economy and the credit crunch, and now the Chinese have come to the rescue, but will end up with a controlling interest.
Also in Australia, Arafura Resources with its big Nolans rare earths project, is also looking to help from China with the board endorsement of East China Mineral Exploration & Development Bureau taking a 25 percent stake in the company.
One of the problems affecting the rare earths production sector is that the treatment process is dirty, difficult and potentially harmful to the environment, thus increasing the cost of production through the cost of meeting pollution controls. For years the feeling has been that China managed to come to dominate the market through lax controls and therefore lower costs, which ended up driving its competitors out of business.
Nowadays though China is beginning to get to grips with environmental controls for its own industries and part of the new rare earths policy will involve shutting down 80 rare earths facilities to improve efficiencies and this is likely a further contributor to the tightening of export quotas.
Now it is up to the rest of the world to take a strategic view on rare earths mining and processing and make the necessary funds available to bring new projects on stream. Advanced projects like Mountain Pass can start producing relatively quickly, but if the Chinese quota reductions and export bans are implemented there is likely to be a considerable shortage of rare earths in the medium term, hence the burgeoning investment interest in rare earths projects.
But projects of this type need finance, and with some of the most promising ones in remote and difficult locations this can be hard to come by – except perhaps from the Chinese!