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from the use-common-earths-instead dept.
MOUNTAIN PASS >> The only rare earth mining and processing plant in the Western Hemisphere is closing and virtually all of its nearly 500 person workforce is expected to be let go. Officials from Greenwood Village, Colorado-basedMolycorp, said earlier this week they will transition their massive San Bernardino County facility to a "care and maintenance" mode while it plans to continue serving its rare earth oxide customers via its production facilities in Estonia and China.
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Half a decade ago China produced some 97 per cent of the world's supply of rare earths. They thought it would be a cute idea to try and flex the monopolistic power they had. Not so much to try and get more for the raw materials: no, they wanted people to move rare earth-consuming businesses into China. There were export restrictions and high export tariffs on the raw materials but none at all on things that were made using them inside China and then exported.So, for example, there's a subsidiary of Siemens out there that makes the lutetium crystals which power MRI machines. If you can't get that Lu (and that one factory consumes perhaps 90 per cent of global production) then you'd better move the factory to where you can, eh? Into China, that is. Certainly one company making the mercury vapour charges for light bulbs (which are doped with rare earths (REs) to change the spectrum of light from them), the world's largest producer of them by far, seriously considered restarting the factory inside China.
What happened then is the fun bit. The rise in the RE prices this caused meant that Molycorp and Lynas were able to gain financing to respectively reopen, and open for the first time, their mines. Not only that but they could do something vastly more expensive: set up the processing plants needed to do the complex separation of each RE from the others.
The point of the article is that China's attempt to abuse their monopoly power in rare earths has eroded their monopoly power. But the question of the strategic vulnerability that represents has not been answered...
(Score: 2, Insightful) by Anonymous Coward on Wednesday September 02 2015, @10:16PM
If 97% of the supply and production is located within one country, the monopolistic fears are never baseless.
(Score: 1, Informative) by Anonymous Coward on Wednesday September 02 2015, @11:12PM
You missed it. That was five years ago. The number now, after this closing, is 100%.
(Score: 1, Insightful) by Anonymous Coward on Wednesday September 02 2015, @11:32PM
Estonia is not China, so no.
(Score: 3, Insightful) by TheRaven on Thursday September 03 2015, @09:12AM
sudo mod me up
(Score: 2) by Immerman on Friday September 04 2015, @03:37PM
No, the biggest risk isn't that they'll push prices up ridiculously - as you say then the other mines will reopen and they get at most a few years of excess profits. The biggest risk is that they push the price up to just *slightly* less than what would make it profitable to reopen the competition, and soak the global market indefinitely.
Of course the two aren't mutually exclusive - the longer a mine sits abandoned the more expensive it is to reopen it, and the higher the Chinese price can be inflated. And of course, knowing that China can drop the price at a moment's notice means that investors will be very hesitant to reopen the mine - even if it has only a few years projected payback on the up-front investement at current prices, China can immediately drop the price again when it reopens and drive them back out of business. Which lets them raise the price even further before a rational investor would reopen a competing mine.
(Score: 2) by TheRaven on Saturday September 05 2015, @06:24PM
Not necessarily. If you have enough capital, you could open a mine but not sell anything, then trickle the the output onto the market. If the Chinese start pushing the price up to an unacceptable point, then government subsidies elsewhere would likely be introduced to make this possible.
The problem, as you say, is that it becomes more expensive to reopen a mine the longer it's been closed. It would be a good idea to keep some investment in some of the mines to ensure that they're maintained, even while not in operation. Unfortunately, the free market won't do this and governments are unlikely to be far-sighted enough to provide the needed subsidy to fix it.
sudo mod me up
(Score: 2) by turgid on Thursday September 03 2015, @09:56PM
If 97% in one country was a problem, The Market would have made new deposits to be mined elsewhere.
I refuse to engage in a battle of wits with an unarmed opponent [wikipedia.org].