china energy security

The Future of Rare Earth Elements

Amidst the brouhaha surrounding Sino-Japanese relations over the past few weeks, I’ve written a piece on rare earth elements that appeared in World Politics Review earlier this week. A few points are worth noting regarding these resources.

The 17 elements, which are scattered across the Earth’s crust, are essential components in important technologies such as cellphones, televisions, precision-guided missiles and hybrid cars. Approximately 130,000 tons of rare earths are produced worldwide each year, and some industry forecasts project that rising demand may cause a 40,000-ton annual global shortfall by as early as 2015.

Much of the focus has been on China, and that is understandable to a certain extent given that Beijing accounts for 97% of global rare earth production and 60% of consumption. China has also slashed export quotas over the last few years, while Chinese companies have tried to pursue stakes in large Australian and American mining firms such as Lynas and Molycorp Inc. (via UNOCAL in 2005). Some see this as a deliberate and coordinated effort by China to hoard strategic resources, while others argue that the mining companies in China are actually much more autonomous than one would think.

But the more interesting trend we should be paying attention to is the feverish rush for alternatives that this rare earth scare has produced. In the United States, Colorado-based Molycorp Inc. (which used to be a rare earth leader) is reopening a mine closed down in 2002, while the U.S. Congress passed the Rare Earths and Critical Materials Revitalization Act of 2010 last month to restore Washington’s status as the world’s lead rare earths producer. Japan, which depends on China for 90 percent of its rare earths, is now signing joint venture deals with countries such as Vietnam and Kazakhstan and recently announced it had developed a hybrid vehicle motor that contains no rare earths. Other mines are also being opened in Australia and South Africa.

The key is whether these alternatives will mature quickly enough to prevent chronic shortages. Extracting, processing and producing rare earths could cost hundreds of millions of dollars and up to 10 years, but some expect annual demand to pass 200,000 tons in 2014 — with almost all of that consumed by China.

Picture: New York Times