Rare Earths
praseodymium, cerium, lanthanum, neodymium, samarium, gadolinium
I once testified to a Senate committee about whether or not trade embargoes work. This was back when the knee-jerk response to anything another country did, that we didn’t like, was to propose an embargo on American exports to that country. The senators and their staffers were asking me about the effectiveness of embargoes against South Africa and Rhodesia (now Zimbabwe) – and they didn’t like what I had to say. I simply told them that embargoes are useless unless you control 100% of the supply or close to it. The only impact I could see of those particular embargoes was that U.S. exporters were losing sales to suppliers of similar products from France and Japan. American jobs were being lost, but I suppose we felt morally superior.
An article yesterday in the International Herald Tribune makes me think conditions are ripe for an embargo that would work. Unfortunately, it’s one that China could use against the entire world, especially against the industrialized western nations with advanced military technologies. And it could be far more effective than anything OPEC ever threw at us, because China controls 97% of the supply – well into my threshold for a successful embargo.
What’s the product? Rare earths. Unless you are a metallurgist, this isn’t a big item on your shopping list. But they do show up in a lot of fairly critical things. Rare earths include minerals like neodymium which is important for making magnets used in many high tech applications, especially sophisticated military stuff. Cerium is used in water filters and to polish glass. Navigation systems for the U.S. Army’s tanks rely on rare earths. So do the radars used by the U.S. Navy. Europium goes into color televisions, and rare earths are showing up in new green energy systems.
Other countries have and can mine rare earths. Prices in recent years haven’t made it worthwhile, and the environmental consequences of mining have lowered any desire to get into the business – except in China, where adverse mining conditions are routinely tolerated. Molycorp is looking into re-opening its old Mountain Pass mine in California, but faces formidable hurdles in doing so. Other companies and countries are looking into it as well. In most cases, it makes strategic but not economic sense.
China has already flexed its muscles with rare earths. Beijing has long imposed export quotas and successively cut the size of the quota between 2005 and 2009. Customers in foreign markets panicked last year when China thought out loud about an embargo on exporting five different rare earths. They didn’t do it, but it got everybody’s attention. I was interested to see that the Mountain Pass mine was part of Unocal when China’s CNOOC tried to buy the oil company in 2005.
As a result, governments and mining companies are scrambling to either redevelop old mines or find and exploit new deposits. The United States is looking at establishing a national rare earth stockpile. But it’s going to take years and a lot of cash before we can feel secure with world supplies.
