The Rare Earth Security Of Supply Crisis In Simplified Form

by Jack Lifton on September 2, 2009 · 1 comment

in China, In The Media, Rare Earths

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I was on CNBC-TV today for a sound and image “bite’ about the impact of the supposed Chinese “decision” to cut off exports of heavy rare earth elements (HREEs) and to reduce exports of light rare earth elements (LREEs). Of course, the Chinese have been reducing their export allocations of all REEs for the last 5 years and will simply continue this process in the next 5 years. Export allocations of REEs are already below the demand just of Japan, so the crisis of security of supply isn’t coming; it’s here now.

A video of the program can be viewed below.

It has been reported that China has said that it may completely eliminate the export altogether of the HREEs dysprosium and terbium. This would be a disaster for the high performance and military users of REE-based permanent magnets, because dysprosium and terbium are necessary and cannot be substituted as additives for REE-based permanent magnets that raise the maximum operating temperature of those magnets. This means that the use of REE-based permanent magnets without dysprosium and terbium in high temperature environments, would require an expensive weighty cooling system. This subtracts range from hybrid cars, performance from wind turbines, and payload from exploration and military rockets.

I was surprised when commentator Erin Burnett stopped putting me on camera after I told her that her tagline of “China hoarding” REEs was wrong. China is merely saying that it is giving priority to domestic uses of its own resouces. I had pointed out to Erin that free market capitalism and globalism requires that any and everything be available for a price, but that is not the Chinese way of thinking. Chinese bureaucrats believe that the health, safety, and well being of the Chinese people come before that of foreigners and that Chinese resources should be used first to improve Chinese daily life. Just substitute the word “American” for Chinese in the sentences above and tell me then that you don’t believe in that and that you don’t wish that American bureaucrats thought the same way!

Here’s the rare earth story in compact form, as I forwarded it to the CNBC producer who requested some talking points and then ignored them…

The Rare Earth Story

  • The forces of nature placed rich resources of the LREEs, in, among other places, Inner Mongolia and of HREEs, in Szechuan, People’s Republic of China.
  • Economic forces in the last 25 years caused lower priced REEs from China to eliminate profitable production anywhere else in the world, including the huge rich resource for LREEs at Mountain Pass, California.
  • The age of technology metals began in the second half of the twentieth century.
  • American innovation just with the rare earth technology metals gave us nickel-metal-hydride (where metal =rare earth) batteries; the highest strength permanent magnets ever developed; the neodymium laser; the PC with its small yet efficient and high storage rare earth magnet-dependent “hard drive”; fluid cracking catalysts, based on lanthanum (the name metal of the lanthanides, i.e., the rare earths) for transforming heavy petroleum products to useful lighter ones.
  • Manufacturing of all of the above technologies, except fluid cracking catalysts for oil, has now moved to China where there are sources of the raw materials and an industry to produce them in their necessary metallic and alloy forms for further fabricating!
  • Now China wants to ensure that its high tech employment, which manufactures the end-use, high value-added components which depend on rare earth metals, continues and grows domestically in China both to increase high tech employment in China and to justify the investments made and to be made.
  • In China, socialism drives the need for full employment and a state-sponsored type of capitalism drives the development of resources and manufacturing capabilities.
  • If America does not wake up and drive, from the top, the production of our own resources of REEs, then all the employment and wealth creation from the REEs and their end uses will simply, by default, accrue to China.
  • There are huge privately owned resources of LREEs in California (Molycorp Minerals), Idaho and Montana (Thorium Energy) and there are perhaps the world’s largest untapped reserves of HREEs in Canada (Avalon Rare Metals and Great Western Minerals Group (GWMG)).
  • The technology to separate REEs from ores exists in North America and is in operation at Mountain Pass, California, the largest such vertically integrated operation in the world outside of China.
  • The technology to reduce compounds of REEs to produce metallic and alloy forms of REEs exists in the USA and in the United Kingdom in both of which places, it is owned by a Canadian company, GWMG.
  • The technology to fabricate REE-based permanent magnets exists and is dormant in the USA, due to a lack of assured REE supply.
  • Ironically therefore the way is there in North America but not the will.

The de-emphasis in America on wealth creation by the development of natural resources and the domestic manufacturing of their end products, has now reached a crisis in the case of the rare earths. If we don’t stop the erosion of this method of wealth creation, a trickle of lost jobs and opportunities will become a flood. Our security is now threatened. We need to wake up immedately or just replace China as the world’s sleeping giant.

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