What does this percentage refer to?
That's the percentage of global production of Rare Earth Elements (REEs) controlled by the People's Republic of China. But even with a virtual monopoly, sales are sluggish in the REEs business.
BEIJING (AP) — China announced a cut Tuesday in its rare earths export quota as it tries to shore up sagging prices for the exotic metals used in mobile phones and other high-tech goods.
China accounts for 97 percent of rare earth output and its 2009 decision to curb exports while it builds up an industry to create products made with them alarmed foreign companies that depend on Chinese supplies.
In its latest quota, the Commerce Ministry said exporters will be allowed to sell 10,546 tons of rare earths in the first half of 2012. That is a 27 percent reduction from the quota for the first half of 2011.
China's export restrictions have strained relations with the United States the European Union, Japan and other governments that have called on Beijing to remove its curbs and make its intentions clear.
Despite production and export curbs, rare earths prices in China have tumbled as U.S. and European economic woes dent demand for its exports. The government ordered its biggest producer to suspend output for a month in October to shore up prices.
But the restrictions have made rare earths much more expensive abroad, giving Chinese makers of products that use them a price advantage and foreign manufacturers an incentive to shift operations to China.
In a sign of unusually weak demand, the Commerce Ministry said actual Chinese exports of rare earths in 2011 totaled 14,750 tons for the first 11 months of 2011 — the equivalent of just 49 percent of the total annual quota.
It's been a while since I've written about REEs. See my October, 2010 post Rare Earth Elements — China Lowers The Hammer and follow the links therein. Finding a domestic producer of REEs has become a high priority for the United States, especially because the Department of Defense (DOD) is a key consumer of weapons requiring them. These statements are from Representative Mike Coffman (R, CO).
“The Department of Defense is facing a near-term shortage of key “rare earth” materials necessary to support our defense weapon systems, and rare earth magnets are especially critical. Currently, over 97% of rare earth production is controlled by China.”
“Today, the United States does not have a manufacturer of neodymium iron boron rare earth magnets, yet they are found in our precision guided munitions, ships, aircraft, and other critical weapons systems.”
As a result, former U.S. producer Molycorp has been permitted to open its old Mountain Pass, California mining operation (December 16, 2011).
Rare earth producer Molycorp (MCP) said today it has been granted U.S. government authorization to begin exploratory drilling for heavy rare earth minerals in Mountain Pass, California.
The U.S. Bureau of Land Management gave it permission to drill at the site, where preliminary exploration has shown rare earth mineralization.
Molycorp president Mark Smith said the company anticipates beginning to drill immediately, with results from the drilling program expects in the second quarter of 2012.
Why did Molycorp stop mining some years ago? Primarily, it was because China chased them out of the global market. It's easy to see that in this global historical production graph.
In a blog post Getting the U.S. economy growing again, economist James Hamilton jumped on the REE mining bandwagon.
We can sit and wring our hands, or we can get to work...
I agree with Stiglitz and Sachs that America's long-term problems played an important role in putting us where we are today. However, I take a different view from either of them on what we should try to do about it. My suggestion is that America should try to return to what some scholars maintain was the original source of America's success, which came from using North America's abundant natural resources as a basis for a competitive advantage in manufacturing...
These "rare earth elements" are vital in all kinds of high-technology manufacturing, and are another area where the U.S. used to play a leading role. We could do the same again.
I must confess that when I read this, I was close to speechless, which is rare for me. Not only is Molycorp just getting underway, but it must sell REEs in a weak (and weakening) market in which China cannot even sell half of its export quota. (Mining firm Molycorp Inc. announced Tuesday that it has reached customer agreements to sell 58% percent of its projected 2012 manufacturing output at its Mojave Desert complex.)
But that's not the half of it. Hamilton's notion that Molycorp starting up again constitutes (paraphrasing) another area where the U.S. could once again play a leading role is just plain ridiculous. As in silly, absurd, harebrained, nonsensical, fatuous, preposterous. It is easy to see that if a miracle occurred, and the global economy started booming again, China would once again dominate the global REEs market. They could easily dump REEs to meet renewed demand and put Molycorp out of business again. Alternatively, the DOD could overpay Molycorp so they can procure domestically produced magnets for precision guided missiles, ships, aircraft, and other "critical" weapons systems.
I thought I'd seen grasping at straws before, but Professor Hamilton has taken it to a whole new level. I don't want to be too hard on Hamilton, for he has been the only mainstream economist worth paying attention to who has written about the risks of peak oil. He finished up his blog post with this—
I recommend that, rather than wring our hands in despair, America should respond to our long-term challenges by making note of the natural advantages we already enjoy and figuring out how to make the best use of them.
If America's abundant natural resources will be the basis for our economic comeback, I recommend wringing our hands in despair as the best strategy for attaining longer term growth. It's easy to do, and some people enjoy doing it. More importantly, it's just as good as the alternative.
By. Dave Cohen
Dave Cohen writes the blog Decline Of The Empire. His commentaries cover a wide variety of subjects, including the American economy & macro-economics, the oil markets, peak oil, politics & policy, environmental issues and global warming. Dave was writing search engine software before he gave up on the industry in 2005 after 20 years as a software engineer. Dave has a M.A. in theoretical linguistics and was working on a Ph.D. before leaving The University of Texas at Austin in 1985 to do research in Artificial Intelligence. He attended the University of Chicago as an undergraduate.