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Where Next-Generation Rare Earth Metals May Come From
retroworks writes "Great piece in The Atlantic by Kyle Wiens of IFIXIT.org, who visited and photographed the Molycorp Mountain Pass rare earth facility in California's Mojave Desert. The mine is the only source of rare earths in North America, one of the only alternatives to the mineral cartels in China, and one of the only sources for the key metals such as tantalum needed in cell phones. There is of course actually one other source of rare earth metals in the USA — recycled cell phones. Is the best 'state of the art' mining as good as the worst state of the art recycling? If the U.S. Department of Energy subsidizes the mine, will China open the floodgates and put it out of business? Or will electronics be manufactured with alternative materials before the mine ever becomes fully scaleable?"
See, there's your problem.
Sadly, the Libertarian model more or less assumes that nothing about current reality applies, and that we can hit a big reset button and start from scratch in a bubble where all of their little assumptions would hold true by sheer force of will.
It's like bed-time stories for economists.
There will always be inequalilties that keep that perfectly free market from happening, and countries will always try to bolster their own industry over others. The US does this in many areas (agriculture, steel, lumber) and seems to expect they can protect their own companies while trying to skew the playing field against foreign competition who have a different cost structure.
To me, there's simply nothing to actually support the notion that the Libertarian free market could ever exist. And, if it did, it sure isn't going to bring about all of the positive things it claims ... mostly the world would devolve into the rich having all of the privileges, and the rest of us being left to duke it out for scraps. But apparently, that's a good thing somehow.
Lost at C:>. Found at C.
It would be even worse running a mine in downtown LA or New York. Imagine trying to get all those Caterpillar 797's and Liebherr T282B's through rush-hour traffic ....
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You don't understand what free trade is. That's your problem. We do NOT have free trade in the united states... not by a long shot. We subsidize one industry, tax another, we bribe other countries to sell us cheap goods with economic and military aid. If China is willing to sell goods for cheaper than it costs to produce, then that's good for us. The rare earth metals will remain in our country while we bleed China dry. You can only try to manipulate the market for so long before you run out of money. That time is fast approaching for China. The price of goods will suddenly skyrocket and manufacturing in the US will suddenly seem a lot more reasonable (it's actually already starting to happen) The only thing standing in our way is our government and its silly programs designed to aid industry and other countries. Let oil rise to its real value (likely $8-$10/gallon) and see what happens to the automotive industry. Stop subsidizing farmers and giving the food away to countries that can't afford to produce it themselves. When the cost of a bad of grain goes from "free" to $20, see how quick local business's figure out the free market.
To clarify, it’s not a monopoly per say. It’s the market structure that makes it hard for anybody to enter.
To start a rare earth mine requires long lead times, large up-front capital spending, and high running costs (As have been mentioned, these mines produce a lot of trailings that need special environmental handling).
Any competitor entering the market would face a opponent that has already spent huge amounts on it’s fixed capital (i.e. sunk costs). What normally happens in these situations is a long, brutal price war as the established company lowers it price because it does not have to recoup it’s sunk costs. So anybody who enters the market could not count on today’s high prices.
If the established company want’s it’s monopoly, it can even “dump” product onto the market for years, starving it’s completion.
Factor in that you are going against a state sponsored Chinese company that has access to cheap capital (effectively reducing the cost of it’s fixed capital) and lower requirements to it’s environmental laws.
My post is indeed not very clever. I won't thank you, but thanks to your unfortunate post, mine looks brillant now. Relativity...
Slashdot, fix the reply notifications... You won't get away with it...
But the structure of the market dictates the best way to handle this. In industries like this you tend to get monopolies, cartels, collusion, etc.
One choice is to break the company up. Not an option here.
Another choice is to compete head on. In industries like this it will mean years of pouring subsidizes down the new competitor. This “monopoly” (well, “leading oligopoly” would be more correct) can hang on for years until it breaks even without a state subside. It may well be worth it, but don’t kid yourself that it’s going to be a quick battle.
Another choice is to doge the issue. Figure out better ways to recycle. Toyota is figuring out how to make electric motors that don’t require rare earths.etc.
As a counter point, look back to the 80’s when Japanese companies were dumping DRAM onto the market Intel had a choice. They could keep producing their bread and butter, seek US Government subsides, and engage in a very long and expensive fight over a commodity product. Or, they could abandon their main business – which they did – for CPUs. And we know how the battle ended – Intel prospered, Japan stagnated, and South Koreans won.
Now, I do think it’s good to have a supply other than China. It’s not the high prices but forcing companies to relocate to China if they want a supply. But it’s good to know the nature of the fight and to think of other options.