The buzz in the rare-earths industry over the past few weeks, sending the analysts scrambling to update their spreadsheets, has been the shocking news that China will become a net importer of rare earths by 2015, completely altering the supply and demand dynamics of the global rare-earth industry.

At least, that is, if this news is accurate… is it?

At the Critical Metals Investment Summit in Vancouver last month, a presentation was made on behalf of Dr. Zhanheng Chen, Director of the Academic Department of the Chinese Society of Rare Earths (CSRE), titled “China’s Role in a Changing Global Rare Earths Market“. Dr. Chen was unfortunately not able to be there, and it is my understanding that Mr. Jay Roberge of Tehama Ventures gave the talk instead.

In the presentation, Dr. Chen forecast a total supply in 2013 of 87,000 t from China, out of a total 134,000 t of global supply. He then forecast a total global supply target after 2015, of 278,000 t of rare earths, with the target for China’s production set at 100,000 t of rare earths. For China, this is not far off the current production levels, but is less than most analysts had been projecting for that time period. More important, this leaves a 178,000 t production target for the rest of the world (ROW), based on CSRE estimates, which is significantly higher than the total output of projects due to come on-stream in the next four years.

Later in the presentation, Dr. Chen indicates that there are “early signs that China is moving from [the] sell side to [the] buy side”, noting that 10,381 to of rare-earth concentrates were imported by China, presumably last year. Nowhere in the presentation does Dr. Chen use the term “net importer” to describe China’s situation in 2015, as has been widely reported on the rare-earth-industry grapevine and beyond.

To find out exactly what Dr. Chen meant, I dropped him a line to ask if he could clarify this notion that China will become a net importer by 2015. In his reply, he said that, “[it] is still too early to make an assertion than China will become a net importer by 2015“. He acknowledged that “[t]here is evidence that several China[-based] companies imported rare earth concentrate from CIS [Commonwealth of Independent States i.e. the former Soviet Union] last year”, as referenced in his Vancouver presentation. Dr. Chen went on to refer to heavy rare-earth elements, and indicated that “China might become a net importer soon” of these materials.

So, is the buzz with which I opened this article, accurate? I would say that it was not. At the very least, Dr. Chen made it clear that it is not he who is making the assertion that has been ascribed to him (while acknowledging the possibility of this happening for a small subset of the total REEs sold). For me the real takeaway from Dr. Chen’s presentation are the CSRE projections for ROW supply requirements beyond 2015.

Finally, for the record, I’m not accusing Mr. Roberge of mis-stating Dr. Chen’s position, or of putting words in his mouth :-) Clearly though, at least some folks in the audience got the wrong end of the stick last month, perhaps reading into the presentation, a sub-text that wasn’t there.

Food for thought.

You may have seen the story over the weekend on China’s suspension of military exchanges with the USA.

The geopolitics of natural resource geography may be about to rear its head for the first time since the Cold War ended. Perhaps a Cool War is now underway.  Americans currently in political power seem to have very short memories to balance their rather noticeable lack of worldly experience. If China were to forbid the export of all components or devices that contain rare metals (including rare earth metals), to any defense-related supplier, then it could insure a crisis in US Department of Defense procurement.

I hope that this is a wake up call to those in Washington, D.C., who play semantic games with words like “strategic” and “critical”, to avoid facing the issue of reviving the US domestic supply chain for rare earths beginning with, and including, mining. With a few hours of the Defense budget or even fewer hours of the stimulus spending allocated as a loan guarantee, the US government could kick start the mining of the light rare earths in Mountain Pass, California (owned by Molycorp) and of heavy rare earths in Idaho’s Lemhi Pass (owned by US Rare Earths, Inc.) as well as restart the refining and fabricating of rare earth based metals in this country.

This would mean that neodymium-iron-boron and samarium-cobalt permanent magnets, neodymium lasers, nickel-metal-hydride batteries, and fluid cracking catalysts as well as a myriad of other products for both the defense and civilian industries, could be made here in the USA and give our government freedom to make policy without having to kiss a**.

And, by the way – that freedom would also include the freedom to make industrial policy such as a national decision to support making electrified cars in the USA, without being dependent for critical raw materials on politically unfriendly countries.

Disclosure: I am a paid business development consultant to US Rare Earths, Inc.